EXECUTION COPY

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SHARE PURCHASE AGREEMENT

In relation to 50,000 ordinary shares in

QUANTUM MAGIC INTEGRATOR FUND CO., LIMITED
(a company limited by shares incorporated in the British Virgin Islands)
 

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[graphic.jpg]
36/F, Edinburgh Tower,
The Landmark,
15 Queen's Road Central,
Hong Kong

 
 

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1.
Definitions
1
     
2.
Sale and Purchase of Shares
7
       
2.1
Sale and Purchase of Shares.
7
         
2.2
Consideration.
7
         
2.3
Payment.
8
         
2.4
Holdback.
8
       
3.
Closing
9
       
3.1
Closing
9
         
3.2
Closing Deliverables.
9
       
4.
Representations and Warranties of the Sellers
10
     
5.
Conditions of the Purchaser’s Obligations at the Closing
10
     
6.
Covenants; Other Agreements
12
       
6.1
Title
12
         
6.2
Confidentiality
12
         
6.3
Compliance with Laws
13
         
6.4
Rectification
13
         
6.5
Compliance with Laws Regarding Anti-Bribery, Anti-Corruption, Anti-Money
Laundering and Sanctions
13
         
6.6
Covenants on Validity of Approvals
14
         
6.7
Closing
14
         
6.8
Conduct of Business before Closing.
14
         
6.9
Non-Competition.
16
         
6.10
Sellers’ Cooperation and Furnishing of Information
18
       
7.
Miscellaneous
18
       
7.1
Termination; Survival
18
         
7.2
Successors and Assigns
18
         
7.3
Indemnity
19
         
7.4
Tax and Social Insurance Expenses
20
         
7.5
Governing Law
20
         
7.6
Dispute Resolution
20
         
7.7
Notices
21
         
7.8
Fees and Expenses
22
         
7.9
Finder’s Fee
22
         
7.10
Severability
22

 
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7.11
Amendments and Waivers
22
         
7.12
No Waiver
22
         
7.13
Rights Cumulative
22
         
7.14
Delays or Omissions
23
         
7.15
No Presumption
23
         
7.16
Headings and Subtitles; Interpretation
23
         
7.17
Counterparts
23
         
7.18
Entire Agreement
23
         
7.19
Conflict with Articles
23
         
7.20
Signing and Binding.
24
       
SCHEDULE A
30
   
SCHEDULE A-1
30
   
SCHEDULE A-2
31
   
SCHEDULE A-3
32
   
SCHEDULE B
33
   
SCHEDULE B-1
33
   
SCHEDULE B-2
33
   
SCHEDULE C
34

 
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SHARE PURCHASE AGREEMENT
 
THIS SHARE PURCHASE AGREEMENT (the “Agreement”) is made on August 3, 2011 (the
“Effective Date”), by and among:
 
(1)           GLOBAL PHARM HOLDINGS GROUP, INC., a company duly incorporated and
existing under the laws of Delaware, the United States of America with its
address at Room 2503-2505, New World Center, No. 6009 Yitian Road, Futian
District, Shenzhen (the “Purchaser”); and
 
(2)           the sellers whose respective details are set out in Schedule B-1
attached hereto (each a  “Seller”, collectively, the “Sellers”).
 
Each of the parties listed above referred to herein individually as a “Party”
and collectively as the “Parties”.
 
RECITALS
 
A.
Quantum Magic Integrator Fund Co., Limited is a company duly incorporated and
validly existing under the laws of British Virgin Islands with its registered
address at Akara Building, 24 De Castro Street, Wickhams Cay I, Road Town,
Tortola, British Virgin Islands (the “Company”).  The details of the Company are
set forth in Schedule A-1 attached hereto.

 
B.
Hong Kong Celestial Asia Pharmaceutical Investment Group Limited is a limited
liability company duly incorporated and validly existing under the laws of Hong
Kong (“Celestial Asia Pharm”).  The entire issued shares of Celestial Asia Pharm
are legally and beneficially owned by the Company and the details of Celestial
Asia Pharm are set forth in Schedule A-2 attached hereto.

 
C.
Shandong Hua Wei Pharmaceutical Co., Ltd. is a wholly foreign owned company duly
incorporated and validly existing under the laws of the PRC (“Hua Wei”).  The
entire equity interest of Hua Wei is legally and beneficially owned by Celestial
Asia Pharm and the details of Hua Wei are set forth in Schedule A-3 attached
hereto.

 
D.
The Sellers desire to sell and the Purchaser desires to purchase the Sale Shares
(as defined below) pursuant to the terms and subject to the conditions set out
in this Agreement.

 
WITNESSETH
 
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
 
1.
Definitions.

 
The following terms shall have the meanings ascribed to them below:
 
“2011 Financial Statements” has the meaning set forth in Section 2.4 hereof.

 
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“Affiliate” means, with respect to a Person, any other Person that, directly or
indirectly through one or more intermediaries, Controls, is Controlled by, or is
under common Control with, such Person.
 
“Agreement” has the meaning set forth in the Recital of this Agreement.
 
“Approval” means any approval, license, authorization, release, order, or
consent required to be obtained from, or any registration, qualification,
designation, declaration, filing, notice, statement or other communication
required to be filed with or delivered to, any Governmental Authority or any
other Person, or any waiver of any of the foregoing.
 
“Associated Person” means, in relation to a Person, the following persons and
concerns (as appropriate): (i) any Relative of such Person; (ii) any company in
which more than fifty percent (50%) of the equity share capital is held, or is
otherwise Controlled, either directly or indirectly by such Person, or any
Relative of such Person or a firm, or any Relative of such Person is a partner
or a member as the case may be; and (iii) any Subsidiary of a company specified
in clause (ii) above.
 
“Board” or “Board of Directors” means the board of directors of the Company.
 
“Business” means the business carried on by the Group at the date of this
Agreement, the details of which are set forth under “Business Scope” in Schedule
A-3 and Schedule A-4.
 
“BVI” means the British Virgin Islands.
 
“Celestial Asia Pharm” has the meaning set forth in the Recital of this
Agreement.
 
“Circular 75” has the meaning set forth in Section 16(iv) of Schedule C.
 
“Closing” has the meaning set forth in Section 3.1 hereof.
 
“Closing Date” has the meaning set forth in Section 3.1 hereof.
 
“Company” has the meaning set forth in the Recital of this Agreement.
 
“Confidential Information” has the meaning set forth in Section 6.2(i) hereof.
 
“Consideration Shares” has the meaning set forth in Section 2.2 hereof.
 
“Contract” means, as to any Person, any provision of any security issued by such
Person or any oral or written contract, agreement, undertaking, understanding,
indenture, note, bond, loan, instrument, lease, mortgage, deed of trust,
franchise, or license to which such Person is a party or by which such Person or
any of its property is bound.
 
“Control” of a given Person means the power or authority, whether exercised or
not, to direct the business, management, policies or activities of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; provided, that such power or authority shall conclusively
be presumed to exist upon possession of beneficial ownership or power to direct
the vote of more than fifty percent (50%) of the votes entitled to be cast at a
meeting of the members or shareholders of such Person or power to control the
composition of a majority of the board of directors of such Person.  The terms
“Controlled” and “Controlling” have meanings correlative to the foregoing.

 
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“Disclosing Party” has the meaning set forth in Section 6.2(iv) hereof.
 
“Dispute” has the meaning set forth in Section 7.6(i) hereof.
 
“Effective Date” has the meaning set forth in the Recital of this Agreement.
 
“Environmental Law” means any and all applicable PRC or non-PRC Law,
authorization by any Governmental Authority, or any other requirement of any
Governmental Authority relating to (i) environmental matters, (ii) the
generation, use, storage, transportation or disposal of Hazardous Substances, or
(iii) occupational safety and health, industrial hygiene, land use or the
protection of human, plant or animal health or welfare, in any manner applicable
to any member of the Group.
 
“Financial Statements” has the meaning set forth in Section 9 of Schedule C
hereof.
 
“Foreign Exchange Authorization” has the meaning set forth in Section 16(iv) of
Schedule C.
 
“Governmental Authority” means any nation or government or any federation,
province or state or any other political subdivision thereof; any entity,
authority or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including any
government authority, agency, department, board, commission or instrumentality
of the PRC or any other country, or any political subdivision thereof, any
court, tribunal or arbitrator, and any self-regulatory organization.
 
“Governmental Order” means any applicable order, ruling, decision, verdict,
decree, writ, subpoena, mandate, precept, command, directive, consent, approval,
award, judgment, injunction or other similar determination or finding by, before
or under the supervision of any Governmental Authority.
 
“Group” means the Company, Celestial Asia Pharm, Hua Wei, and any Affiliate and
Subsidiary of any of the aforementioned entity.  The particulars of the members
of the Group as at the date of this Agreement are set forth in Schedule A
attached hereto.
 
 “Hazardous Substances” means (but shall not be limited to) substances that are
defined or listed in, or otherwise classified pursuant to, any Environmental
Laws as “hazardous substances,” “hazardous materials,” “hazardous wastes” or
“toxic substances,” or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or “EP toxicity,” and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefore, and asbestos or asbestos-containing
materials.
 
“HKIAC” has the meaning set forth in Section 7.6(iii) hereof.
 
“Hong Kong” means the Hong Kong Special Administrative Region of the People’s
Republic of China.
 
“Hua Wei” has the meaning set forth in the Recital of this Agreement.

 
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 “Indemnifiable Loss” means, with respect to any Person, any action, cost,
damage, disbursement, expense, liability, loss, deficiency, diminution in value,
obligation, penalty or settlement of any kind or nature, other than in any event
consequential, incidental, special and punitive damages.  Notwithstanding
anything to the contrary provided in the preceding sentence, Indemnifiable Loss
shall include, but shall not be limited to, (i) interest or other carrying
costs, penalties, legal, accounting and other professional fees and expenses
incurred in the investigation, collection, prosecution and defense of claims and
amounts paid in settlement, that may be imposed on or otherwise incurred or
suffered by such Person and (ii) any Taxes that may be payable by such Person by
reason of the indemnification of any Indemnifiable Loss hereunder, other than
Taxes that would have been payable notwithstanding the event giving rise to
indemnification.
 
“Indemnified Party” has the meaning set forth in Section 7.3(iv) hereof.
 
“Indemnifying Party” has the meaning set forth in Section 7.3(iv) hereof.
 
“Intellectual Property” means any and all (i) patents, all patent rights and all
applications therefor and all reissues, reexaminations, continuations,
continuations-in-part, divisions, and patent term extensions thereof, (ii)
inventions (whether patentable or not), discoveries, improvements, concepts,
innovations and industrial models, (iii) registered and unregistered copyrights,
copyright registrations and applications, author’s rights and works of
authorship (including artwork of any kind and software of all types in whatever
medium, inclusive of computer programs, source code, object code and executable
code, and related documentation), (iv) URLs, web sites, web pages and any part
thereof, (v) technical information, know-how, trade secrets, drawings, designs,
design protocols, specifications for parts and devices, quality assurance and
control procedures, design tools, manuals, research data concerning historic and
current research and development efforts, including the results of successful
and unsuccessful designs, databases and proprietary data, (vi) proprietary
processes, technology, engineering, formulae, algorithms and operational
procedures, (vii) trade names, trade dress, trademarks, domain names, and
service marks, and registrations and applications therefor, and (viii) the
goodwill of the Business symbolized or represented by the foregoing, customer
lists and other proprietary information and common-law rights.
 
“Key Executives” has the meaning set forth in Section 5(viii) hereof.
 
“Law” or “Laws” means any constitutional provision, statute or other law, rule,
regulation, published official policy or published official interpretation of
any Governmental Authority and any injunction, judgment, order, ruling,
assessment or writ issued by any Governmental Authority.
 
“Liabilities” means, with respect to any Person, all liabilities owing by such
Person of any nature, whether accrued, absolute, contingent or otherwise, and
whether due or to become due.
 
“Lien” means any mortgage, pledge, claim, security interest, encumbrance, title
defect, lien, charge or other restriction or limitation.
 
“Material Adverse Effect” means with respect to any Person, any (i) event,
occurrence, fact, condition, change or development that has had a material
adverse effect on the operations, results of operations, financial condition,
assets or liabilities of such Person, (ii) material adverse effect on such
Person’s ability to perform any material obligations of such Person hereunder or
under any other Transaction Document, as applicable, or (iii) material adverse
effect on any material rights such Person may have hereunder or under any
Transaction Document; provided that, without limiting the generality of this
definition, any adverse effect resulting in any loss, directly or indirectly, of
at least US$100,000 or its equivalent, to the members of the Group (taken as a
whole) shall be deemed to constitute a Material Adverse Effect with respect to
each member of the Group.  Notwithstanding anything to the contrary contained
herein, any reference to a “Material Adverse Effect” with respect to any member
of the Group shall be a reference to a Material Adverse Effect on the Group,
taken as a whole.

 
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“Material Contracts” has the meaning set forth in Section 15(i) of Schedule C
hereof.
 
“Party” has the meaning set forth in the Recital of this Agreement.
 
“PCAOB” means the US Public Company Accounting Oversight Board.
 
“Permits” has the meaning set forth in Section 19(ii) of Schedule C hereof.
 
“Person” means any individual, corporation, partnership, limited partnership,
proprietorship, association, limited liability company, firm, trust, estate or
other enterprise or entity.
 
“Pledged Shares” has the meaning set forth in Section 2.3(ii) hereof.
 
“PRC” means the People’s Republic of China, but solely for the purposes of this
Agreement and the other Transaction Documents, excluding Hong Kong, the Macau
Special Administrative Region and the islands of Taiwan.
 
“PRC GAAP” means generally accepted accounting principles and practices in
effect from time to time in the PRC applied consistently throughout the periods
involved.
 
“Public Official” means any employee of a Governmental Authority, member of a
political party, political candidate, officer of a public international
organization, or officer or employee of a state-owned enterprise, including a
PRC state-owned enterprise.
 
“Purchaser” has the meaning set forth in the Recital of this Agreement.
 
“Purchaser Indemnified Person” has the meaning set forth in Section 7.3(i)
hereof.
 
“Real Property” has the meaning set forth in Section 23(i) of Schedule C hereof.
 
“Related Party” means any of the current or former officers, employees,
directors, or any Person who beneficially owns 5% or more of the outstanding
ordinary shares or equity interest of any member of the Group or any Associated
Person of any of them (or any Relative of any of the foregoing).
 
“Relative” means, in relation to a Person, the spouse, parents, siblings and
children of such Person and their respective spouses and children (as
appropriate).
 
“Representative” has the meaning set forth in Section 17(i) of Schedule C
hereof.
 
“RMB” means Renminbi, the lawful currency of China.
 
“Sale Shares” means 50,000 ordinary shares of the Company, representing 100% of
the entire issued share capital of the Company, to be sold by the Sellers to the
Purchaser at the Closing in accordance with the terms of this Agreement.

 
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“SAFE” means the State Administration of Foreign Exchange of the PRC.
 
“SAFE Rules and Regulations” has the meaning set forth in Section 16(iv) of
Schedule C hereof.
 
“SAIC” means the State Administration for Industry and Commerce of the PRC
and/or its regional and local counterparts.
 
“Seller” has the meaning set forth in the Recital of this Agreement.
 
“Share Pledge” means the share pledge agreement entered into by and between the
Purchaser and the Sellers on the date hereof in the agreed form pursuant to
which each of the Sellers agrees to pledge 10% of its Consideration Shares in
favor of the Purchaser with effect from the Closing Date.
 
“Social Insurance” has the meaning set forth in Section 25(ii) of Schedule C
hereof.
 
“Statement Date” has the meaning set forth in Section 9 of Schedule C hereof.
 
“Subsidiary” means, with respect to any specified Person, any other Person
Controlled by the specified Person, directly or indirectly, whether through
contractual arrangements or through ownership of equity securities, voting power
or registered capital.
 
“Tax” or “Taxes” means all applicable forms of taxation, duties, levies imposts
and social security charges, whether direct or indirect including without
limitation corporate income tax, wage withholding tax, national social security
contributions and employee social security contributions, value added tax,
business tax, customs and excise duties, capital tax and other legal transaction
taxes, dividend withholding tax, dividend distribution tax, land taxes,
environmental taxes and duties and any other type of taxes or duties payable by
virtue of any applicable national, regional or local law or regulation and which
may be due directly or by virtue of joint and several liability in any relevant
jurisdiction; together with any interest, penalties, surcharges or fines
relating to them, due, payable, levied, imposed upon or claimed to be owed in
any relevant jurisdiction.
 
“Tax Return” means any report or statement showing Taxes, used to pay Taxes, or
required to be filed with respect to any Tax (including any elections,
declarations, schedules or attachments thereto, and any amendment thereof),
including any information return, claim for refund, amended return or
declaration of estimated or provisional Tax.
 
“Transaction Documents” means this Agreement, the Share Pledge and any other
agreements, instruments or certificates executed or entered into pursuant to or
in connection with any of the foregoing.
 
“US” means the United States of America.
 
“US$” means the United States dollars, the lawful currency of the US.
 
“US GAAP” means generally accepted accounting principles and practices in effect
from time to time in the US.
 
“Warranties” has the meaning set forth in Section 4.1 hereof.

 
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2. 
Sale and Purchase of Shares

 

 
2.1
Sale and Purchase of Shares.

 
(i)           Subject to the terms and conditions hereof, each of the Sellers
shall sell the Sale Shares set out opposite its respective name in Table 1 below
free from all Liens and with all rights now attached to the Sale Shares
including the right to receive all dividends and other distributions declared,
made or paid on or after the Closing Date, and the Purchaser relying on the
representations, warranties, undertakings and indemnities of the Sellers
contained or referred to in this Agreement shall purchase the Sale Shares with
effect from Closing.
 
Table 1

Name of Seller
   
Number of Sale Shares
         
YAU Fan Chung
    735            
WANG Zi Yi
    20,000            
WANG Yuan Yuan
    8,825            
LI Xian Feng
    20,440  

 
(ii)           Each Seller hereby irrevocably waives and shall procure, at or
prior to Closing, the irrevocable waiver of any restrictions on transfer
(including rights of pre-emption) which may exist in relation to the Sale
Shares, whether under the articles of association of the Company or otherwise.
 
(iii)          The Purchaser shall not be obliged to complete the purchase of
any of the Sale Shares unless the sale of all the Sale Shares is completed
simultaneously in accordance with this Agreement.
 

 
2.2 
Consideration.

 
The total purchase price for the Sale Shares is US$9,000,000 which shall be
satisfied within 90 days after the Closing Date by the issue to the Sellers of
common stock of the Purchaser (“Consideration Shares”), in the manner set forth
in Section 2.3 and in the proportions set out in Table 2 below:
 
Table 2
 
Name of Seller
   
Percentage of
Consideration Shares
         
YAU Fan Chung
    1.47 %          
WANG Zi Yi
    40 %          
WANG Yuan Yuan
    17.65 %          
LI Xian Feng
    40.88 %

 
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2.3 
Payment.

 
(i)           The Purchaser shall issue the Consideration Shares to the Sellers
or their designees within 90 days after the Closing Date. The number of the
Consideration Shares to be issued to the Sellers shall be equal to US$9,000,000
divided by the fair market value of the Purchaser’s issued and outstanding
common stock as at the Closing Date, as determined by a third party valuer
selected by the Purchaser at its discretion.
 
(ii)           Ninety percent (90%) of the total Consideration Shares shall be
released to the Sellers in such proportions as set forth in Table 2 in
accordance with Section 2.2 and this Section 2.3 and ten percent (10%) of the
total Consideration Shares (“Pledged Shares”) shall be pledged to the Purchaser
in accordance with the terms of the Share Pledge upon the release of ninety
percent (90%) of the total Consideration Shares.  The Pledged Shares shall be
released to the Sellers subject to the terms set forth in Section 2.4.  The
Consideration Shares shall be locked up for six months commencing from the date
of its release to the Seller pursuant to Rule 506 of Regulation D. The Sellers
shall promptly execute such documents as may be required by the Purchaser to
provide for such lock-up obligations.
 
2.4         Holdback. The Sellers hereby covenant and undertake that the
consolidated net revenue of the Company for the financial year ended December
31, 2011, based on the audited consolidated balance sheet and income statement
of the Company (“2011 Financial Statements”), prepared in accordance with US
GAAP and audited by a PCAOB registered accounting firm shall be no less than
RMB275,000,000.  The Purchaser shall, within twenty (20) Business Days after it
receives the 2011 Financial Statements, release the following amount of Pledged
Shares to the Sellers subject to the following terms:
 
(i)           all of the Pledged Shares, if the consolidated net revenue of the
Company according to the 2011 Financial Statements is no less than
RMB275,000,000;
 
(ii)          50% of the Pledged Shares, if the consolidated net revenue of the
Company according to the 2011 Financial Statements is below RMB275,000,000 but
no less than RMB250,000,000; or
 
(iii)          none of the Pledged Shares, if the consolidated net revenue of
the Company according to the 2011 Financial Statements is below RMB250,000,000.
 
In the cases of (ii) and (iii) above, the Purchaser shall have the right to take
any action with respect to the unreleased Pledged Shares as it desires and for
the avoidance of doubt, the Sellers shall have no right, entitlement or claim
whatsoever with respect to such Pledged Shares.

 
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3. 
Closing.

 
3.1          Closing.  The consummation of the sale and purchase of the Sale
Shares shall be conducted by remote exchange of relevant documents, on a date no
later than two (2) Business Days after the fulfillment (or waiver by the
Purchaser) of the conditions to the Closing as set forth in Section 5 hereof, or
at such other place and time as the Purchaser and the Sellers may mutually agree
upon (the “Closing”, and the date of the Closing, the “Closing Date”).
 
3.2          Closing Deliverables.
 
At the Closing, the Sellers shall deliver or cause to be delivered the following
items to the Purchaser:
 
(i)           duly executed instrument of transfers of Sale Shares in favor of
the Purchaser together with the relevant share certificates;
 
(ii)          counterparts of each Transaction Document to which any Seller is a
party, duly executed by such Seller;
 
(iii)         a compliance certificate dated the Closing Date signed by each
Seller or its duly authorized representative certifying that all the conditions
specified in Section 5 have been fulfilled and stating that there shall have
been no Material Adverse Effect since the Statement Date;
 
(iv)         originals of the resignation letters duly executed by each director
of each of the Company and Celestial Asia Pharm, in the form satisfactory to the
Purchaser;
 
(v)          originals of the resignation letters duly executed by the auditors
of the Company (if any), in the form satisfactory to the Purchaser;
 
(vi)         all the statutory and other books and records (including financial
records) (duly written up to, but not including, Closing) of the Group and its
certificate of incorporation, current business registration certificate, common
seal and any other papers and documents of the Group in their possession or
under their control;
 
(vii)        copies of the directors’ resolutions and/or shareholders’
resolutions of the Company and each Seller, where applicable, approving, among
other things, (A) the transfer of the Sale Shares to the Purchaser; (B) the
execution of and the performance of such Seller’s obligations under the
Transaction Documents; and (C) any other transactions contemplated under the
Transaction Documents;
 
(viii)       an original of the resolutions of the board of directors of the
member of the Group (where applicable) approving, in the form satisfactory to
the Purchaser:
 
(a)          the registration of the Purchaser as holder of the Sale Shares;
 
(b)          the appointment of such persons as the Purchaser may nominate as
directors of such member of the Group; and
 
(c)          revocation of all authorities to the bankers of the Group relating
to bank accounts of the Group and procure the giving of authority to such
persons as the Purchaser may nominate to operate the same;

 
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4.
Representations and Warranties of the Sellers.

 
4.1          The Sellers, jointly and severally, represent and warrant to the
Purchaser that each of the Recitals and each of the warranties as set out in
Schedule C (the “Warranties”) is true, accurate, complete and not misleading as
of the date of this Agreement and each of the Warranties will continue to be
true, accurate, complete and not misleading on each day up to and including the
Closing Date as if repeated on each such day by reference to the facts and
circumstances subsisting at that date and on the basis that any reference in the
Warranties, whether express or implied, to the date of this Agreement is
substituted by a reference to that date.
 
4.2          Each of the Warranties shall be construed as a separate and
independent Warranty and, except where expressly provided to the contrary, shall
not be limited or restricted by reference to or inference from the terms of any
other Warranty or any other terms of this Agreement.
 
4.3          The Sellers shall, jointly and severally, procure that no act shall
be performed or omission allowed, either by themselves or by any member of the
Group in such interval which would result in any of the Warranties being
breached or misleading at any time up to and including the Closing.
 
4.4          The Sellers acknowledge that the Purchaser is entering into this
Agreement in reliance upon representations in the terms of the Warranties made
by the Sellers with the intention of inducing the Purchaser to enter into this
Agreement and that accordingly the Purchaser has been induced to enter into this
Agreement relying on each of the Warranties.
 
4.5          The Sellers, jointly and severally, undertake to disclose in
writing to the Purchaser anything which is or may constitute a breach of or be
inconsistent with any of the Warranties immediately upon it coming to the notice
of any of them at any time on, before or after  the Closing.
 
4.6          Benefit of Warranties. Any rights to which the Purchaser may be or
becomes entitled by reason of any of the Warranties and all remedies which may
be available to the Purchaser in consequence of any of the Warranties being
untrue, misleading or breached will enure for the benefit of any holding company
of the Purchaser or any subsidiary of any such holding company which is the
beneficial owner for the time being of the Sale Shares. Accordingly, any loss
which is sustained by such beneficial owner for the time being of the Sale
Shares in consequence of any of the Warranties being untrue, misleading or
breached will be deemed to be that of the Purchaser and the Purchaser may bring
proceedings and exercise any other remedy on the footing that it has been the
beneficial owner of the Sale Shares at all times from Completion. If so
requested by the Purchaser, the Sellers will represent, warrant and undertake by
way of deed on the terms satisfactory to the Purchaser directly with such
beneficial owner on the terms and subject to the limitations of this Agreement.
 
5.
Conditions of the Purchaser’s Obligations at the Closing.

 
The obligation of the Purchaser to purchase the Sale Shares at the Closing is
subject to the fulfillment of each of the following conditions (any or all of
which may be waived by the Purchaser) at or prior to the Closing:
 
(i)           Due Diligence.  The Purchaser is satisfied with the due diligence
results as to the business, legal, financial, accounting, contractual, and Tax
positions of each member of the Group. 

 
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(ii)           Representations and Warranties.   The representations and
warranties made by the Sellers in Section 4 and Schedule C shall be true,
correct, accurate, complete and not misleading when made, and shall be true,
correct, accurate, complete and not misleading as of the Closing Date with the
same force and effect as if they had been made on and as of such date, or as of
another date if any representations and warranties are made with respect to such
other date.
 
(iii)          Performance.  Each of the Sellers shall have performed and
complied with all covenants, agreements, obligations and conditions contained in
the Transaction Documents that are required to be performed or complied with by
it on or before the Closing and shall have obtained and delivered to the
Purchaser all applicable government, regulatory or other approvals, consents,
waivers and qualifications necessary to complete the transactions contemplated
hereby and under the other Transaction Documents.
 
(iv)         Proceedings and Documents.  All corporate and other proceedings in
connection with the transactions contemplated hereby and under the other
Transaction Documents and all documents and instruments incidental to such
transactions shall be reasonably satisfactory in substance and form to the
Purchaser, and the Purchaser shall have received all copies of such documents as
it may reasonably request.
 
(v)          Authorization.  Each member of the Group and each Seller shall have
obtained any and all Approvals necessary for consummation of the transactions
contemplated by this Agreement and under the other Transaction Documents,
including any waivers of any anti dilution rights, right of first refusal or
preemptive rights, put or call rights and any and all similar rights (if any) of
any shareholder, on or prior to the Closing that are required to be obtained on
or prior to the Closing.
 
(vi)         Compliance Certificate.  At the Closing, the Sellers shall have
delivered to the Purchaser a certificate, dated the Closing Date, certifying
that all the conditions specified in this Section 5 have been fulfilled and
stating that there shall have been no Material Adverse Effect since the
Statement Date.
 
(vii)        Audited Financials.  The Purchaser shall have received the audited
consolidated balance sheet and income statement of the Company for the financial
year ended December 31, 2010, prepared in accordance with US GAAP by a PCAOB
registered accounting firm and accompanied by a clean, unqualified opinion of
such firm.
 
(viii)       Key Executives.  The Purchaser shall have received a duly signed
employment agreement between Mr. SUN Wenjie and Mr. SUN Chengyong (“Key
Executives”) and such member of the Group as determined by the Purchaser at its
discretion, in such form and terms satisfactory to the Purchaser, which terms
shall include, among others, that (A) Mr. SUN Wenjie and Mr. SUN Chengyong shall
continue to serve as the executive officers of Hua Wei for five consecutive
years from the Closing Date, and (B) without the prior written consent of the
Purchaser, none of Mr. SUN Wenjie, Mr. SUN Chengyong or any of their direct
relatives, including their parents, spouse and children, shall during the five
years from the Closing Date, either on their own account or in conjunction with
or on behalf of any other person, carry on or be engaged, concerned or
interested, directly or indirectly, whether as shareholder, director, partner,
agent or otherwise, in carrying on any business which competes, or do any act or
omit to do any act which may assist or enable any other person to compete with
the Business in the PRC.

 
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(ix)          Good Standing.  The Purchaser shall have received a certificate of
good standing issued by the appropriate authority of the BVI in customary form,
dated no earlier than twenty (20) days prior to the Closing.
 
(x)           No Material Adverse Change.  There shall not, since the Statement
Date, have been any material adverse change to the condition (financial or
otherwise), results of operations, assets, regulatory status, business and
prospects of the Group or the financial markets or economic conditions in
general that has had a Material Adverse Effect on the Group.
 
6. 
Covenants; Other Agreements.

 
6.1         Title
 
Each Seller, jointly and severally, covenants with the Purchaser that
 
(i)           it has now and at all times up to and at Closing shall have full
power and the right to sell and transfer the legal and beneficial title in the
Sale Shares listed against that Seller's name in Table 1 on the terms set out in
this Agreement;
 
(ii)          the Company is now and at all times up to and at Closing shall be
the sole legal and beneficial owner of the entire issued share capital of
Celestial Asia Pharm free from all Liens; and
 
(iii)         Celestial Asia Pharm is now and at all times up to and at Closing
shall be the sole legal and beneficial owner of the entire equity interest of
Hua Wei free from all Liens.
 
6.2         Confidentiality.
 
(i)           Each Party acknowledges that the terms and conditions of this
Agreement and the other Transaction Documents, the transactions contemplated
hereby and thereby, including their existence, and all information furnished by
any Party and by representatives of such Party to the other Party or any of the
representatives of such Party (collectively, the “Confidential Information”),
shall be considered confidential information.
 
(ii)          No disclosure or announcement relating to the Confidential
Information shall be made by any Party without the prior written consent of the
other Party, which consent shall not be unreasonably withheld or delayed.
 
(iii)         The provisions of Section 6.2(ii) shall not apply to any
disclosure or announcement which may be required by Law, by any regulatory body,
or by the rules of any stock exchange upon which the shares of a Party or of any
of its Affiliates are quoted and publicly traded.  The Party making the
announcement shall send to each of the other Party a copy of such public
announcement prior to that announcement’s publication.

 
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(iv)        Except as set forth in Section 6.2(iii) above, in the event that any
Party is requested or becomes legally compelled (including without limitation,
pursuant to any applicable tax, securities, or other Laws of any jurisdiction)
to disclose any Confidential Information, such Party (the “Disclosing Party”)
shall to the extent permitted by law provide the other Parties hereto with
prompt written notice of that fact and shall consult with the other Parties
hereto regarding such disclosure.  At the request of the other Parties, the
Disclosing Party shall, to the extent reasonably possible and with the
cooperation and reasonable efforts of the other Parties, seek a protective
order, confidential treatment or other appropriate remedy. In any event, the
Disclosing Party shall furnish only that portion of the information that is
legally required and shall exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded to such information.
 
(v)         Notwithstanding any other provision of this Section 6.2, the
confidentiality obligations of the Parties under this Section 6.2 shall not
apply to:  (a) information which a restricted party learns from a third party
having the right to make the disclosure, provided the restricted party complies
with any restrictions imposed by the third party; (b) information which is
rightfully in the restricted party’s possession prior to the time of disclosure
by the protected party and not acquired by the restricted party under a
confidentiality obligation; (c) information which was in the public domain or
otherwise known to the restricted party before it is furnished to it by another
party hereto or, after it is furnished to that restricted party, enters the
public domain without breach by that restricted party of this Section 6.2; (d)
information disclosed by any director or observer of the Company to its
appointer or any of its Affiliates or to any Person to whom disclosure would be
permitted in accordance with the foregoing provisions of this Section 6.2; or,
(e) information which a restricted party develops independently without
reference to the Confidential Information.
 
(vi)        The provisions of this Section 6.2 shall terminate and supersede the
provisions of any separate nondisclosure agreement previously executed by any of
the Parties hereto with respect to the transactions contemplated hereby.
 
(vii)       Notices.  All notices required under this Section 6.2 shall be made
pursuant to Section 7.7 of this Agreement.
 
6.3         Compliance with Laws.  Prior to Closing, each Seller shall cause
each member of the Group to use their best endeavors to comply in all respects
with all applicable Laws, including but not limited to applicable PRC rules and
regulations relating to the Business, Intellectual Property, taxation,
employment and social welfare and benefits.
 
6.4         Rectification.  Without prejudicing the generality of the provisions
under Section 6.3, before the Closing and upon the written request by the
Purchaser, the Sellers shall cause each member of the Group to rectify any
non-compliance with applicable Laws.
 
6.5         Compliance with Laws Regarding Anti-Bribery, Anti-Corruption,
Anti-Money Laundering and Sanctions.
 
(i)          Prior to Closing, each Seller shall cause each member of the Group
and its Representatives to comply with all anti-bribery, anti-corruption and
anti-money laundering Laws as referred to in Section 17 of Schedule C.

 
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(ii)         Prior to Closing, each Seller shall cause each member of the Group
and its Representatives:
 
(1)         to remain in compliance with all applicable anti-bribery or
anti-corruption Laws, including those prohibiting the bribery of Public
Officials;
 
(2)         not to authorize, offer, be a party to, make any payments or provide
anything of value directly or indirectly to any Public Officials; and
 
(3)         not to use, commit to have the intention of using the payments
received, or to be received, by them from the Purchaser for any purpose that
could constitute a violation of any applicable Laws.
 
6.6         Covenants on Validity of Approvals.  Each Seller shall prior to
Closing cause each member of the Group to maintain at all times the validity of,
and comply with all legal and regulatory requirements with respect to, the
Approvals that it has obtained for the conduct of its Business.
 
6.7         Closing.  Each Seller shall work expeditiously with the Purchaser in
good faith towards the Closing and will not, directly or indirectly, do any act
or thing which is intended or might reasonably be expected to prevent or delay
the Closing.
 
6.8         Conduct of Business before Closing. The Sellers shall procure that
between the date of this Agreement and Closing each member of the Group shall
(i) carry on its business, as carried on as at the date of this Agreement, in
the normal course and (ii) use best efforts to preserve intact its current
business organization, keep available the services of their current officers and
employees, and keep and preserve its present relationships with Governmental
Authorities, customers, suppliers, licensors, licensees, distributors and others
having material business dealings with it.  In addition, and without limiting
the generality of the foregoing,  the Sellers shall procure that between the
date of this Agreement and Closing each member of the Group shall not do any of
the following without the prior written consent of the Purchaser:
 
(i)           (a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock or other equity or voting
interests, (b) split, combine or reclassify any of its capital stock or other
equity or voting interests, or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or other equity or voting interests, (c) purchase, redeem or
otherwise acquire any shares of capital stock or any other securities or any
rights, warrants or options to acquire any such shares or other securities or
(d) take any action that would result in any amendment, modification or change
of any terms of any of its indebtedness for borrowed money;
 
(ii)          issue, deliver, sell, pledge, grant or otherwise encumber (a) any
shares of its capital stock, (b) any other voting securities, (c) any securities
convertible into or exchangeable for, or any options, warrants, calls or rights
to acquire, any such shares, voting securities or convertible or exchangeable
securities or (d) any “phantom” stock, “phantom” stock rights, stock
appreciation rights or stock-based performance units;
 
(iii)         amend its memorandum and articles of association or other
comparable organizational documents;
 
 
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(iv)        acquire or agree to acquire (a) by merging or consolidating with, or
by purchasing all or a substantial equity or voting interest in, or by
purchasing all or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (b) any assets that are
material, individually or in the aggregate, to the Group, taken as a whole;
 
(v)         (a) grant to any of its executive officers or directors any increase
in compensation, (b) grant to any of its current or former executive officers or
directors any increase in severance or termination pay, (c) enter into any
severance or termination agreement with any such executive officer or director,
(d) establish, adopt, enter into or amend any collective bargaining agreement or
benefit plan or (e) take any action to accelerate any rights or benefits, or
make any determinations under any of its benefit plans; provided that the
foregoing clauses (a), (b), (c), (d) and (e) shall not restrict it from entering
into or making available to newly hired employees or to employees (other than
executive officers), in the context of promotions based on job performance or
workplace requirements, in each case in the ordinary course of business, plans,
agreements, benefits and compensation arrangements (including incentive grants)
that have a value that is consistent with the past practice of making
compensation and benefits available to newly hired or promoted employees in
similar positions;
 
(vi)        make any change in accounting methods, principles or practices
affecting the reported consolidated assets, liabilities or results of operations
of the Company;
 
(vii)       convene any shareholders’ meeting (or any adjournment thereof),
other than a shareholders’ meeting to vote upon the adoption of this Agreement
(solely to the extent such meeting is required by this Agreement and applicable
Law);
 
(viii)      sell, lease, license, sell and lease back, mortgage or otherwise
subject to any Lien or otherwise dispose of or abandon any of its properties or
assets (including any shares of capital stock, equity or voting interests or
other rights, instruments or securities or rights with respect to any item of
Intellectual Property), except for sales or dispositions of assets in the
ordinary course of business consistent with past practice;
 
(ix)         (a) repurchase, prepay, incur or modify in any respect any
indebtedness for borrowed money, except for (1) advances of credit incurred
under its existing credit facilities in the ordinary course of business and
consistent in scope with past practice, (2) short-term borrowings incurred in
the ordinary course of business consistent in scope with past practice to
finance its working capital needs, and (3) indebtedness solely involving it and
any of its direct or indirect wholly owned subsidiaries, (b) issue or sell any
debt securities or warrants or other rights to acquire any of its debt
securities, guarantee any debt securities of another person, enter into any
“keep well” or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing or (c) make any loans, advances or capital contributions to, or
investments in, any other Person;
 
(x)          incur or commit to incur, or make or agree to make, any capital
expenditures, or any obligations or liabilities in connection therewith;

 
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(xi)        make or change any material Tax election, adopt or change any
accounting method or period in respect of Taxes, file any amended Tax Return or
settle or compromise any Tax liability or refund;
 
(xii)       (a) pay, discharge, settle or satisfy any action, litigation, claim
or arbitration, (b) cancel any indebtedness (individually or in the aggregate)
or waive any claims or rights of value or (c) waive any benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement to
which it is a party;
 
(xiii)      enter into or amend, extend or terminate in a manner that is adverse
to it, or waive, release or assign any rights or claims under any Material
Contract or any contract that would have been deemed to be a Material Contract
if entered into prior to the date hereof, in each case except in the ordinary
course of business consistent with past practice;
 
(xiv)      enter into any contract pursuant to which the consent of the other
party thereto would be required to effect the consummation of the transaction
contemplated hereunder;
 
(xv)       adopt or enter into a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization;
 
(xvi)      write down any of its assets, including any rights with respect to
any item of its Intellectual Property, except pursuant to applicable Law or
accounting requirements;
 
(xvii)     adopt or enter into any collective bargaining agreement or other
labor union contract applicable to its employees; or
 
(xviii)    authorize any of, or commit, resolve or agree to take any of, the
foregoing actions.
 
6.9         Non-Competition. Each of the Sellers undertakes severally with the
Purchaser that it or he will not, without the prior written consent of the
Purchaser, whether directly or indirectly and either alone or in conjunction
with, or on behalf of, any other person, and whether as principal, shareholder,
director, employee, agent, consultant, partner or otherwise:
 
(i)          for a period of three years immediately following Closing, canvass,
solicit or approach, or cause to be canvassed, solicited or approached, for
orders any person who at any time during the 24 months immediately preceding the
Closing Date is or was:
 
(1)         negotiating with any member of the Group for the supply by any such
company of goods or services;
 
(2)         a client or customer of any member of the Group; or
 
(3)         in the habit of dealing with any member of the Group,
 
where the orders relate to goods and/or services which are competitive with or
of the type supplied by any member of the Group at any time during the 24 months
immediately preceding the Closing Date;

 
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(ii)         for a period of three years immediately following Closing,
interfere, or seek to interfere, with the continuance of supplies to any member
of the Group from any supplier who has been supplying goods and/or services to
any such company at any time during the 24 months immediately preceding the
Closing Date if such interference causes or would cause that supplier to cease
supplying, or materially reduce its supply of, those goods and/or services to
any such company;
 
(iii)        for a period of five years immediately following the Closing Date,
either on its own account or in conjunction with or on behalf of any person,
firm or company, carry on or participate or have an interest in, anywhere in the
PRC, any business comprised in the Business and/or any other business which
competes directly or indirectly with the Business; and
 
(iv)        for a period of three years immediately following the Closing Date,
either on its own account or in conjunction with or on behalf of any person,
firm or company, employ or solicit or endeavour to entice away from any member
of the Group any person who to its or his knowledge is at the date of this
Agreement or has been during the 24 months preceding the date of this Agreement
an employee of any such company and whether or not such person would commit a
breach of contract by reason of leaving service or office.
 
Each of the undertakings in Section 6.9 is a separate and independent
undertaking. If one or more of those undertakings is held to be void or
unenforceable, the validity of the remaining undertakings will not be affected.

The Sellers agree that:

 
(a)
the restrictions and undertakings contained in Section 6.9 are reasonable and
necessary for the protection of the Purchaser’s legitimate interests in the
goodwill of the Group; and

 
(b)
if any such restrictions or undertakings are found to be void or voidable, but
would be valid and enforceable if some part or parts of the restriction or
undertaking were deleted, such restriction or undertaking will apply with such
modifications as may be necessary to make it valid and enforceable.

Without prejudice to the above provisions, if any restriction or undertaking is
found by any court or other competent authority to be void or unenforceable, the
Parties to the relevant restriction or undertaking will negotiate in good faith
to replace such void or unenforceable restriction or undertaking with a valid
provision, which, as far as possible, has the same legal and commercial effect
as that which it replaces.

The Parties acknowledge that since damages or an account of profits will not be
an adequate remedy for a breach of the obligations in Section 6.9, a Party is
entitled to an injunction to prevent a breach or continued breach.

 
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6.10      Sellers’ Cooperation and Furnishing of Information.  Each of the
Sellers shall cooperate fully with the Purchaser and furnish all information
concerning itself, its Affiliates, directors, officers and stockholders, any
member of the Group and such other matters as may be reasonably necessary or
advisable in connection with the transactions contemplated hereby, in the
preparation of all relevant disclosure and filings to the competent authorities
when so requested by the Purchaser. Subject to applicable Law, and upon
reasonable prior written notice, the Sellers shall, and shall cause each member
of the Group to, afford to the Purchaser and to its Representatives reasonable
access during normal business hours during the period prior to the Closing Date
to all of their properties, offices and other facilities, officers, personnel
and books, records, contracts, permits and other information as may be requested
by the Purchaser and, during such period, the Sellers shall, and shall cause
each of the member of the Group to, furnish promptly to the Purchaser all
financial, operating and other data, documents and information concerning its
business, properties and personnel as the Purchaser may request.
 
7.
Miscellaneous.

 

 
7.1
Termination; Survival.

 
(i)           This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned at any time before the Closing: (a) by
mutual written agreement of the Purchaser and the Sellers; (b) by the Purchaser
in the event any of the closing conditions as set forth in Section 5 herein
shall have not been satisfied or waived by the Purchaser on or before the date
that is 30 days after the date hereof.
 
(ii)         The representations and warranties set forth under Schedule C and
any covenants and agreements of the Sellers contained in or made pursuant to
this Agreement shall survive after the Closing, and such representations,
warranties, covenants and agreements shall in no way be affected by any due
diligence or investigation of the subject matter thereof made by or on behalf of
the Purchaser and any facts which are known to the Purchaser.
 
(iii)         Subject to Section 7.1(ii) above, if this Agreement is terminated
pursuant to Section 7.1(i) above, this Agreement shall forthwith become null and
void, and there shall be no liability or obligation on the part of the Sellers
or the Purchaser (or any of their respective officers, directors, employees,
agents or other Representatives or Affiliates) under this Agreement or in
connection with the transactions contemplated hereby, except that such
termination shall not relieve any breaching party from liability hereunder from
breach of any representation or warranty contained herein or any breach of any
covenant or agreement contained herein.
 
7.2         Successors and Assigns.  Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the Parties hereto whose
rights or obligations hereunder are affected by such terms and conditions.  This
Agreement, and the rights hereunder, shall not be assigned, and the obligations
hereunder shall not be transferred, without the mutual written consent of the
Parties hereto, provided that the Purchaser may assign its rights and
obligations to an Affiliate or a nominee of the Purchaser without consent of the
other Parties under this Agreement.  Nothing in this Agreement, express or
implied, is intended to confer upon any Party other than the Parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
Liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 
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7.3         Indemnity.
 
(i)           The Sellers hereby agree to jointly and severally indemnify and
hold harmless any member of the Group, the Purchaser, and the Purchaser’s
employees, Affiliates, agents and assigns (each a “Purchaser Indemnified
Person”), from and against any and all Indemnifiable Losses suffered by the
Purchaser, or the Purchaser’s employees, Affiliates, agents and assigns, as a
result of, or based upon or arising from any breach or nonperformance of any of
the certificates, representations, warranties, covenants or agreements made or
given by the Sellers in or pursuant to this Agreement or any of the other
Transaction Documents;
 
(ii)          Without limiting the generality of Section 7.3(i), each of the
Sellers hereby agrees to jointly and severally indemnify and hold harmless any
member of the Group, the Purchaser and the Purchaser Indemnified Person, from
and against any and all Indemnifiable Losses suffered by any member of the Group
and/or the Purchaser or the Purchaser Indemnified Person, arising from:
 
(1)         any penalties imposed on any member of the Group by SAIC or any
other relevant government authority for non-compliance with the applicable Laws
and regulations relating to any capital increase of any member of the Group
carried out before the Closing;
 
(2)         any penalties imposed on any member of the Group by SAFE or any
other relevant government authority for non-compliance with the applicable Laws
and regulations relating to any remittance of foreign currencies by any member
of the Group carried out before the Closing;
 
(3)          failure by the Group to obtain all the licences, permits,
registrations and certificates necessary for the Group to conduct its business;
 
(4)          failure by the Group to register or be licensed to use any of the
trademarks used by any member of the Group as at the date of this Agreement; and
 
(5)          any outstanding payments to the social security funds and/or to the
housing provident fund as at the Closing Date which are requested by the
relevant government authority to be repaid by the relevant member of the Group,
and any penalties imposed on any member of the Group by any relevant government
authority for non-compliance with any laws and regulations relating to the
social security funds and/or the housing provident fund.
 
(iii)         Tax Indemnification.  Each Seller shall jointly and severally
indemnify, exonerate and hold free and harmless each Purchaser Indemnified
Person from and against any Indemnifiable Losses attributable to (a) all Taxes
(or the non-payment thereof) of any member of the Group for all Taxable periods
ending on or before the Closing Date and the portion through the end of the
Closing Date for any Taxable period that includes (but does not end on) the
Closing Date, (b) all Taxes of any member of an affiliated, consolidated,
combined or unitary group of which any member of the Group is or was a member on
or prior to the Closing Date, and (c) any and all Taxes of any person imposed on
any member of the Group as a transferee or successor, by contract, or otherwise.

 
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(iv)        Any Party seeking indemnification with respect to any Indemnifiable
Loss (an “Indemnified Party”) shall give written notice to the party or parties
required to provide indemnity hereunder (the “Indemnifying Party”).
 
(v)         If any claim, demand or Liability is asserted by any third party
against any Indemnified Party, the Indemnifying Party shall upon the written
request of the Indemnified Party, defend any actions or proceedings brought
against the Indemnified Party in respect of matters embraced by the indemnity
under this Section 7.3.  If, after a request to defend any action or proceeding,
the Indemnifying Party neglects to defend the Indemnified Party, a recovery
against the Indemnified Party suffered by it in good faith shall be conclusive
in its favor against the Indemnifying Party, provided, however, that, if the
Indemnifying Party has not received reasonable notice of the action or
proceeding against the Indemnified Party or is not allowed to control its
defense, judgment against the Indemnified Party shall only constitute
presumptive evidence against the Indemnifying Party.
 
(vi)        This Section 7.3 shall not be deemed to preclude or otherwise limit
in any way the exercise of any other rights or pursuit of other remedies for the
breach of this Agreement or with respect to any misrepresentation.
 
(vii)       For the purposes of this Section 7.3, the “Indemnifiable Losses” of
an Indemnified Party shall include a quantifiable diminution in the value of any
member of the Group arising out of a matter which is the subject of the
indemnities in Sections 7.3(i), (ii) and/or (iii).
 
7.4         Tax and Social Insurance Expenses.  The Sellers shall jointly and
severally pay to the relevant member of the Group the full amount of any losses,
liabilities, damages, liens, penalties, costs and expenses, incurred by and
associated with any failure by any member of the Group to pay any Taxes or
social insurance contributions owed by it (both as a taxpayer and a withholding
agent) prior to the Closing or attributable to its operational period prior to
the Closing.
 
7.5         Governing Law.  This Agreement shall be governed by and construed
under the Laws of Hong Kong.
 
7.6         Dispute Resolution.
 
(i)           Any dispute, controversy or claim (each, a “Dispute”) arising out
of or relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved at the first instance through consultation
between the parties to such Dispute.  Such consultation shall begin immediately
after any party has delivered written notice to any other party to the Dispute
requesting such consultation.
 
(ii)          If the Dispute is not resolved within thirty (30) days following
the date on which such notice is given, the Dispute shall be submitted to
arbitration upon the request of any party to the Dispute with notice to each
other party to the Dispute.
 
(iii)         The arbitration shall be conducted in Hong Kong and shall be
administered by the Hong Kong International Arbitration Centre (the “HKIAC”) in
accordance with the HKIAC Administered Arbitration Rules in force at the time of
the commencement of the arbitration. There shall be one (1) arbitrator who shall
be qualified to practice Law in Hong Kong chosen by the Secretary General of the
HKIAC.

 
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(iv)        The arbitration proceedings shall be conducted in English.  If the
HKIAC Administered Arbitration Rules are in conflict with the provisions of this
Section 7.6, including the provisions concerning the appointment of arbitrators,
the provisions of this Section 7.6 shall prevail.
 
(v)         The arbitrator shall decide any dispute submitted by the parties to
the arbitration tribunal strictly in accordance with the substantive Law of Hong
Kong and shall not apply any other substantive Law.
 
(vi)        Any party to the Dispute shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
 
(vii)       During the course of the arbitration tribunal’s adjudication of the
dispute, this Agreement shall continue to be performed except with respect to
the part in dispute and under adjudication.
 
(viii)      The award of the arbitration tribunal shall be final and binding
upon the parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
 
(ix)         The Purchaser and each of the Sellers hereby irrevocably appoint
HONG KONG KING & KIRIN BUSINESS LIMITED, whose address is FLAT 01, 28/F., YAT
HEI HOUSE, TUNG HEI COURT, 38 YIU HING ROAD, HONG KONG (“Agent”), to receive
legal procedure documents in Hong Kong (including but not limited to, claims for
reimbursement, summons, arbitration application and arbitration award) (“Legal
Procedure Documents”).
 
(x)          Each of the Parties hereby undertakes immediately notify the other
Parties in writing if the Agent or its address is modified.
 
(xi)         Each of the Parties agrees and confirms that Legal Procedure
Documents which have been sent to its Agent shall be deemed as having been sent
to such Party.
 
7.7         Notices.  Any notice required or permitted pursuant to this
Agreement shall be given in writing and shall be given either personally or by
sending it by next-day or second-day courier service, fax, electronic mail or
similar means to the address as shown below the signature of such Party on the
signature page of this Agreement (or at such other address as such Party may
designate by fifteen (15) days’ advance written notice to the other Parties to
this Agreement given in accordance with this Section 7.7).  Where a notice is
sent by next-day or second-day courier service, service of the notice shall be
deemed to be effected by properly addressing, pre-paying and sending by next-day
or second-day service through an internationally-recognized courier a letter
containing the notice, with a confirmation of delivery, and to have been
effected at the expiration of two (2) days after the letter containing the same
is sent as aforesaid. Where a notice is sent by fax or electronic mail, service
of the notice shall be deemed to be effected by properly addressing, and sending
such notice through a transmitting organization, with a written confirmation of
delivery, and to have been effected on the day the same is sent as aforesaid.

 
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7.8         Fees and Expenses.
 
(i)           Subject to Section 7.8(ii), each of the Purchaser and the Sellers
shall pay for its own costs and expenses incurred in connection with the
negotiation, execution, delivery and performance of this Agreement and other
Transaction Documents and the transactions contemplated hereby and
thereby.  Each Seller undertakes to the Purchaser that neither the Company nor
any other member of the Group has paid or will pay (in connection with the
transactions contemplated by this Agreement) any legal, accounting or other
professional charges, fees, expenses or commissions relating to the sale of the
Sale Shares including any such costs incurred in connection with any
investigation of the affairs of any member of the Group or the negotiation,
preparation, execution and carrying into effect of this Agreement and other
Transaction Documents.
 
(ii)          All transfer, documentary, sales, use stamp, registration and
other such Taxes, and any conveyance fees or recording charges incurred in
connection with the transactions contemplated under this Agreement and other
Transaction Documents, shall be borne and paid by the Sellers when due.  The
Sellers will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges.
 
7.9         Finder’s Fee.  Each of the Sellers and the Purchaser represents that
it neither is nor will be obligated for any finder’s fee or commission in
connection with the transaction contemplated hereunder.
 
7.10       Severability.  If one or more provisions of this Agreement are held
to be unenforceable under applicable Law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
 
7.11       Amendments and Waivers.  Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Parties; provided that each Party may waive any
of its rights hereunder without the consent of any other Party.  Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
of the Parties hereto.
 
7.12       No Waiver.  Failure to insist upon strict compliance with any of the
terms, covenants, or conditions hereof will not be deemed a waiver of such term,
covenant, or condition, nor will any waiver or relinquishment of, or failure to
insist upon strict compliance with, any right, power or remedy power hereunder
at any one or more times be deemed a waiver or relinquishment of such right,
power or remedy at any other time or times.
 
7.13       Rights Cumulative.  Each and all of the various rights, powers and
remedies of a Party will be considered to be cumulative with and in addition to
any other rights, powers and remedies which such Party may have at law or in
equity in the event of the breach of any of the terms of this Agreement.  The
exercise or partial exercise of any right, power or remedy will neither
constitute the exclusive election thereof nor the waiver of any other right,
power or remedy available to such Party.

 
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7.14       Delays or Omissions.  No delay or omission to exercise any right,
power or remedy accruing to any Party under this Agreement, upon any breach or
default of any other Party under this Agreement, shall impair any such right,
power or remedy of such non-breaching or non-defaulting Party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring.  Any waiver, permit,
consent or approval of any kind or character on the part of any Party of any
breach or default under this Agreement, or any waiver on the part of any Party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing.  All
remedies, either under this Agreement or by Law or otherwise afforded to any
Party, shall be cumulative and not alternative.
 
7.15       No Presumption.  The Parties acknowledge that any applicable Law that
would require interpretation of any claimed ambiguities in this Agreement
against the Party that drafted it has no application and is expressly
waived.  If any claim is made by a Party relating to any conflict, omission or
ambiguity in the provisions of this Agreement, no presumption or burden of proof
or persuasion will be implied because this Agreement was prepared by or at the
request of any Party or its counsel.
 
7.16       Headings and Subtitles; Interpretation.  The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.  Unless a provision
hereof expressly provides otherwise:  (i) the term “or” is not exclusive;
(ii) words in the singular include the plural, and words in the plural include
the singular; (iii) the terms “herein”, “hereof”, and other similar words refer
to this Agreement as a whole and not to any particular section, subsection,
paragraph, clause, or other subdivision; (iv) the term “including” will be
deemed to be followed by, “but not limited to”, (v) the masculine, feminine, and
neuter genders will each be deemed to include the others; (vi) the terms
“shall”, “will”, and “agrees” are mandatory, and the term “may” is permissive;
(vii) the term “day” means “calendar day”, and (viii) all references to dollars
or to “US$” are to currency of the United States of America (and shall be deemed
to include reference to the equivalent amount in other currencies).
 
7.17       Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Facsimile and e-mailed
copies of signatures shall be deemed to be originals for purposes of the
effectiveness of this Agreement.
 
7.18       Entire Agreement.  This Agreement and the Transaction Documents,
together with all schedules and exhibits hereto and thereto, constitute the
entire agreement among the Parties with respect to the subject matter hereof and
thereof, and no Party shall be liable or bound to any other Party in any manner
by any warranties, representations, or covenants except as specifically set
forth herein or therein.  For the avoidance of doubt, this Agreement shall be
deemed to terminate and supersede the provisions of any letter of intent,
memorandum of understanding, confidentiality and nondisclosure agreement, or any
other agreement executed between the Purchaser and any Seller prior to the date
of this Agreement, none of which agreements shall continue.
 
7.19       Conflict with Articles.  In the event of any conflict between the
provisions of this Agreement and the provisions of the memorandum and articles
of association of the Company, as between the Parties the provisions of this
Agreement shall prevail.

 
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7.20       Signing and Binding.  Notwithstanding that any Party does not validly
execute this Agreement, this Agreement shall be binding, effective and
enforceable to and among all those Parties duly executing this Agreement, in
which case, the “Parties” or “Party” used in  this Agreement shall refer to
those Parties duly executing the Agreement.
 
[The remainder of this page has been left intentionally blank]

 
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first
written above.
 
PURCHASER:
GLOBAL PHARM HOLDINGS GROUP, INC.
      By:
/s/ Yin Yun Lu
 
Name: YIN Yun Lu
 
Capacity: President / CEO
 
Address: Room 2503-2505, New World Center, No. 6009 Yitian Road, Futian
District, Shenzhen, China
 
Fax: (86-755) 83039671
 
Attn: YIN Yun Lu

 
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first
written above.
 
SELLER:
YAU Fan Chung
      By: 
/s/ Yau Fan Chung                                                               
 
Name: YAU Fan Chung
 
Address: G/F Lihe Building, No. 124 Heyihed, Kuiyong, Hong Kong

 
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first
written above.
 
SELLER:
WANG Zi Yi
      By:    
/s/ Wang Zi Yi                                                   
 
Name: WANG Zi Yi
 
Address: No.2 Group of No. 2 New Community, Xinjian Street, Ba Dao Jiang
District, Baishang City, Jilin Province, China

 
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first
written above.

 
SELLER:
WANG Yuan Yuan
     
By:
/s/ Wang Yuan Yuan  
Name: WANG Yuan Yuan
 
Address: 2-6-1 No.44 Building Zhonghua Ming Cheng, Ba Yi Road, Xi Gang District,
Liaoning Province, China

 
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first
written above.

 
SELLER:
LI Xian Feng
     
By:
/s/ Li Xian Feng  
Name: LI Xian Feng
 
Address: Room 301, No. 16 Lvyi Sixth Street, Qifuxincun, Shiguang Road, Panyu
District, Guangzhou City, China

 
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SCHEDULE A
 
MEMBERS OF THE GROUP

 
SCHEDULE A-1
 
Quantum Magic Integrator Fund Co., Limited
 
Name in English
 
：
Quantum Magic Integrator Fund Co., Limited
Place of Registration
 
：
British Virgin Islands
Registered Address
 
：
British Virgin Islands, whose address is Akara Building, 24 De Castro Street,
Wickhams Cay I, Road Town, Tortola, British Virgin Islands
 
Date of Registration and Establishment
：
April 19, 2010
 
Company Form
 
：
Limited Liability Company
Registered No.
 
：
1580027
Names of Shareholders (% of shareholding)
 
 
YAU Fan Chung (1.47%)
WANG Zi Yi (40%)
WANG Yuan Yuan (17.65%)
LI Xian Feng (40.88%)
 
Director
 
：
YAU Fan Chung, WANG Zi Yi, WANG Yuan Yuan, LI Xian Feng
 
Company Secretary
：
Mossack Fonseca & Co. (B.V.I.) Ltd
 
Shares
：
Authorized: US$50,000, divided into 50,000 shares with par value of US$1.00 per
share Issued and fully paid：US$50,000, divided into 50,000 share with par value
of US$1.00 per share

 
 
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SCHEDULE A-2
 
Hong Kong Celestial Asia Pharmaceutial Investment Group Limited
 
Name in Chinese
：
香港时富医药投资集团有限公司
 
Name in English
 
：
Hong Kong Celestial Asia Pharmaceutial Investment Group Limited
 
Place of Registration
 
：
Hong Kong
Registered Address
 
：
Flat 905, Workingberg Commercial Building, 41-47 Marble Road, Hong Kong
 
Date of Registration and Establishment
：
August 24, 2009
     
Company Form
 
：
Limited Liability Company
Registered No.
 
：
1365806
Name of Shareholder
(% of shareholding)
：
Quantum Magic Integrator Fund Co., Limited (100%)
 
     
Director
 
：
YAU Fan Chung
Company Secretary
：
J&C (HK) Business Limited 
 
Shares
：
Authorized: HKD10,000, divided into 10,000 shares with par value of HKD1.00 per
share Issued and fully paid：HKD10,000, divided into 10,000 share with par value
of HKD1.00 per share

 
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SCHEDULE A-3
 
Shandong Hua Wei Pharmaceutical Co., Ltd.
 
Name in Chinese
 
：
山东华潍医药有限公司
Name in English
 
：
Shandong Hua Wei Pharmaceutical Co., Ltd.
Legal Address
 
：
No.258 East Fushou Street, Kuiwen District, Weifang City
 
Type of Enterprise
 
：
Wholly Foreign Owned Enterprise
Date of Establishment
 
：
March 18, 1998
Business License No.
 
：
370705018000409
Term of Operation
：
20 years
 
Total Amount of Investment
：
RMB5,000,000
 
Registered Capital
 
：
RMB5,000,000
Paid-in Capital
：
RMB5,000,000
 
Name of Shareholder (% shareholding)
：
Hong Kong Celestial Asia Pharmaceutical Investment Group Limited (100%)
 
Legal Representative
：
SUN Wenjie
 
Director
 
：
SUN Wenjie, Hu Qing, Hu Yanmei, Shao Pangfeng, Zen Jieqiong
 
Business Scope
：
Major business: licensed operation items: sales of TCM herbs, Chinese medicine
slice (Yin Pian), Chinese patent medicine, chemical raw material medicine,
chemical medicine preparations, antibiotics, biochemistry medicine, biological
products (excluding vaccine), psychotropic substances (Class II), medical-used
toxic medicine, poppy shell, anabolic agents, peptide hormone (the expiration
date of License for Pharmaceutical Trading Enterprise is to August 17, 2014);
sales of Class II, III medical instruments and products (excluding contact
lenses and its solution, in-vitro diagnostic reagent, 6848 implant materials,
artificial organs and 6877 accessing instruments) (the expiration date of
Medical Device Distributing Enterprise License is to December 31, 2010),
operation of prepackaged health-care related food (the expiration date of
Hygiene License is to September 21, 2010); wholesale and retail of prepackaged
food (the expiration date of Food Circulation Permit is to April 18, 2013);
general operation items: sales of cosmetics; medical consultancy.

 
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SCHEDULE B
 
CAPITALIZATION TABLES
 
SCHEDULE B-1
 
Capitalization of the Company immediately prior to the Closing

 
Seller/Registered
Shareholder
   
Number of Ordinary
Shares
     
Par Value
     
% of issued share capital
                     
YAU Fan Chung
  735     US$ 1.00       1.47 %                        
WANG Zi Yi
  20,000     US$ 1.00       40 %                        
WANG Yuan Yuan
  8,825     US$ 1.00       17.65 %                        
LI Xian Feng
  20,440     US$ 1.00       40.88 %

 
SCHEDULE B-2
 
Capitalization of the Company immediately after the Closing
 
Purchaser/Registered
Shareholder
   
Number of Ordinary
Shares
     
Par Value
     
% of issued share capital
                     
Global Pharm Holdings Group, Inc
  50,000     US$ 1.00       100 %

 
 
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SCHEDULE C
 
WARRANTIES
 
1.
Organization, Good Standing and Qualification.

 
(i)           Each member of the Group is duly organized, validly existing and
in good standing under the Laws of the jurisdiction of its incorporation.
 
(ii)          Each member of the Group has all requisite legal and corporate
power and authority to carry on its business as now conducted, and is duly
qualified to transact business in each jurisdiction in which it operates.
 
(iii)         Since its incorporation, neither the Company nor Celestial Asia
Pharm has (a) commenced any business, (b) hired any employees, (c) other than
holding the 100% equity interest in Hua Wei (in the case of Celestial Asia
Pharm), acquired any assets or interest, or (d) incurred any liability.
 
2.           Capitalization and Voting Rights.
 
(i)           Immediately prior to the Closing, the authorized share capital of
the Company shall be US$50,000, divided into 50,000 ordinary shares of US$1.00
each.
 
(ii)          Each of the Sellers is the sole legal and beneficial owner of the
Sale Shares set out opposite its name in Section 2.1 of this Agreement and is
entitled to sell and transfer and will at Closing sell and transfer the full
legal and beneficial ownership of such Sale Shares to the Purchaser or its
nominees free from all Liens and with all rights now and hereafter relating to
such Sale Shares.
 
(iii)         There are no Liens on, over or affecting any of the Sale Shares or
any part of the issued or unissued share capital of the Company. There is no
agreement or commitment to give or create any Lien. No claim has been made by
any person to be entitled to any Lien which has not been waived in its entirety
or satisfied in full.
 
(iv)         The Sale Shares comprise the whole of the issued and allotted share
capital of the Company. All of the Sale Shares are fully paid up or credited as
fully paid up.
 
(v)          There is no agreement or commitment outstanding which calls for the
transfer, allotment or issue of or accords to any person the right to call for
the transfer, allotment or issue of any shares or debentures in any member of
the Group (including any option or right of pre-emption or conversion). No claim
has been made by any person to be entitled to any such agreement or commitment.
 
(vi)         Other than as shown in Schedule A, each member of the Group has no
shareholding or other interest in any other company, partnership, firm or other
entity.
 
(vii)        The shares in the share capital of each member of the Group are
owned by the relevant shareholders as set out in Schedule A free from all Liens
and are fully paid up or credited as such.

 
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(viii)       Each member of the Group has not repaid, redeemed or purchased any
of its share capital or issued any share capital as paid up otherwise than by
receipt of consideration therefor.
 
(xi)         Each member of the Group has not been directly or indirectly
engaged or involved in any scheme of reconstruction or amalgamation or any
reorganisation or reduction of share capital or conversion of securities nor has
such member of the Group transferred any business carried on by it.
 
(x)          No consent of any third party is required to be obtained in respect
of the sale of the Sale Shares.
 
(xi)         The obligations of the Sellers under this Agreement and each
document to be executed at or before Closing are, or when the relevant document
is executed, will be binding in accordance with their terms.
 
(xii)        There are no outstanding options, securities, warrants, rights
(including conversion or preemptive rights and rights of first refusal), proxy
or shareholders agreements, or agreements of any kind for the purchase or
acquisition from the Company or the Sellers of any of the equity securities of
the Company.
 
(xiii)       Neither the Sellers nor the Company is a party or subject to (i)
any agreement that affects or relates to the voting or giving of written
consents with respect to any security of any member of the Group or (ii) any
agreement under which it is or may be entitled or required to acquire any
securities of the Company, any member of the Group or any other person.
 
(xiv)       The Capitalization Tables attached to this Agreement as Schedules
B-1 and B-2 set forth the complete and accurate capitalization of the Company
immediately prior to the Closing and immediately after the Closing,
respectively, including without limitation all record and beneficial owners of
all share capital of the Company.
 
(xv)        All share capital or equity interest of each member of the Group has
been duly and validly issued (or subscribed for), and is fully paid and
non-assessable.  All share capital or equity interest of each member of the
Group is free of Liens and any other restrictions on transfer and have been
issued in compliance with the requirements of all applicable securities
Laws.  No share capital or equity interest of any member of the Group was issued
or subscribed to in violation of the preemptive rights of any Person, terms of
any agreement or any Laws, by which each such member at the time of issuance or
subscription was bound.  There are no (a) resolutions pending to increase the
share capital of any member of the Group; (b) outstanding options, warrants,
proxies, agreements, pre-emptive rights or other rights relating to the share
capital or equity interest of any member of the Group; (c) outstanding Contracts
or other agreements under which any member of the Group or any other Person
purchases or may purchase or otherwise acquires or may acquire, any interest in
the share capital or equity interest of any member of the Group; (d) interest
payable to any Person (in cash or otherwise) or dividends which have accrued or
been declared but are unpaid by any member of the Group; or (e) outstanding or
authorized equity appreciation, phantom equity, equity plans or similar rights
with respect to any member of the Group.
 
(xvi)       None of the memoranda and articles of association of each member of
the Group contains any provision which would restrict the distribution of
profits to its shareholders except where such restriction is required by
applicable Laws.

 
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3.           Corporate Structure; Subsidiaries.   The corporate details of each
member of the Group set forth in Schedule A are accurate and complete, showing
ownership and Control relationships among all members of the Group and all
holders (directly or indirectly) of equity interests in the members of the
Group.  No member of the Group owns or Controls, directly or indirectly, any
interest in any other Person, other than members of the Group, as applicable, or
is a participant in any joint venture, partnership or similar arrangement.
 
4.           Authorization.  Each Seller has all requisite power and authority
to execute and deliver the Transaction Documents to which it is a party and to
carry out and perform its obligations thereunder. All action on the part of each
of  the Sellers (and, as applicable, its officers, directors and shareholders)
necessary for the authorization, execution and delivery of the Transaction
Documents to which it is a party, the performance of all obligations of each
Seller, has been taken or will be taken prior to the Closing.  This Agreement
has been duly executed and delivered by each Seller.  This Agreement and each of
the Transaction Documents are, or when executed and delivered by the Sellers
shall be, valid and legally binding obligations of such Sellers, enforceable
against such Sellers in accordance with its terms.
 
5.           Consents.  No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Authority or any party to a Contract or any other third Party is
required on the part of any Seller in connection with the valid execution,
delivery and performance of this Agreement or the Transaction Documents or the
consummation of the transactions contemplated thereby.
 
6.           Broker.  The Company does not have any Contract with any broker,
finder or similar agent with respect to the transactions contemplated by this
Agreement or by any of the Transaction Documents and the Company has incurred no
liability for any brokerage fees, agents’ fees, commissions or finder’s fees in
connection with any of the Transactions Documents or the consummation of the
transactions contemplated therein.
 
7.           Tax Matters.
 
(i)          Each member of the Group (a) has timely filed all income, franchise
and other material Tax Returns that are required to have been filed by it with
any Governmental Authority, (b) has timely paid all Taxes owed by it which are
due and payable and without prejudice to the foregoing each member of the Group
has made all such deductions and retentions as it was obliged or entitled to
make and all such payments as should have been made, and (c) has not waived any
statute of limitations with respect to Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.  No Tax liens are currently in
effect against any of the assets of any member of the Group (except for Tax
liens not yet delinquent). In respect of any presence of a member of the Group
in the PRC, Tax registrations have been completed in all applicable locations in
the PRC.
 
(ii)         Each filed Tax Return was properly prepared in compliance with
applicable Law and was (and will be) true, correct, accurate and complete in all
material aspects and are not the subject of any material dispute nor are likely
to become the subject of any material dispute with such authorities.  None of
such Tax Returns contains a statement that is false or misleading in any
material respect or omits any matter that is required to be included or without
which the statement would be false or misleading in any material respect.  No
reporting position was taken on any such Tax Return which has not been disclosed
to the appropriate tax authority or in such Tax Return, as may be required by
Law.

 
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(iii)        The assessment of any additional Taxes with respect to the
applicable member of the Group for periods for which Tax Returns have been filed
is not expected to exceed the recorded Liability therefor in the most recent
balance sheet in the Financial Statements (as defined below), and there are no
unresolved questions or claims concerning any Tax Liability of any member of the
Group.  There is no pending dispute with, or notice from, any taxing authority
relating to any of the Tax Returns filed by any member of the Group which, if
determined adversely to such member, would result in the assertion by any taxing
authority of any valid deficiency in any amount for Taxes. There is no proposed
Liability for a deficiency in any Tax to be imposed upon the properties or
assets of any member of the Group.  No member of the Group is responsible for
the Taxes of any other Person by reason of contract, successor liability or
otherwise.
 
(iv)        The amount of Taxes chargeable on any member of the Group during the
relevant statutory limitation period has not been affected to any extent by any
concession, arrangements, agreement or other formal or informal arrangement with
any Tax authority. No member of the Group is subject to a special regime in
respect of Tax.  Any preferential Tax treatment enjoyed by any member of the
Group on or prior to the Closing has been in compliance with all applicable Laws
and will not be subject to any retroactive deduction or cancellation except as a
result of retroactive effects of changes in the applicable Laws.
 
(v)         All notices, computations and returns which ought to have been given
or made, have been properly and duly submitted by each member of the Group to
the relevant Tax authorities and all information, notices, computations and
returns submitted to such authorities are true, accurate and complete.
 
(vi)        All records which any member of the Group is required to keep for
Tax purposes or which would be needed to substantiate any claim made or position
taken in relation to Tax by the relevant member of the Group, have been duly
kept.
 
(vii)       No member of the Group is expected to become liable to pay, nor are
there any circumstances by reason of which it is likely to become liable to pay
any interest, penalty, surcharge or fine relating to Tax.
 
(viii)      No member of the Group has since incorporation been subject to or is
currently subject to any investigation, audit or visit by any Tax or excise
authority, and neither the Sellers nor any member of the Group is aware of any
such investigation, audit or visit planned for the next twelve months.
 
(ix)        No member of the Group is treated for any Tax purposes as resident
in a country other than the country of its incorporation and no member of the
Group has, or has had within the relevant statutory limitation period, a branch,
dependent agency or permanent establishment in a country other than the country
of its incorporation.
 
8.           Constitutional Documents; Books and Records.  The constitutional
documents of each member of the Group are in the form previously provided to the
Purchaser.  Each member of the Group maintains its books of accounts and records
in the usual, regular and ordinary manner, on a basis consistent with prior
practice, and which permits its Financial Statements (as defined below) to be
prepared in accordance with PRC GAAP and US GAAP. With respect to the internal
accounting controls and financial reporting of each member of the Group:

 
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(i)          it maintains systems of internal accounting controls sufficient to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes, including,
but not limited to internal accounting controls sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management’s
general or specific authorizations, (b) transactions are recorded as necessary
to permit preparation of financial statements in conformity with all relevant
statutes and generally accepted accounting principles and practice and to
maintain asset accountability, and (c) access to assets is permitted only in
accordance with management’s general or specific authorization, (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences;
 
(ii)         the member of the Group’s principal executive officer and its
principal financial officer have disclosed to its auditors (i) all known
significant deficiencies in the design or operation of internal controls over
financial reporting that are reasonably likely to adversely affect the company’s
ability to record, process, summarize and report financial information and have
identified for its auditors any weaknesses in internal controls, and (ii) any
known fraud, whether or not material, that involves management or other
employees who have a significant role in the company’s internal controls;
 
(iii)        it has effective internal control over financial reporting and is
not aware of (a) any weaknesses or deficiencies in its internal control over
financial reporting or (b) any change in its internal control over financial
reporting that has adversely affected, or is reasonably likely to adversely
affect, its internal control over financial reporting;
 
(iv)        it has established and maintains disclosure controls and procedures
that are designed to ensure that transactions of the company are being made only
in accordance with the authorization of management and directors of the company;
 
(v)         its financial statements, accounting books and records have been
properly maintained in accordance with applicable laws and accounting
requirements and are complete and correct in all respects;
 
(vi)        its audited accounts and management accounts (if applicable) have
been prepared in accordance with the requirements of all relevant statutes and
generally accepted accounting principles and practice in the applicable
jurisdiction consistently applied, complied as to form in all respects with the
applicable accounting requirements and the published rules and regulations of
the U.S. Securities and Exchange Commission (“SEC”) with respect thereto, and
are accurate in all respects and show a true and fair view of the state of
affairs of the company and of its results and profits for the financial period
ending on the relevant accounts date;
 
(vii)       there is no undisclosed related party transactions, including (a) no
undisclosed inter-company liabilities, (b) no shareholder, director or officer
providing any material assets, properties services or facilities to the company
or vice versa; (c) no beneficial ownership, direct or indirect, by any
shareholder or director or officer in any competing business, supplier or
customer of the company;
 
(viii)      there is no unlawful gift, unlawful expense relating to political
activity, unlawful payment to any foreign or domestic government employee or
official from corporate funds; and

 
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(ix)         there is effective disclosure controls and procedures that is
sufficient to provide reasonable assurances that violations of the FCPA will be
prevented, detected and deterred.
 
9.           Financial Statements.  The Company has delivered to the Purchaser,
(i) the unaudited balance sheets and income statements of Hua Wei for the two
fiscal years ended December 31, 2009 and 2010, prepared in accordance with PRC
GAAP by the management of the Group, and (ii) the unaudited consolidated balance
sheets and income statements of Hua Wei for the six months ended June 30, 2011
(the “Statement Date”), prepared in accordance with PRC GAAP by the management
of the Group, (collectively, the financial statements referred to in clauses (i)
and (ii) above, the “Financial Statements”).  The Financial Statements are
complete and correct in all material respects and present fairly the financial
condition and position of Hua Wei as of their respective dates on a consistent
basis. The accounts receivable owing to Hua Wei, including without limitation
all accounts receivable owing to Hua Wei set forth on the Financial Statements,
constitute valid and enforceable claims and are good and collectible in the
ordinary course of business in all respects, net of any reserves shown on the
Financial Statements (which reserves are adequate and were calculated on a basis
consistent with PRC GAAP or US GAAP, as applicable), and no further goods or
services are required to be provided in order to complete the sales and to
entitle Hua Wei to collect in full.  There are no contingent or asserted claims,
refusals to pay, or other rights of set-off with respect to any accounts
receivable of Hua Wei.
 
None of the members of the Group has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) except liabilities,
obligations, conditions or circumstances (i) to the extent disclosed and
provided for in its most recent Financial Statement or of a nature not required
by PRC GAAP or US GAAP, as applicable, to be reflected thereon, (ii) related to
the future performance of any contract, (iii) incurred or arising in the
ordinary course of business since the date of the most recent Financial
Statements, or (v) as would not reasonably be likely to, individually or in the
aggregate, have a Material Adverse Effect.
 
10.        Changes.  Since the Statement Date, except as contemplated by the
Transaction Documents or any Material Contract and other than in the ordinary
course of business consistent with its past practice, there has not been:
 
(i)          any change in the assets, liabilities, financial condition or
operations of the Group from that reflected in the Financial Statements;
 
(ii)         any waiver by a member of the Group of a right or of a debt owed to
it in an amount equal to or greater than US$10,000 in any one instance or
US$30,000 in the aggregate;
 
(iii)        any incurrence of or commitment to incur any indebtedness for money
borrowed;
 
(iv)        any resignation or termination of the employment of any senior
management of any member of the Group, or any notice (whether verbal or written)
of an intention to resign or terminate the employment of any senior management
of any member of the Group;
 
(v)         any satisfaction or discharge of any Lien or payment of any
obligation by the Group, except in the ordinary course of business;
 
(vi)        any change or amendment to or termination of a Material Contract;

 
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(vii)       any change in any compensation arrangement or agreement with the Key
Executives;
 
(viii)      any sale, assignment, exclusive license, or transfer of any
Intellectual Property of any member of the Group;
 
(ix)         any Lien created by any member of the Group with respect to any of
its properties or assets, except Liens for taxes not yet due or payable;
 
(x)          any loan or advance to, guarantee for the benefit of, or investment
in, any Person (including but not limited to any of the employees, officers or
directors, or any members of their immediate families, of any member of the
Group), corporation, partnership, joint venture or other entity;
 
(xi)         any declaration, setting aside or payment or other distribution in
respect of any member of the Group’s capital shares, or any direct or indirect
redemption, purchase or other acquisition of any of such shares by any member of
the Group (including without limitation, any warrants, options or other rights
to acquire capital stock or other equity securities);  
 
(xii)        any failure to conduct business in the ordinary course, consistent
with the past practices of any member of the Group;
 
(xiii)       any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the assets, properties, financial condition,
operation or business of any member of the Group;
 
(xvi)       receipt of notice that there has been a loss of, or order
cancellation by, any major customer of any member of the Group;
 
(xv)        any charitable contributions or pledges;
 
(xvi)       any capital expenditures or commitments therefor, other than in the
ordinary course of business;
 
(xvii)      any other event or condition of any character which individually or
in the aggregate might adversely affect the assets, properties, financial
condition, operating results or business of any member of the Group; or
 
(xviii)     any agreement or commitment by any member of the Group to do any of
the things described in this Section 12.
 
13.         Litigation.  There is no action, suit, or other court, regulatory or
other proceeding pending or threatened against or affecting any member of the
Group or any of the officers, directors or employees of any member of the Group
with respect to their businesses or proposed business activities, nor is any
Seller aware of any basis for any of the foregoing.  The foregoing shall include
but not be limited to any action, suit, or other court, regulatory or other
proceeding involving the prior employment of any of employees of the members of
the Group, their use in connection with the Business of any information or
techniques allegedly proprietary to any of their former employers or their
obligations under any agreements with prior employers.  There is no
investigation pending or threatened against any member of the Group.  There is
no action, suit, proceeding or investigation pending or threatened against any
director of any member of the Group in connection with their respective
relationship with such entity.  There is no judgment, decree or order of any
court or Governmental Authority in effect and binding on any member of the Group
or their respective assets or properties.  There is no court action, suit,
proceeding or investigation by any member of the Group which such Person intends
to initiate against any third party.  No Government Authority has at any time
challenged or questioned in writing the legal right of any member of the Group
to conduct its business as presently being conducted or proposed to be
conducted.  No member of the Group has received any opinion or memorandum or
advice from legal counsel to the effect that it has been exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business.

 
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14.         Liabilities.  The Company has no liabilities of the type required to
be disclosed on a balance sheet, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, except for (i) liabilities set
forth in the Financial Statements, and (ii) trade or business liabilities
incurred in the ordinary course of business.
 
15.         Commitments.
 
(i)          The Purchaser has been provided with copies of the following
Contracts (each, a “Material Contract”, and collectively, the “Material
Contracts”) to which any member of the Group is a party or to which any member
of the Group or any of their respective properties is subject or by which any
such Person or property is bound: (i) any Contract that was entered into out of
ordinary course of business, (ii) any Contract on which the business of any
member of the Group is substantially dependent or which is otherwise material to
the business of any member of the Group, (iii) any loan agreement, indenture,
letter of credit, security agreement, mortgage pledge agreement, deed of trust,
bond, note, or other agreement relating to the borrowing of money or to the
mortgaging, pledging, transferring of a security interest, or otherwise placing
a Lien on any asset or any part of the assets of any member of the Group, (iv)
any Contract involving a guarantee of performance by any Person (other than a
guarantee of performance by a member of the Group) or involving any agreement to
act as surety for any Person (other than a member of the Group), or any other
Contract to be contingently or secondarily liable for the obligations of any
Person (other than a member of the Group), (v) any Contract that limits or
restricts the ability of any member of the Group to compete or otherwise to
conduct its business in any manner or place, (vi) any joint venture,
partnership, alliance or similar Contract, (vii) any asset purchase agreement,
share purchase agreement or other Contract for acquisition or divestiture of any
assets (including, without limitation, any Intellectual Property) by or of any
member of the Group, (viii) any Contract requiring performance by a member of
the Group in any country other than the PRC, (ix) any Contract that grants a
power of attorney, agency or similar authority to another Person or entity other
than power delegated to an officer of a member of the Group for the performance
of his duties in the ordinary course of business, and (x) any Contract that
contains a right of first refusal in respect of the equity securities of any
member of the Group and any contract that gives a right to any Person with
respect to the equity securities of any member of the Group.
 
(ii)         Each of the Material Contracts is valid, subsisting, in full force
and effect and binding upon the applicable member(s) of the Group and upon the
other parties thereto.  None of the Material Contracts are oral Contracts.
 
(iii)        Each member of the Group has in all respects satisfied or provided
for all of its Liabilities and obligations under the Material Contracts
requiring performance prior to the date hereof, is not in default in any respect
under any Material Contract, nor does any condition exist that with notice or
lapse of time or both would constitute such a default.  No Seller is aware of
any default thereunder by any other party to any Material Contract or any
condition existing that with notice or lapse of time or both would constitute
such a default, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, a Material Contract.

 
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(iv)        No member of the Group has given to or received from any Person any
notice or other communication (whether written or oral) regarding any actual,
alleged, possible, or potential violation or breach of, or default under, any
Material Contract.
 
(v)         With respect to each Material Contract to which it is a party, each
member of the Group has taken all necessary corporate actions, fulfilled all
conditions and otherwise taken all other actions required by applicable Laws to
(a) enter into, execute, adopt, assume, issue, and deliver such Material
Contract, and (b) perform its obligations pursuant to the respective terms and
conditions of such Material Contract.
 
(vi)        None of the Material Contracts do or will (a) result in a violation
or breach of any provision of, the respective memorandum and articles of
association or other constitutional documents of any member of the Group, or (b)
result in a breach of, or constitute a default under, or result in the creation
or imposition of, any Lien pursuant to any Contract to which any member of the
Group is a party or by which any member of the Group or any of their properties
is bound, or (c) result in a breach of any Laws to which the Founder or any
member of the Group is subject to or by which any member of the Group or any of
their respective properties is bound.
 
(vii)       Each copy of the Material Contracts as made available by the Group
to the Purchaser, as of the date of this Agreement, sets out the rights and
obligations of the Group in full and is accurate, up to date and not misleading.
 
16.        Compliance with Laws.
 
(i)          Each member of the Group is in compliance in all respects with all
Laws, including but not limited to those relating to the Business, that are
applicable to it or to the current and planned conduct or operation of its
business or the ownership or use of any of its assets or properties. All
approvals and authorizations from and filings and registrations with the
relevant Governmental Authority required in respect of the Group, including but
not limited to the registrations with the Ministry of Commerce (or any
predecessors), State Food and Drug Administration, the State Administration of
Industry and Commerce, the State Administration of Foreign Exchange (the
“SAFE”), any tax bureau, customs authorities and the local counterpart of each
of the aforementioned PRC Governmental Authorities, as applicable, have been
duly completed in accordance with all applicable Laws.  Each member of the Group
has been conducting its business activities within the permitted scope of
business or is otherwise operating its Businesses in compliance with all
relevant Laws and Governmental Orders in all respects.
 
(ii)         No event has occurred and no circumstance exists that (with or
without notice or lapse of time) (a) may constitute or result in a violation by
any member of the Group of, or a failure on the part of such member to comply
with, any Law in any respect, or (b) may give rise to any obligation on the part
of a member of the Group to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.

 
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(iii)        No member of the Group has received any notice from any
Governmental Authority regarding (a) any actual, alleged, possible or potential
violation of, or failure to comply with, any Law, or (b) any actual, alleged,
possible or potential obligation on the part of such member of the Group to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
 
(iv)        Each Seller, who is a “Domestic Resident” as defined in Circular 75
issued by SAFE on October 21, 2005, as amended and/or implemented by the Notice
on Implementation Rule on Circular 75 issued by SAFE on May 29, 2007 (the
“Circular 75”) and is subject to any of the registration or reporting
requirements of Circular 75 has complied with such reporting and/or registration
requirements under Circular 75 and any other applicable SAFE rules and
regulations, (the “SAFE Rules and Regulations”).  No member of the Group nor any
of the Sellers has received any oral or written inquiries, notifications, orders
or any other form of official correspondence from SAFE or any of its local
branches with respect to any actual or alleged non-compliance with the SAFE
Rules and Regulations, and the Company has made all oral or written filings,
registrations, reporting or any other communications as may be required by SAFE
or any of its local branches.  Hua Wei has obtained all certificates, approvals,
permits, licenses, registration receipts and any similar authority necessary
under PRC Laws to conduct foreign exchange transactions (each, a “Foreign
Exchange Authorization” and collectively, the “Foreign Exchange Authorizations”)
as now being conducted by it, and believes it can obtain, without undue burden
or expense, any such Foreign Exchange Authorizations for the conduct of foreign
exchange transactions as presently planned to be conducted.  All existing
Foreign Exchange Authorizations held by Hua Wei are valid and it is not in
default under any of such Foreign Exchange Authorizations.
 
(v)         The business of each member of the Group is in compliance with all
Laws that are applicable, including without limitation all Laws of the PRC with
respect to mergers, acquisitions, foreign investment and foreign exchange
transactions.
 
17.         Anti-Bribery, Anti-Corruption, Anti-Money Laundering and Sanctions
 
(i)          U.S. Foreign Corrupt Practices Act:  No member of the Group or any
director, officer, agent, employee, or any other person acting for or on behalf
of the foregoing (individually and collectively, a “Representative”), has
violated the U.S. Foreign Corrupt Practices Act or any other applicable
anti-bribery or anti-corruption laws, nor has any Representative offered, paid,
promised to pay, or authorized the payment of any money, or offered, given,
promised to give, or authorized the giving of anything of value, to any officer,
employee or any other person acting in an official capacity for any Government
Entity, as defined below, to any political party or official thereof or to any
candidate for political office (individually and collectively, a “Government
Official”) or to any person under circumstances where such Representative knew
or was aware of a high probability that all or a portion of such money or thing
of value would be offered, given or promised, directly or indirectly, to any
Government Official, for the purpose of:
 
(a) (1) influencing any act or decision of such Government Official in his
official capacity, (2) inducing such Government Official to do or omit to do any
act in relation to his lawful duty, (3) securing any improper advantage, or (4)
inducing such Government Official to influence or affect any act or decision of
any Government Entity, or

 
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(b) in order to assist any member of the Group or its subsidiaries in obtaining
or retaining business for or with, or directing business to any member of the
Group or its subsidiaries.

(ii)         “Government Entity” as used in this paragraph means any government
or any department, agency or instrumentality thereof, including any entity or
enterprise owned or controlled by a government, or a public international
organization.
 
(iii)        Each member of the Group and its Representatives (a) are and have
been acting in compliance with all applicable anti-bribery or anti-corruption
Laws, including those prohibiting the bribery of Public Officials; (b) have not
authorized, offered, been party to, made any payments or provided anything of
value directly or indirectly to any Public Official in violation of applicable
Laws; and (c) have not used, committed to have the intention of using the
payments received, or to be received, by them from the Purchaser for any purpose
that could constitute a violation of any applicable Laws.
 
(iv)        No member of the Group nor its Representatives has (a) ever been
found by a Government Authority to have violated any criminal or securities Law,
(b) been party to the use of any of the assets of the company for the
establishment of any unlawful or unrecorded fund of monies or other assets or
making of any unlawful or undisclosed payment, or (c) made any false or
fictitious entries in the books or records of such company.

(v)         Each member of the Group and its Representatives have complied with
all applicable anti-money-laundering Laws.

(vi)        None of the Representatives of any member of the Group are Public
Officials.
 
18.         Environmental and Safety Laws.
 
(i)          No member of the Group is in violation of any Environmental Law and
no expenditures are or will be required in order to comply with any such
Environmental Law.  No member of the Group (i) owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, (ii) is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or (iii) is subject to any claim relating to any
Environmental Laws and there is no pending or threatened lawsuit, proceeding or
investigation against any of them which might lead to such a claim.

(ii)         each member of the Group is in compliance in all respects with all
applicable Environmental Laws; there are no claims, proceedings, investigations
or actions by any Governmental Authority or other Person pending or threatened
in writing in connection with the operations of the Group under any applicable
Environmental Law;

(iii)        each member of the Group has obtained and holds all Permits
required under applicable Environmental Law, and is in compliance with all terms
and conditions of such Permits;

(iv)        there have been no releases of, or exposure of any Person to, any
Hazardous Substances at, to, from, in, on or under any Real Property owned or
leased by the Group, and no Hazardous Substances are present in, on, at, under,
or migrating to or from any Real Property owned or leased by the Group; and

 
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(v)         there have been no environmental investigations, studies, tests,
reviews or other analyses conducted by, on behalf of, or which are in the
possession or control of any member of the Group or the Sellers with respect to
any Real Property owned or leased by the Group that have not been delivered or
made available to the Purchaser prior to execution of this Agreement.
 
19.        Title; Liens; Permits.
 
(i)          The members of the Group have good and marketable title to all the
tangible properties and assets reflected in their books and records, whether
real, personal or mixed, purported to be owned by the Group, free and clear of
any Liens.  With respect to the tangible property and assets that are leased by
any member of the Group, each member of the Group is in compliance in all
respects with such leases and holds a valid leasehold interest free of any
Liens.  Each member of the Group owns or leases all tangible properties and
assets necessary to conduct in all respects their respective business and
operations as presently conducted or planned to be conducted.
 
(ii)         Each member of the Group has all franchises, authorizations,
approvals, permits, certificates and licenses, including without limitation any
special approval or permits and has made all the necessary filings for record
with the relevant government authority required under the Laws of the PRC (the
“Permits”) necessary for its respective business and operations.  No member of
the Group is in default under any such Permit. Neither any Seller nor any member
of the Group has reason to believe that any Permit required for the conduct of
any part of its Business which is subject to periodic renewal will not be
granted or renewed by the relevant Governmental Authority.
 
20.        Compliance with Other Instruments.  No member of the Group is in
violation, breach or default of its memorandum and articles of association or
any other constitutional documents (which include, as applicable, any articles
of incorporation, articles of association, by-laws, joint venture contracts and
similar documents).  The consummation of the transactions contemplated hereby
and thereby, will not result in any such violation, breach or default, or be in
conflict with or constitute, with or without the passage of time or the giving
of notice or both, a default under (i) the memorandum and articles of
association or any other such constitutional documents of any member of the
Group, (ii) any Material Contract, (iii) any judgment, order, writ or decree or
(iv) any applicable Law.
 
21.        Related Party Transactions.  None of the Related Parties has any
other agreement, understanding, proposed transaction with (other than standard
agreements in relation to employment with a member of the Group), or is indebted
to, any member of the Group, nor is any member of the Group indebted (or
committed to make loans or extend or guarantee credit) to any Related Party
(other than for accrued salaries, reimbursable expenses or other standard
employee benefits).  No Related Party has any direct or indirect ownership
interest in any firm or corporation (other than a member of the Group) with
which a member of the Group is affiliated or with which a member of the Group
has a business relationship, or any firm or corporation (other than a member of
the Group) that competes with any member of the Group.  No Related Party has any
interest, either directly or indirectly, in: (i) any Person which purchases from
or sells, licenses or furnishes to a member of the Group any goods, property,
intellectual or other property rights or services; or (ii) any Material Contract
to which a member of the Group is a party or by which it may be bound or
affected.   All members of the Group have conducted all Related Party
transactions on an arm's-length basis.

 
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22.         Intellectual Property Rights.
 
(i)          The members of the Group own or otherwise have the sufficient right
or license to use all Intellectual Property necessary for their business as
currently conducted and planned to be conducted without any violation or
infringement of the rights of others, free and clear of all Liens.  The list
provided by the Sellers to the Purchaser prior to the Closing contains a
complete and accurate list of all patents, trademarks, service marks, trade
names, domain names and copyrights owned, licensed to or used by the Group,
whether registered or not, and a complete and accurate list of all licenses
granted by the members of the Group to any third party with respect to any
Intellectual Property.  There is no pending or threatened claim or litigation
against any member of the Group contesting the right to use its Intellectual
Property, asserting the misuse thereof, or asserting the infringement or other
violation of any Intellectual Property of any third party.  All inventions and
know-how conceived by employees of the Group, and related to the Businesses of
the Group are “works made for hire”, and all right, title, and interest therein,
including any applications therefor, have been transferred and assigned to, and
are currently owned by, the Group.
 
(ii)         No proceedings or claims in which any member of the Group alleges
that any Person is infringing upon, or otherwise violating, any member of the
Group’s Intellectual Property rights are pending, and none has been served,
instituted or asserted by any member of the Group.
 
(iii)        None of the employees of any member of the Group is obligated under
any Contract, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Group or that would conflict with the
Business of the Group as presently conducted and planned to be conducted.
 
(iv)        The members of the Group have each taken all security measures that
are commercially prudent in order to protect the secrecy, confidentiality and
value of their respective Intellectual Property.
 
23.         Real Property
 
(i)          Each member of the Group owns or has legal or equitable title to or
other right or interest in any real property used in its Business, (the “Real
Property”).
 
(ii)         All water, sewer, gas, electric, telephone, and drainage facilities
and all other utilities required by applicable Law necessary for the present and
planned use and operation of its Business (a) are installed across public
property or under valid easements to the boundary lines of each Real Property
currently leased by each member of the Group and (b) are connected pursuant to
valid Approvals.
 
(iii)        There does not exist any actual or threatened condemnation or
eminent domain proceedings that affects or might affect any Real Property
currently leased by the Group or any part thereof, and no member of the Group
has received any notice, oral or written, of the intention of any Governmental
Authority or other Person to take or use all or any part thereof.
 
(iv)        No member of the Group owns, holds, is obligated under or is a party
to, any option, right of first refusal or other contractual right to purchase,
acquire, sell, assign or dispose of any Real Property or any portion thereof or
interest therein.

 
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24.        Entire Business.  There are no facilities, services, assets or
properties shared with any other entity which is not a member of the Group,
which are used in connection with the Business of the Group.
 
25.        Labor Agreements and Actions.
 
(i)          No employee of the members of the Group intends to terminate their
employment with the members of the Group, nor do the members of the Group have a
present intention to terminate the employment of any of the foregoing.  Subject
to applicable Law, the employment of each employee of the members of the Group
is terminable at will.
 
(ii)         No member of the Group is a party to or bound by any currently
effective deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employment compensation
agreement.  The members of the Group have entered into employment contracts with
their respective employees as required under all applicable Laws and have
complied in all respects with all applicable Laws related to employment, and
none of the members of the Group have any union organization activities,
threatened or actual strikes or work stoppages or grievances.  None of the
members of the Group are bound by or subject to (and none of their assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union. Each member of the
Group maintains, and has fully funded, any pension plan and any other labor
related plans that is required by Law or by contract to maintain.  Each member
of the Group is in compliance with any Law relating to its provision of any form
of social insurance (the “Social Insurance”), and has paid, or made provision
for the payment of, all Social Insurance contributions required under applicable
Law.
 
(iii)         The Key Executives are currently devoting substantially all of
their business time to the current and planned conduct of the business of the
applicable member of the Group and the Key Executives are not currently working
or plans to work for any other Person that competes with any member of the
Group, whether or not the Key Executives are or will be compensated by such
Person.
 
(iv)        The contract entered into between Hua Wei and the Key Executives as
provided for under this Agreement constitutes the entire agreement between the
Company and the Key Executives with respect to the subject matter thereof.  No
member of the Group has entered into any other employment agreement with the Key
Executives prior to the Closing.
 
26.         Insurance.  The members of the Group have purchased and maintained
insurance policies or programs that are customarily purchased and maintained by
businesses of similar nature. All such policies are in full force and effect and
all premiums due thereon have been paid.  All such insurance policies are
underwritten by financially sound and reputable insurers, and are sufficient to
satisfy all applicable Laws and cover all material risks associated with each
member of the Group’s Businesses that are customarily insured against in such
industry in PRC.  Each member of the Group has complied in all respects with the
terms and provisions of such policies. All such policies will remain in full
force and effect and will not in any way be affected by, or terminate or lapse
by reason of any of the transactions contemplated by the Transaction Documents.
 
27.         Advisors.  No member of the Group has any Contract with any
financial or other advisors who would be entitled to the payment of any fee in
connection with the transactions contemplated by the Transaction Documents.

 
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28.         Disclosure.  The Sellers have made available to the Purchaser all
the information regarding the members of the Group requested by the Purchaser
for deciding whether to purchase the Sale Shares.  No representation or warranty
of the Sellers contained in this Agreement or information or document provided
to the Purchaser in connection with the Sale Shares, the Group and the
transactions contemplated hereunder contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.  There is no fact that the Sellers have not disclosed or
otherwise made available to the Purchaser of which any Seller is aware and that
has had or would reasonably be expected to have, as of the date of such
disclosure, any adverse effect upon the Group.
 
29.         Accuracy of Business Plan and Budget.  The business plan and annual
and monthly budgets of the Group as delivered by the Sellers to the Purchaser,
as of the date of such business plan or budget, reflects the Business and is
accurate, up to date and not misleading.  The assumptions used in such business
plan or budget were reasonable ones to make when made and remain reasonable as
of the date of this Agreement.
 
30.         No Undisclosed Business.   The sole business of the Group is the
Business.  No member of the Group is engaged in any other business including,
without limit, in insurance, banking or financial services, telecommunications,
public utility businesses or any other regulated businesses.
 
31.         Insolvency.  No order has been made, no petition has been presented,
no meeting has been convened to consider a resolution and no resolution has been
passed for the winding up of any member of the Group.  No administration order
has been made or petition presented or application made for such an order and no
administrator has been appointed or notice given or filed or step taken or
procedure commenced with a view to the appointment of an administrator in
respect of any member of the Group.  No receiver has been appointed in respect
of any member of the Group or all or any of its assets.   No unsatisfied
judgment is outstanding against any member of the Group.  No event analogous to
any of the foregoing has occurred in relation to the Group.  No member of the
Group (i) is unable to pay its debts as they fall due or (ii) has aggregate
liabilities that are greater than its aggregate assets.
 
32.         Ownership by the Sellers.   Each of the Sellers holds, and has
always held, all his interests in the Group on his own account and not as a
nominee of any other Person.
 
33.         U.S. Office of Foreign Assets Control: No member of the Group or any
of their respective officers, employees, directors or agents ((a) and (b)
collectively, “Relevant Persons”) has engaged directly or indirectly in
transactions connected with any of North Korea, Iraq, Libya, Cuba, Iran, Myanmar
or Sudan, or otherwise engaged directly or indirectly in transactions connected
with any government, country or other entity or person that is the target of
U.S. economic sanctions administered by the U.S. Treasury Department Office of
Foreign Assets Control, including those designated on its list of Specially
Designated Nationals and Blocked Persons and no Relevant Person is any such
person or entity.
 
34.         Non-compete.  There is no non-compete agreement or other similar
commitment to which any member of the Group is a party that would impose
restrictions upon such member of the Group, the Purchaser and/or its Affiliates.

 
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35.         Liabilities in earlier transactions.  No member of the Group has (i)
given any representation or warranty in connection with any previous issue of
securities which was untrue when made and/or repeated, or (ii) failed to comply
with any covenant, agreement or undertaking made with or given to any person in
connection with any previous issue of securities or in connection with any
agreement in force at any time before Closing.
 
36.         No breach of shareholder rights.   None of the transactions
contemplated under any of the Transaction Documents is in breach of any
anti-dilution rights, rights of first refusal, pre-emptive rights, put or call
rights or similar rights of any existing shareholders in relation to the
securities of the Company.

 
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