PREFERRED STOCK PURCHASE AGREEMENT

BETWEEN

CHINA KANGTAI CACTUS BIO-TECH, INC.

AND

T SQUARED INVESTMENTS LLC

DATED

JULY 16, 2008

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PREFERRED STOCK PURCHASE AGREEMENT

This PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 16th day of July, 2008 between China Kangtai Cactus Bio-Tech,
Inc., a corporation organized and existing under the laws of the State of Nevada
(“CKGT” or the “Company”) and T Squared Investments LLC, a Delaware limited
liability company, (“T Squared Investments” or “Investor”).

PRELIMINARY STATEMENT:
 
WHEREAS, the Investor wishes to purchase from the Company, upon the terms and
subject to the conditions of this Agreement, Four Houndred and Sixteen Thousand
Six Hundred and Sixty Seven (416,667) shares of preferred stock of the Company,
with such preferred stock being as described in the First Amended and Restated
Certificate of Designations, Rights and Preferences (the “Certificate of
Designations”) in substantially the form attached hereto as Exhibit A (the
“Preferred Stock”) for the Initial Purchase Price set forth in Section 1.3.13
hereof. Subject to the limitations set forth herein and in the Certificate of
Designation, the Preferred Stock shall be initially convertible into shares of
common stock of the Company at any time at a conversion ratio of One (1) share
of Common Stock for One (1) share of Preferred Stock (the “Conversion Value”).
In addition, the Company will issue to the Investor Common Stock Purchase
Warrants (the “Warrants”) to purchase up to an additional 1,100,000 shares of
common stock of the Company at exercise prices as stated in the Warrants; and
 
WHEREAS, the parties intend to memorialize the purchase and sale of such
Preferred Stock and the Warrants.

NOW, THEREFORE, in consideration of the mutual covenants and premises contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby conclusively acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
 
ARTICLE I
 
INCORPORATION BY REFERENCE, SUPERSEDER AND DEFINITIONS
 
1.1 Incorporation by Reference. The foregoing recitals and the Exhibits and
Schedules attached hereto and referred to herein, are hereby acknowledged to be
true and accurate, and are incorporated herein by this reference.
 
1.2 Superseder. This Agreement, to the extent that it is inconsistent with any
other instrument or understanding among the parties governing the affairs of the
Company, shall supersede such instrument or understanding to the fullest extent
permitted by law. A copy of this Agreement shall be filed at the Company’s
principal office.
 

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1.3 Certain Definitions. For purposes of this Agreement, the following
capitalized terms shall have the following meanings (all capitalized terms used
in this Agreement that are not defined in this Article 1 shall have the meanings
set forth elsewhere in this Agreement):
 
1.3.1 “1933 Act” means the Securities Act of 1933, as amended.
 
1.3.2 “1934 Act” means the Securities Exchange Act of 1934, as amended.
 
1.3.3 “Affiliate” means a Person or Persons directly or indirectly, through one
or more intermediaries, controlling, controlled by or under common control with
the Person(s) in question. The term “control,” as used in the immediately
preceding sentence, means, with respect to a Person that is a corporation, the
right to the exercise, directly or indirectly, of more than 50 percent of the
voting rights attributable to the shares of such controlled corporation and,
with respect to a Person that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such controlled Person.
 
1.3.4 “Articles” means the Articles of Incorporation of the Company, as the same
may be amended from time to time. 
 
1.3.5 “Closing” shall mean the Closing of the transactions contemplated by this
Agreement on the Closing Date.
 
1.3.6 “Closing Date” means the date on which the payment of the Purchase Price
(as defined herein) by the Investor to the company is completed pursuant to this
Agreement to purchase the Preferred Stock and Warrants, which shall occur on or
before July 16, 2008.
 
1.3.7 “Common Stock” means shares of common stock of the Company, par value
$0.001 per share.
 
1.3.8 [Reserved].
 
1.3.9 "Exempt Issuance" means the issuance of (a) shares of Common Stock or
options to employees, officers, or directors of the Company pursuant to any
stock or option plan duly adopted by a majority of the non-employee members of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, (b) securities
upon the exercise of or conversion of any securities issued hereunder, and (c)
securities issued pursuant to acquisitions or strategic transactions, provided
any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with the business
of the Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
 

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1.3.10 "Material Adverse Effect" shall mean any adverse effect on the business,
operations, properties or financial condition of the Company that is material
and adverse to the Company and its subsidiaries and affiliates, taken as a whole
and/or any condition, circumstance, or situation that would prohibit or
otherwise materially interfere with the ability of the Company to perform any of
its material obligations under this Agreement or the Registration Rights
Agreement or to perform its obligations under any other material agreement.
 
1.3.11 “Nevada Act” means the Nevada General Corporation Law, as amended.
 
1.3.12 “Person” means an individual, partnership, firm, limited liability
company, trust, joint venture, association, corporation, or any other legal
entity.
 
1.3.13 “Initial Purchase Price” means the Two Hundred Fifty Thousand Dollars
($250,000.00) paid by the Investor to the Company for the Preferred Stock and
the Warrants.
 
1.3.14 Reserved.
 
1.3.15 "Registration Statement" shall mean the registration statement under the
1933 Act to be filed with the Securities and Exchange Commission for the
registration of the Shares pursuant to Section 6.1 below.
 
1.3.16 “SEC” means the Securities and Exchange Commission.
 
1.3.17 “SEC Documents” shall mean the Company's latest Form 10-K or 10-KSB as of
the time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter, and the
Proxy Statement for its latest fiscal year as of the time in question until such
time as the Company no longer has an obligation to maintain the effectiveness of
a Registration Statement as set forth in the Registration Rights Agreement.
 
1.3.18 “Shares” shall mean, collectively, the shares of Common Stock of the
Company issued upon conversion of the Preferred Stock subscribed for hereunder
and those shares of Common Stock issuable to the Investor upon exercise of the
Warrants.
 
1.3.19 “Subsequent Financing” shall mean any offer and sale of shares of
Preferred Stock or debt that is initially convertible into shares of Common
Stock or otherwise senior or superior to the Preferred Stock.
 
1.3.20 “Transaction Documents” shall mean this Agreement, all Schedules and
Exhibits attached hereto and all other documents and instruments to be executed
and delivered by the parties in order to consummate the transactions
contemplated hereby, including, but not limited to the documents listed in
Sections 3.2 and 3.3 hereof.
 
1.3.21 “Warrants” shall mean the Common Stock Purchase Warrants in the form
attached hereto Exhibit B.

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ARTICLE II

SALE AND PURCHASE OF COMPANY PREFERRED STOCK AND WARRANTS PURCHASE PRICE

2.1 Sale of Preferred Stock and Issuance of Warrants. 

(a) Upon the terms and subject to the conditions set forth herein, and in
accordance with applicable law, the Company agrees to sell to the Investor, and
the Investor agrees to purchase from the Company, on the Closing Date 416,667
shares of Preferred Stock and the Warrants for the (the “Initial Purchase
Price”) of Five Hundred Thousand Dollars ($250,000.00). The Purchase Price shall
be paid by the Investor to the Company on the Closing Date by a wire transfer or
check of the Purchase Price in immediately available funds payable to an account
at the direction of the Company. The Company shall cause the Preferred Stock and
the Warrants to be issued to the Investor upon the receipt of the Initial
Purchase Price. The Company shall register the shares of Common Stock into which
the Preferred Stock is convertible pursuant to the terms and conditions set
forth in Section 6.1 below.
 
(b) Each share of Preferred stock shall initially be convertible by the Investor
into One (1.0) share of Common Stock; provided, however, that the Investor shall
not be entitled to convert the Preferred Stock into shares of Common Stock that
would result in beneficial ownership by the Investor and its affiliates of more
than 4.9% of the then outstanding number of shares of Common Stock on such date.
For the purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13d-3 thereunder.
 
(c) Upon execution and delivery of this Agreement and the Company’s receipt of
the Initial Purchase Price from the Investor, the Company shall issue to the
Investor the Warrant to purchase an aggregate of 1,100,000 shares of Common
Stock at exercise prices as stated in the Warrants, all pursuant to the terms
and conditions of the form of Warrants attached hereto as Exhibit B; provided,
however, that the Investor shall not be entitled to exercise the Warrants and
receive shares of Common Stock that would result in beneficial ownership by the
Investor and its affiliates of more than 4.9% of the then outstanding number of
shares of Common Stock on such date. For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder.
 
2.2 Purchase Price. The Initial Purchase Price shall be delivered by the
Investor in the form of a check or wire transfer of immediately available funds
made payable to the Company in United States Dollars from the Investor on the
Closing Date.

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ARTICLE III

CLOSING DATE AND DELIVERIES AT CLOSING

3.1 Closing Date. The closing of the transactions contemplated by this Agreement
(the “Closing”), unless expressly determined herein, shall be held at the
offices of the Company, at 5:00 P.M. local time, on the Closing Date or on such
other date and at such other place as may be mutually agreed by the parties,
including closing by facsimile with originals to follow.

3.2 Deliveries by the Company. In addition to and without limiting any other
provision of this Agreement, the Company agrees to deliver, or cause to be
delivered, to the escrow agent under the Escrow Agreement, the following:
 

(a)
At or prior to Closing, an executed Agreement with all exhibits and schedules
attached hereto;

(b)
At or prior to Closing, an executed Warrant in the name of the Investor in the
form attached hereto as Exhibit B;

(c)
Stock Certificate in the name of Investor evidencing the Preferred Stock;

(d)
Such other documents or certificates as shall be reasonably requested by
Investor or its counsel; and

 

(e)
Good Standing Certificate from the State of Nevada.

 
3.3 Deliveries by Investor. In addition to and without limiting any other
provision of this Agreement, the Investor agrees to deliver, or cause to be
delivered, to the Company, the following:
 

 
(a)
A deposit in the amount of the Investor Funds in immediately available funds;

 
(b)
The executed Agreement with all Exhibits and Schedules attached hereto;

 
(c)
Such other documents or certificates as shall be reasonably requested by the
Company or its counsel.

 
In the event any document provided to the other party in Paragraphs 3.2 and 3.3
herein are provided by facsimile, the party shall forward an original document
to the other party within seven (7) business days.
 
3.4 Further Assurances. The Company and the Investor shall, upon request, on or
after the Closing Date, cooperate with each other (specifically, the Company
shall cooperate with the Investor, and the Investor shall cooperate with the
Company) by furnishing any additional information, executing and delivering any
additional documents and/or other instruments and doing any and all such things
as may be reasonably required by the parties or their counsel to consummate or
otherwise implement the transactions contemplated by this Agreement.
 
3.5 Waiver. The Investor may waive any of the requirements of Section 3.2 of
this Agreement, and the Company at its discretion may waive any of the
provisions of Section 3.3 of this Agreement. The Investor may also waive any of
the requirements of the Company under the Escrow Agreement.
 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF
THE COMPANY

Except as set forth in the Company’s SEC Documents and the Disclosure Schedules
which Disclosure Schedules shall be deemed a part hereof and shall qualify any
representation or otherwise made herein to the extent of the disclosure
contained in the corresponding section of the Disclosure Schedules, the Company
represents and warrants to the Investor as of the date hereof and as of Closing
(which warranties and representations shall survive the Closing regardless of
what examinations, inspections, audits and other investigations the Investor has
heretofore made or may hereinafter make with respect to such warranties and
representations) as follows:
 
4.1 Organization and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada, and
has the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted and is duly
qualified to do business in any other jurisdiction by virtue of the nature of
the businesses conducted by it or the ownership or leasing of its properties,
except where the failure to be so qualified will not, when taken together with
all other such failures, have a Material Adverse Effect on the business,
operations, properties, assets, financial condition or results of operation of
the Company and its subsidiaries taken as a whole.
 
4.2 Articles of Incorporation and By-Laws. The complete and correct copies of
the Company’s Articles and By-Laws, as amended or restated to date which have
been filed with the Securities and Exchange Commission are a complete and
correct copy of such document as in effect on the date hereof and as of the
Closing Date.
 
4.3 Capitalization.
 
4.3.1 The authorized and outstanding capital stock of the Company is set forth
in The Company’s Annual Report on Form 10-KSB, filed on April 15, 2008 with the
Securities and Exchange Commission and updated on all subsequent SEC Documents.
All shares of capital stock have been duly authorized and are validly issued,
and are fully paid and no assessable, and free of preemptive rights.
 
4.3.2 As of the date of this Agreement, the authorized capital stock of the
Company consists of 200,000,000 shares of common Stock ($.001 par value) and
200,000,000 shares of preferred stock ($.001 par value), of which approximately
17,739,625 share of common Stock are issued and outstanding as of July 16, 2008.
As of Closing, following the issuance by the Company of the Preferred Stock to
the Investor, the authorized capital stock of the Company will consist of
200,000,000 shares of Common Stock ($.001 par value) and 200,000,000 shares of
preferred stock ($.001 par value), of which approximately 17,739,625 share of
Common Stock and 833,333 shares of preferred stock shall be issued and
outstanding. All outstanding shares of capital stock have been duly authorized
and are validly issued, and are fully paid and nonassessable and free of
preemptive rights. All shares of capital stock described above to be issued have
been duly authorized and when issued, will be validly issued, fully paid and
nonassessable and free of preemptive rights. Schedule 4.3 hereby contains all
shares and derivatives currently and potentially outstanding. The company hereby
represents that any and all shares and current potentially dilutive events have
been included in Schedule 4.3, including employment agreements, acquisition,
consulting agreements, debts, payments, financing or business relationships that
could be paid in equity, derivatives or resulting in additional equity issuances
that could potentially occur.
 

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4.3.3 Except pursuant to this Agreement and as set forth in Schedule 4.3 hereto,
and as set forth in the Company’s SEC Documents, filed with the SEC, as of the
date hereof and as of the Closing Date, there are no now outstanding options,
warrants, rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any class of capital stock of the Company, or agreements,
understandings or arrangements to which the Company is a party, or by which the
Company is or may be bound, to issue additional shares of its capital stock or
options, warrants, scrip or rights to subscribe for, calls or commitment of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of any class of its capital stock. The Company
agrees to inform the Investors in writing of any additional warrants granted
prior to the Closing Date.
 
4.3.4 The Company on the Closing Date (i) will have full right, power, and
authority to sell, assign, transfer, and deliver, by reason of record and
beneficial ownership, to the Investor, the Company Shares hereunder, free and
clear of all liens, charges, claims, options, pledges, restrictions, and
encumbrances whatsoever; and (ii) upon conversion of the Preferred Stock or
exercise of the Warrants, the Investor will acquire good and marketable title to
such Shares, free and clear of all liens, charges, claims, options, pledges,
restrictions, and encumbrances whatsoever, except as otherwise provided in this
Agreement as to the limitation on the voting rights of such Shares in certain
circumstances.
 
4.4 Authority. The Company has all requisite corporate power and authority to
execute and deliver this Agreement, the Preferred Stock, and the Warrants, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby except as
disclosed in this Agreement. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
 

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4.5 No Conflict; Required Filings and Consents. The execution and delivery of
this Agreement by the Company does not, and the performance by the Company of
their respective obligations hereunder will not: (i) conflict with or violate
the Articles or By-Laws of the Company; (ii) conflict with, breach or violate
any federal, state, foreign or local law, statute, ordinance, rule, regulation,
order, judgment or decree (collectively, "Laws") in effect as of the date of
this Agreement and applicable to the Company; or (iii) result in any breach of,
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, give to any other entity any right of
termination, amendment, acceleration or cancellation of, require payment under,
or result in the creation of a lien or encumbrance on any of the properties or
assets of the Company pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by the Company or any of its
properties or assets is bound. Excluding from the foregoing are such violations,
conflicts, breaches, defaults, terminations, accelerations, creations of liens,
or incumbency that would not, in the aggregate, have a Material Adverse Effect.
 
4.6 Report and Financial Statements. The Company’s Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2007, filed on April 15, 2008 with the
SEC contains the audited financial statements of the Company and quarterly
reports on Form 10-QSB for subsequent quarters filed with the SEC contains the
unaudited interim financial statements of the Company (the “Financial
Statements”). Each of the balance sheets contained in or incorporated by
reference into any such Financial Statements (including the related notes and
schedules thereto) fairly presented the financial position of the Company, as of
its date, and each of the statements of income and changes in stockholders’
equity and cash flows or equivalent statements in such Financial Statements
(including any related notes and schedules thereto) fairly presents, changes in
stockholders’ equity and changes in cash flows, as the case may be, of the
Company, for the periods to which they relate, in each case in accordance with
United States generally accepted accounting principles (“U.S. GAAP”)
consistently applied during the periods involved, except in each case as may be
noted therein, subject to normal year-end audit adjustments in the case of
unaudited statements. The books and records of the Company have been, and are
being, maintained in all material respects in accordance with U.S. GAAP and any
other applicable legal and accounting requirements and reflect only actual
transaction.
 
4.7 Compliance with Applicable Laws. The Company is not in violation of, or, to
the knowledge of the Company is under investigation with respect to or has been
given notice or has been charged with the violation of any Law of a governmental
agency, except for violations which individually or in the aggregate do not have
a Material Adverse Effect.
 
4.8 Brokers. Except as set forth on Schedule 4.8, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
Commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
 
4.9 SEC Documents. The Company acknowledges that the Company is a publicly held
company and has made available to the Investor after demand true and complete
copies of any requested SEC Documents. The Company has registered its Common
Stock pursuant to Section 12(d) of the 1934 Act, and the Common Stock is quoted
and traded on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. The Company has received no notice, either oral or written, with
respect to the continued quotation or trading of the Common Stock on the OTC
Bulletin Board. The Company has not provided to the Investor any information
that, according to applicable law, rule or regulation, should have been
disclosed publicly prior to the date hereof by the Company, but which has not
been so disclosed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act, and rules and
regulations of the SEC promulgated thereunder and the SEC Documents did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
 

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4.10 Litigation. To the knowledge of the Company, no litigation, claim, or other
proceeding before any court or governmental agency is pending or to the
knowledge of the Company, threatened against the Company, the prosecution or
outcome of which may have a Material Adverse Effect.
 
4.11 Exemption from Registration. Subject to the accuracy of the Investor’s
representations in Article V, except as required pursuant to the Registration
Rights Agreement, the sale of the Common Stock and Warrants by the Company to
the Investor will not require registration under the 1933 Act, but may require
registration under New York state securities law if applicable to the Investor.
When validly converted in accordance with the terms of the Preferred Stock, and
upon exercise of the Warrants in accordance with their terms, the Shares
underlying the Preferred Stock and the Warrants will be duly and validly issued,
fully paid, and non-assessable. The Company is issuing the Preferred Stock and
the Warrants in accordance with and in reliance upon the exemption from
securities registration afforded, inter alia, by Rule 506 under Regulation D as
promulgated by the SEC under the 1933 Act, and/or Section 4(2) of the 1933 Act;
provided, however, that certain filings and registrations may be required under
state securities “blue sky” laws depending upon the residency of the Investor.
 
4.12 No General Solicitation or Advertising in Regard to this Transaction.
Neither the Company nor any of its Affiliates nor, to the knowledge of the
Company, any Person acting on its or their behalf (i) has conducted or will
conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D as promulgated by the SEC under the 1933 Act) or general
advertising with respect to the sale of the Preferred Stock or Warrants, or (ii)
made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the
Preferred Stock or Warrants, under the 1933 Act, except as required herein.
 
4.13 No Material Adverse Effect. Except as set forth in Schedule 4.13 attached
hereto and in the Company’s SEC Documents, since June 30, 2007, no event or
circumstance resulting in a Material Adverse Effect has occurred or exists with
respect to the Company. No material supplier or customer has given notice, oral
or written, that it intends to cease or reduce the volume of its business with
the Company from historical levels. Since June 30, 2004, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under any applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in writing to the Investor. 
 

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4.14 Material Non-Public Information. The Company has not disclosed to the
Investors any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
 
4.15 Internal Controls And Procedures. The Company maintains books and records
and internal accounting controls which provide reasonable assurance that (i) all
transactions to which the Company or any subsidiary is a party or by which its
properties are bound are executed with management's authorization; (ii) the
recorded accounting of the Company's consolidated assets is compared with
existing assets at regular intervals; (iii) access to the Company's consolidated
assets is permitted only in accordance with management's authorization; and (iv)
all transactions to which the Company or any subsidiary is a party or by which
its properties are bound are recorded as necessary to permit preparation of the
financial statements of the Company in accordance with U.S. generally accepted
accounting principles.
 
4.16 Full Disclosure. No representation or warranty made by the Company in this
Agreement and no certificate or document furnished or to be furnished to the
Investor pursuant to this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
 
ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
 
The Investor represents and warrants to the Company that:

5.1 Organization and Standing of the Investor. The Investor is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware. The state in which any offer to purchase shares
hereunder was made or accepted by such Investor is the state shown as such
Investor’s address. The Investor was not formed for the purpose of investing
solely in the Preferred Stock, the Warrants or the shares of Common Stock which
are the subject of this Agreement.
 
5.2 Authorization and Power. The Investor has the requisite power and authority
to enter into and perform this Agreement and to purchase the securities being
sold to it hereunder. The execution, delivery and performance of this Agreement
by the Investor and the consummation by the Investor of the transactions
contemplated hereby have been duly authorized by all necessary limited liability
company action where appropriate. This Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Investor and at the
Closing shall constitute valid and binding obligations of the Investor
enforceable against the Investor in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
 

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5.3 No Conflicts. The execution, delivery and performance of this Agreement and
the consummation by the Investor of the transactions contemplated hereby or
relating hereto do not and will not (i) result in a violation of such Investor's
charter documents or bylaws where appropriate or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument to which the Investor is a party, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Investor or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a Material Adverse Effect on such Investor). The Investor is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of such Investor’s obligations under this Agreement or to
purchase the securities from the Company in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, the
Investor is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
 
5.4 Financial Risks. The Investor acknowledges that such Investor is able to
bear the financial risks associated with an investment in the securities being
purchased by the Investor from the Company and that it has been given full
access to such records of the Company and the subsidiaries and to the officers
of the Company and the subsidiaries as it has deemed necessary or appropriate to
conduct its due diligence investigation. The Investor is capable of evaluating
the risks and merits of an investment in the securities being purchased by the
Investor from the Company by virtue of its experience as an investor and its
knowledge, experience, and sophistication in financial and business matters and
the Investor is capable of bearing the entire loss of its investment in the
securities being purchased by the Investor from the Company.
 
5.5 Accredited Investor. The Investor is (i) an “accredited investor” as that
term is defined in Rule 501 of Regulation D promulgated under the 1933 Act by
reason of Rule 501(a)(3) and (6), (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any way
by the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the securities being purchased by the Investor from the Company.
 
5.6 Brokers. Except as set forth in Schedule 4.8, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
Commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Investor.
 

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5.7 Knowledge of Company. The Investor and such Investor’s advisors, if any,
have been, upon request, furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the securities being purchased by the Investor from the Company. The
Investor and such Investor’s advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries.
 
5.8 Risk Factors. The Investor understands that such Investor’s investment in
the securities being purchased by the Investor from the Company involves a high
degree of risk. The Investor understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the securities being purchased by the Investor
from the Company. The Investor warrants that such Investor is able to bear the
complete loss of such Investor’s investment in the securities being purchased by
the Investor from the Company.
 
5.9 Full Disclosure. No representation or warranty made by the Investor in this
Agreement and no certificate or document furnished or to be furnished to the
Company pursuant to this Agreement contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading. Except as set
forth or referred to in this Agreement, Investor does not have any agreement or
understanding with any person relating to acquiring, holding, voting or
disposing of any equity securities of the Company.
 
5.10 Payment of Due Diligence Expenses. At Closing the Company shall disperse to
the Investor Six Thousand Two Hundred and Fifty Dollars ($6,250.00) as partial
payment for due diligence expenses as set forth in Section 5.10 of the Preferred
Stock Purchase Agreement by and between the parties herein dated March 21, 2008.
 
ARTICLE VI

COVENANTS OF THE COMPANY

6.1 Registration Rights. Provided that the Registrable Securities have not been
registered, if at any time after the date hereof, the Company proposes to
register any of its securities under the 1933 Act (other than by a registration
in connection with an acquisition in a manner which would not permit
registration of the Shares for sale to the public, on Form S-8, or any successor
form thereto, on Form S-4, or any successor form thereto), the Company will each
such time give prompt written notice to all holders of the Shares of its
intention to do so and of such holders of the Shares' rights under this Section
6.1. Upon the written request of any such holders of the Shares made within ten
(10) days after the receipt of any such notice (which request shall specify the
Shares intended to be disposed of by such holders of the Shares and the intended
method of disposition thereof), the Company will, subject to the terms of this
Agreement, use its commercially reasonable best efforts to effect the
registration under the 1933 Act of the Shares, to the extent requisite to permit
the disposition (in accordance with the intended methods thereof as aforesaid)
of such Shares so to be registered, by inclusion of such Shares in the
registration statement which covers the securities which the Company proposes to
register, provided that if, at any time after written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holders of the Shares and, thereupon, (i) in the case of a
determination not to register, shall be relieved of this obligation to register
any Shares in connection with such registration (but not from its obligation to
pay the registration expenses in connection therewith), and (ii) in the case of
a determination to delay registering, shall be permitted to delay registering
any of the Shares, for the same period as the delay in registering such other
securities. The Company will pay all registration expenses in connection with
each registration of the Shares requested pursuant to this Section 6.1. The
right provided the holders of the Shares pursuant to this Section shall be
exercisable at their sole discretion and will in no way limit any of the
Company's obligations to pay the Shares according to their terms.
 

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6.2 Reservation of Common Stock. As of the date hereof, the Company has reserved
and the Company shall continue to reserve and keep available at all times, free
of preemptive rights, shares of Common Stock for the purpose of enabling the
Company to issue the shares of Common Stock underlying the Preferred Stock and
Warrants.
 
6.3 Compliance with Laws. The Company hereby agrees to comply in all respects
with the Company's reporting, filing and other obligations under the Laws.
 
6.4 Exchange Act Registration. The Company (a) will continue its obligation to
report to the SEC under the 1934 Act and thereafter shall continue to be
registered thereunder and will use its best efforts to comply in all respects
with its reporting and filing obligations under the 1934 Act, and will not take
any action or file any document (whether or not permitted by the 1934 Act or the
rules thereunder) to terminate or suspend any such registration or to terminate
or suspend its reporting and filing obligations under the 1934 until the
Investors have disposed of all of their Shares.
 
6.5 Corporate Existence; Conflicting Agreements. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company. The
Company shall not enter into any agreement, the terms of which agreement would
restrict or impair the right or ability of the Company to perform any of its
obligations under this Agreement or any of the other agreements attached as
exhibits hereto.
 
6.6 Listing, Securities Exchange Act of 1934 and Rule 144 Requirements. The
Company is required to maintain their current listing on OTC Bulletin Board or a
listing on a national exchange and maintain their status as a Company regulated
by Securities Exchange Act of 1934 and if the Company is current currently
listed on the Pink Sheets the Company must be fully reporting per Rule 144 until
such time as they are regulated by the Securities Exchange Act of 1934. If for
any time post Closing the Company is no longer regulated by the Securities
Exchange Act of 1934 and is not a fully reporting Company, then the Company
shall pay to the Investors as liquidated damages and not as a penalty, one
percent (1%) a month of the Initial Purchase Price plus the Additional
Investment Right as described in Section 6.16, should such investment right be
exercised, in cash or PIK at the option of the Investor. Such damages shall
cease at the time the Company begins complying with the standards as mentioned
above in Section 6.6.
 

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6.7 Convertible Debt. On or prior to the Closing Date, the Company will cause to
be cancelled all convertible debt in the Company. For a period of two years from
the closing the Company will not issue any convertible debt below $0.90 per
share.
 
6.8 Reset Equity Deals. On or prior to the Closing Date, the Company will cause
to be cancelled any and all reset features related to any shares outstanding
that could result in additional shares being issued. For a period of five years
from the closing the Company will not enter into any transactions that have any
reset features that could result in additional shares being issued.
 
6.9 Use of Proceeds. The Company will use the proceeds from the sale of the
Preferred Stock and the Warrants (excluding amounts paid by the Company for
legal and administrative fees in connection with the sale of such securities)
for sales and marketing, working capital and acquisitions.
 
6.10 Right of First Refusal. Each Investor shall have the right to participate
in any subsequent funding by the Company on a pro rata basis at one hundred
percent (100%) of the offering price for a three month period following the
Closing.
 
6.11 Price Adjustment. From the date hereof until such time as no Purchaser
holds any of the Securities, the Company closes on the sale of a note or notes,
shares of Common Stock, or shares of any class of Preferred Stock at a price per
share of Common Stock, or with a conversion right to acquire Common Stock at a
price per share of Common Stock, that is less than the Conversion Price (as
adjusted to the capitalization per share as of the Closing Date, following any
stock splits, stock dividends, or the like) (collectively, the “Subsequent
Conversion Price”), the Company shall make a post-Closing adjustment in the
Conversion Price so that the effective price per share paid by the Investor is
adjusted to a price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
Outstanding (defined below) immediately prior to such issuance plus the number
of shares of Common Stock that the aggregate consideration received by the
Company for such issuance would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock Outstanding
(as defined below) immediately prior to such issuance plus the number of shares
issued at such issuance. For purposes of this Section 6.11, the term “Common
Stock Outstanding” shall mean and include the following: (1) outstanding Common
Stock, (2) Common Stock issuable upon conversion of outstanding Preferred Stock,
(3) Common Stock issuable upon exercise of outstanding warrants. Shares
described in (1) through (4) above shall be included whether vested or unvested,
whether contingent or non-contingent and whether exercisable or not yet
exercisable.
 

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6.12 Price Adjustment Based on Earnings Per Share. In the event the Company
earns between $0.0670 and $0.0335 (50% Decline) per share (where such earnings
in this paragraph shall always be defined as earnings on a pre tax fully diluted
basis (including dilution from any options, warrants and convertible securities)
as reported for the audited sixth months ended June 30, 2008 from continuing
operations before any non-cash items the then current Conversion Price to the
Investor at the time the audited numbers are reported to the SEC shall be
decrease proportionately by 0% if the pre tax earnings (for first six months
ended June 30, 2008) are $0.0670 per share or greater and by 50% if the pre tax
earnings (for first six months ended June 30, 2008) are $0.0335 per share (50%
decrease). For example if the earnings are $ 0.0536 per share or less (20%
Decline) then the then current Conversion Price to the investor shall be reduced
by 20%. Such adjustment shall be made automatically within five business days of
the audited numbers being reported to the SEC.
 
In the event the Company earns between $0.1559 and $0.0780 (50% Decline) per
share (where such earnings in this paragraph shall always be defined as earnings
on a pre tax fully diluted basis (including dilution from any options, warrants
and convertible securities) as reported for the audited fiscal year ending 2008
from continuing operations before any non-cash items the then current Conversion
Price to the Investor at the time the audited numbers are reported to the SEC
shall be decrease proportionately by 0% if the pre tax earnings are $0.1559 per
share or greater and by 50% if the pre tax earnings are $0.0780 per share (50%
decrease). For example if the earnings are $ 0.1247 per share or less (20%
Decline) then the then current Conversion Price to the investor shall be reduced
by 20%. Such adjustment shall be made automatically within five business days of
the audited numbers being reported to the SEC.
 
6.13 Insider Selling. The earliest any “Insiders” can start selling their shares
shall be six months from registration effectiveness. Insiders shall include all
officers, consultants and directors of the Company. The managing members of the
Investor and the Investor shall not be considered “Insiders”.
 
6.14 Subsequent Equity Sales. From the date hereof until such time as no
Purchaser holds any of the Securities, the Company shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Financing
involving a “Variable Rate Transaction” or an “MFN Transaction” (each as defined
below). The term “Variable Rate Transaction” shall mean a transaction in which
the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time after
the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock. The term “MFN
Transaction” shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
which grants to an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable than those granted to
such investor in such offering. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages. Notwithstanding the
foregoing, this Section 6.14 shall not apply in respect of an Exempt Issuance,
except that no Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance, nor shall this Section 6.14 prevent the Company from potentially
granting anti-dilution protection to any potential future investors in the
Company.
 

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6.15 Stock Splits. All forward and reverse stock splits shall effect all equity
and derivative holders proportionately.

ARTICLE VII

COVENANTS OF THE INVESTOR

7.1 Compliance with Law. The Investor's trading activities with respect to
shares of the Company's Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and rules and
regulations of any public market on which the Company's Common Stock is listed.
 
7.2 Transfer Restrictions. The Investor’s acknowledge that (1) the Preferred
Stock, Warrants and shares underlying the Preferred Stock and Warrants have not
been registered under the provisions of the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Investor shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Preferred Stock,
Warrants and shares underlying the Notes and Warrants to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration; and
(2) any sale of the Preferred Stock, Warrants and shares underlying the
Preferred Stock and Warrants made in reliance on Rule 144 promulgated under the
1933 Act may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such securities under
circumstances in which the seller, or the person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder.
 
7.3 Restrictive Legend. The Investor acknowledges and agrees that the Preferred
Stock, the Warrants and the Shares underlying the Preferred Stock and Warrants,
and, until such time as the Shares underlying the Preferred Stock and Warrants
have been registered under the 1933 Act and sold in accordance with an effective
Registration Statement, certificates and other instruments representing any of
the Shares, shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of any such
securities):
 
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT."

7.4 Amendment to Articles of Incorporation. Investor hereby agrees to vote any
shares of capital stock that it may own directly or beneficially, for the
amendment to the Articles. Pending adoption of such amendment, Investor hereby
agrees for itself and its successors and assigns that neither this Section 7.4
or any restriction on exercise of the Warrant shall be amended, modified or
waived without the consent of the holders of a majority of the shares of Common
Stock held by Persons who are not Affiliates of the Company, or the Investor or
Affiliates of the Investor.
 

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ARTICLE VIII
 

CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS

The obligation of the Company to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to Closing Date, of the
following conditions:

8.1 No Termination. This Agreement shall not have been terminated pursuant to
Article X hereof.

8.2 Representations True and Correct. The representations and warranties of the
Investor contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.

8.3 Compliance with Covenants. The Investor shall have performed and complied in
all material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied by it prior to or at the Closing
Date.

8.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall
be pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.

ARTICLE IX

CONDITIONS PRECEDENT TO INVESTOR’S OBLIGATIONS

The obligation of the Investors to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or prior to Closing Date unless
specified otherwise, of the following conditions:

9.1 No Termination. This Agreement shall not have been terminated pursuant to
Article X hereof.
 
9.2 Representations True and Correct. The representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on as of the Closing Date.
 

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9.3 Compliance with Covenants . The Company shall have performed and complied in
all material respects with all covenants, agreements, and conditions required by
this Agreement to be performed or complied by it prior to or at the Closing
Date.
 
9.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall
be pending by any public authority or individual or entity before any court or
administrative body to restrain, enjoin, or otherwise prevent the consummation
of this Agreement or the transactions contemplated hereby or to recover any
damages or obtain other relief as a result of the transactions proposed hereby.
 
ARTICLE X

TERMINATION, AMENDMENT AND WAIVER

10.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date
 
10.1.1 by mutual written consent of the Investor and the Company;
 
10.1.2 by the Company upon a material breach of any representation, warranty,
covenant or agreement on the part of the Investor set forth in this Agreement,
or the Investor upon a material breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company or the Investor, respectively, shall
have become untrue, in either case such that any of the conditions set forth in
Article VIII or Article IX hereof would not be satisfied (a "Terminating
Breach"), and such breach shall, if capable of cure, not have been cured within
five (5) business days after receipt by the party in breach of a notice from the
non-breaching party setting forth in detail the nature of such breach.
 
10.2 Effect of Termination. Except as otherwise provided herein, in the event of
the termination of this Agreement pursuant to Section 10.1 hereof, there shall
be no liability on the part of the Company or the Investor or any of their
respective officers, directors, agents or other representatives and all rights
and obligations of any party hereto shall cease; provided that in the event of a
Terminating Breach, the breaching party shall be liable to the non-breaching
party for all costs and expenses incurred by the non-breaching party not to
exceed $50,000.00.
 
10.3 Amendment. This Agreement may be amended by the parties hereto any time
prior to the Closing Date by an instrument in writing signed by the parties
hereto.
 
10.4 Waiver. At any time prior to the Closing Date, the Company or the Investor,
as appropriate, may: (a) extend the time for the performance of any of the
obligations or other acts of other party or; (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto which have been made to it or them; or (c) waive compliance with
any of the agreements or conditions contained herein for its or their benefit.
Any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by the party or parties to be bound hereby.

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ARTICLE XI

GENERAL PROVISIONS

11.1 Transaction Costs. Except as otherwise provided herein, each of the parties
shall pay all of his or its costs and expenses (including attorney fees and
other legal costs and expenses and accountants’ fees and other accounting costs
and expenses) incurred by that party in connection with this Agreement;
provided, the Company shall pay Investor such due diligence expenses as
described in section 5.10.
 
11.2 Indemnification. The Investor agrees to indemnify, defend and hold the
Company (following the Closing Date) and its officers and directors harmless
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities or damages, including interest, penalties and
reasonable attorney’s fees, that it shall incur or suffer, which arise out of or
result from any breach of this Agreement by such Investor or failure by such
Investor to perform with respect to any of its representations, warranties or
covenants contained in this Agreement or in any exhibit or other instrument
furnished or to be furnished under this Agreement. The Company agrees to
indemnify, defend and hold the Investor harmless against and in respect of any
and all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney’s fees, that it
shall incur or suffer, which arise out of, result from or relate to any breach
of this Agreement or failure by the Company to perform with respect to any of
its representations, warranties or covenants contained in this Agreement or in
any exhibit or other instrument furnished or to be furnished under this
Agreement. In no event shall the Company or the Investors be entitled to recover
consequential or punitive damages resulting from a breach or violation of this
Agreement nor shall any party have any liability hereunder in the event of gross
negligence or willful misconduct of the indemnified party. In the event of a
breach of this Agreement by the Company, the Investor shall be entitled to
pursue a remedy of specific performance upon tender into the Court an amount
equal to the Initial Purchase Price hereunder. The indemnification by the
Investor shall be limited to the Initial Purchase Price.
 
11.3 Headings. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
 
11.4 Entire Agreement. This Agreement (together with the Schedule, Exhibits,
Warrants and documents referred to herein) constitute the entire agreement of
the parties and supersede all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof.
 

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11.5 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given (i) on the date they are delivered if
delivered in person; (ii) on the date initially received if delivered by
facsimile transmission followed by registered or certified mail confirmation;
(iii) on the date delivered by an overnight courier service; or (iv) on the
third business day after it is mailed by registered or certified mail, return
receipt requested with postage and other fees prepaid as follows:

If to the Company:

99 Taibei Road
Limin Economic and Technological Development Zone
Harbin, China 150025
Facsimile No.: +86 451 57351551
Attention: Jinjiang Wang

With a copy to:
 
Crone Rozynko, LLP
101 Montgomery Street, Suite 1950
San Francisco, CA 94104
Facsimile No.: (415) 955-8910
Attn: Alisande M. Rozynko, Esq.
 
If to the Investor:

T Squared Investments LLC
c/o T Squared Capital LLC
1325 Sixth Avenue, Floor 28
New York, New York 10019
Attn: Thomas M. Sauve

11.6 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any such term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
 

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11.7 Binding Effect. All the terms and provisions of this Agreement whether so
expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and assignees.
 
11.8 Preparation of Agreement. This Agreement shall not be construed more
strongly against any party regardless of who is responsible for its preparation.
The parties acknowledge each contributed and is equally responsible for its
preparation.
 
11.9 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
applicable principles of conflicts of law.
 
11.10 Jurisdiction. This Agreement shall be exclusively governed by and
construed in accordance with the laws of the State of New York. If any action is
brought among the parties with respect to this Agreement or otherwise, by way of
a claim or counterclaim, the parties agree that in any such action, and on all
issues, the parties irrevocably waive their right to a trial by jury. Exclusive
jurisdiction and venue for any such action shall be the Federal Courts serving
the State of New York. In the event suit or action is brought by any party under
this Agreement to enforce any of its terms, or in any appeal therefrom, it is
agreed that the prevailing party shall be entitled to reasonable attorneys fees
to be fixed by the arbitrator, trial court, and/or appellate court.
 
11.11 Preparation and Filing of Securities and Exchange Commission filings. The
Investor shall reasonably assist and cooperate with the Company in the
preparation of all filings with the SEC after the Closing Date due after the
Closing Date.
 
11.12 Further Assurances, Cooperation. Each party shall, upon reasonable request
by the other party, execute and deliver any additional documents necessary or
desirable to complete the transactions herein pursuant to and in the manner
contemplated by this Agreement. The parties hereto agree to cooperate and use
their respective best efforts to consummate the transactions contemplated by
this Agreement.
 
11.13 Survival. The representations, warranties, covenants and agreements made
herein shall survive the Closing of the transaction contemplated hereby.
 
11.14 Third Parties. Except as disclosed in this Agreement, nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties hereto and their respective administrators, executors, legal
representatives, heirs, successors and assignees. Nothing in this Agreement is
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party to this
Agreement.
 
11.15 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty, covenant or agreement herein, nor shall
nay single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
 

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11.16 Counterparts. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto. 

[SIGNATURES ON FOLLOWING PAGE]

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

THE COMPANY:
 
CHINA KANGTAI CACTUS BIO-TECH, INC.
   
By:
/s/ Jinjiang Wang
Jinjiang Wang
President and CEO
 
INVESTOR:
 
T Squared Investments LLC
By: T Squared Capital LLC, Managing Member
   
By:
/s/ Thomas Sauve
Thomas Sauve
Managing Member
1325 Sixth Avenue, Floor 28
New York NY 10019

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Schedule A

NAME AND ADDRESS
 
AMOUNT OF 
INVESTMENT
 
NUMBER OF SHARES 
OF COMMON STOCK 
INTO WHICH PREFERRED
STOCK IS CONVERTIBLE
 
NUMBER OF SHARES 
UNDERLYING 
WARRANTS
                 
T Squared Investments LLC
1325 Sixth Avenue, Floor 28
New York, New York 10019
Attn: Thomas M. Sauve
 
$
250,000
   

416,667
   

1,100,000
 

 

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