Unassociated Document


    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of May 30, 2008, by and among Genesis
      Pharmaceuticals Enterprises, Inc. (f/k/a Genesis Technology Group, Inc.), a
      Florida corporation,
      and all
      predecessors thereof (collectively, the “Company”),
      Karmoya International Ltd., a British Virgin Islands company (“BVI”),
      Genesis Jiangbo (Laiyang) Biotech Technologies Co., Ltd., a wholly owned foreign
      enterprise in the People’s Republic of China (“WOFE”),
      Wubo
      Cao (“Mr. Cao”) and the investors identified on the signature pages hereto
      (each, an “Investor”
      and
      collectively, the “Investors”).

    


    WHEREAS,
      on October 1, 2007, the Company entered into a Share Exchange Agreement (the
      “Exchange
      Agreement”),
      with
      BVI and certain other parties named therein, pursuant to which the Company
      acquired all of the equity interest of BVI, in exchange for 75% of the Common
      Stock (as defined below) on a fully diluted basis as of the time of the closing
      of the exchange under the Exchange Agreement (the “Exchange”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      exemptions from registration under the Securities Act (as defined below), the
      Company desires to issue and sell to each Investor, and each Investor, severally
      and not jointly, desires to purchase from the Company, the Company’s 6%
      Convertible Notes due May 30, 2011 (the “Notes”)
      and
      warrants to acquire shares of the Company’s Common Stock, all as more fully
      described in this Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and the Investors agree as
      follows:

     

    ARTICLE
      1.

    DEFINITIONS

     

    1.1. Definitions.
      In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms shall have the meanings indicated in this
      Section 1.1:

     

    “2008
      Financials”
      means
      the
      consolidated financial statements of the Company for the fiscal year ending
      June
      30, 2008 as filed with the Commission on Form 10-K (or such other form
      appropriate for such purpose as promulgated by the Commission.

     

    “2008
      EBT”
      has the
      meaning set forth in Section 4.11.

     

    “2008
      Diluted EBT”
      has the
      meaning set forth in Section 4.11.

     

    “2008
      Guaranteed EBT” has
      the
      meaning set forth in Section 4.11.

     

    “2008
      Guaranteed Diluted EBT” has
      the
      meaning set forth in Section 4.11

     

    “2008
      Make Good Shares” has
      the
      meaning set forth in Section 4.11.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “2009
      Financials”
      means
      the
      consolidated financial statements of the Company for the fiscal year ending
      June
      30, 2009 as filed with the Commission on Form 10-K (or such other form
      appropriate for such purpose as promulgated by the Commission).

     

    “2009
      EBT”
      has the
      meaning set forth in Section 4.11

     

    “2009
      Diluted EBT”
      has the
      meaning set forth in Section 4.11.

     

    “2009
      Guaranteed EBT” has
      the
      meaning set forth in Section 4.11.

     

    “2009
      Guaranteed Diluted EBT” has
      the
      meaning set forth in Section 4.11.

     

    “2009
      Make Good Shares” has
      the
      meaning set forth in Section 4.11. 

     

    “Action”
      as to
      any Person, means any action, suit, inquiry, notice of violation, proceeding
      (including any partial proceeding such as a deposition) or investigation pending
      or threatened in writing against or affecting such Person, any of such Person’s
      Subsidiaries or any of such Person’s or such Subsidiaries’ respective
      properties, before or by any court, arbitrator, governmental or administrative
      agency, regulatory authority (federal, state, county, local or foreign), stock
      market, stock exchange or trading facility.

     

    “Affiliate”
      means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 144.

     

    “Asset
      Sale” means
      any
      direct or indirect sale, issuance, conveyance, transfer, lease (other than
      operating leases entered into in the ordinary course of business), assignment
      or
      other transfer for value by the Company or any of its Subsidiaries (including
      any Sale and Leaseback Transaction) to any Person other than the Company or
      a
      Subsidiary of the Company of (a) any capital stock of any Subsidiary of the
      Company; or(b) any other property or assets of the Company or any Subsidiary
      of
      the Company other than in the ordinary course of business; provided,
      however,
      that
      Asset Sales shall not include a transaction or series of related transactions
      for which the Company or its Subsidiaries receive aggregate consideration of
      less than US$3,000,000 (each such transaction or series of related transactions,
      a “Permitted
      Sale”),
      and
provided
      further,
      that no
      sale by the Company of securities (other than those of any Subsidiary) contained
      in the stock portfolio owned by the Company at the time of the Exchange shall
      not be considered an Asset Sale.

    


    “Board
      Holdback Escrow Amount” has
      the
      meaning set forth in Section 4.12(a).

     

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

     

    “Buy-In”
      has
      the
      meaning set forth in Section 4.1(c).

     

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


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    “CFO
      Holdback Escrow Amount” has
      the
      meaning set forth in Section 4.12(b).

     

    “Closing”
      means
      the closing of the purchase and sale of the Notes
      pursuant
      to Article II.

     

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

     

    "Closing
      Escrow Agreement"
      means
      the Closing Escrow Agreement, dated as of the date hereof, between the Company,
      the Investors and the escrow agent (the “Closing
      Escrow Agent”)
      identified therein, in the form of Exhibit
      A
      hereto. 

     

    “Commission”
      means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
      means
      the common stock of the Company, par value US$0.001 per share, and any
      securities into which such common stock may hereafter be reclassified or for
      which it may be exchanged as a class.

     

    “Common
      Stock Equivalents”
      means
      any securities of the Company or any Subsidiary which entitle the holder thereof
      to acquire Common Stock at any time, including without limitation, any debt,
      preferred stock, rights, options, warrants or other instrument that is at any
      time convertible into or exchangeable for, or otherwise entitles the holder
      thereof to receive, Common Stock or other securities that entitle the holder
      to
      receive, directly or indirectly, Common Stock.

     

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

     

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

     

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

     

    “Company
      Florida Counsel”
      means
      Schneider Weinberger & Beilly LLP..

     

    “Company
      U.S. Counsel”
      means
      Loeb & Loeb LLP.

     

    “Compliance
      Notice Date” has
      the
      meaning set forth in Section 4.17.

     

    “Compliance
      Period” has
      the
      meaning set forth in Section 4.17.

     

    “Conversion
      Price” equals
      US$0.20 per share of Common Stock, as the same may be adjusted in accordance
      with the terms of the Notes.

     

    “Conversion
      Shares”
      means
      the shares of Common Stock issuable upon conversion of the Notes.

     

    “Debentures”
      means
      the Company’s 6% Convertible Subordinated Debentures due November 30,
      2010.


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    “Disclosure
      Materials”
      has the
      meaning set forth in Section 3.1(h).

     

    “Effective
      Date”
      means
      the date that the Registration Statement required by Section 2(a) of the
      Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Entrustment
      Agreements”
      means
      that certain Consulting Services Agreement, Operating Agreement, Option
      Agreement, Equity Pledge Agreement, Proxy Agreement, each dated September 21,
      2007, and any other agreement, certificate, instrument or understanding, whereby
      (i) the authority to conduct business in the name of and on behalf of the
      Company Entities, (ii) the
      right
      to transact in and with, sell, license, encumber, grants right in and to,
      dispose of, and otherwise deal in and with any and all of the assets (including,
      without limitation, the goodwill, intellectual property rights, profits,
      tangible and intangible assets, rights, claims, rebates, refunds and
      properties), and liabilities of the Company Entities are transferred to
WOFE.

     

    “Evaluation
      Date” has
      the
      meaning set forth in Section 3.1(r).

     

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

     

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

     

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

     

    “Exempt
      Issuance”
means
      the issuance of (a) shares of Common Stock or options to employees, officers,
      directors of and consultants (other than consultants whose services relate
      to
      the raising of funds) of the Company pursuant to any stock or option plan that
      was or may be adopted by a majority of independent members of the Board of
      Directors of the Company or a majority of the members of a committee of
      independent directors established for such purpose, and approved by a majority
      of the Company’s stockholders; provided,
      that
      (i) no options are granted at a price which is less than the fair market value
      on the date of grant and (ii) no more than such number of shares of Common
      Stock
      as represents 5% of the then outstanding shares of Common Stock shall be
      included in the definition of Exempt Issuances; (b) securities upon the exercise
      of or conversion of any Notes or Warrants and any other options, warrants or
      convertible securities which are outstanding on the date hereof including the
      Debentures and the November Warrants, and (c) securities issued pursuant to
      acquisitions, licensing agreements, or other 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 which the Company’s Board of
      Directors believes is beneficial to 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.

     

    “Existing
      Company Entities”
      means
      the Company, BVI, WOFE and their respective Subsidiaries. 

     

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


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    “Holdback
      Escrow Agreement” means
      the
      Holdback Escrow Agreement, dated as of the date hereof, by and among the
      Company, the Investors and escrow agent named therein (the “Escrow
      Agent”),
      in
      the form of Exhibit
      E
      hereto.

     

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

     

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

     

    “Investment”
means,
      with respect to any Person, any direct or indirect loan or other extension
      of
      credit (including, without limitation, a guarantee) or capital contribution
      to
      (by means of any transfer of cash or other property to others or any payment
      for
      property or services for the account or use of others), or any purchase or
      acquisition by such Person of any capital stock, bonds, notes, debentures or
      other securities or evidences of indebtedness issued by, any Person.
      "Investment" shall exclude extensions of trade credit by the Company and its
      Subsidiaries on commercially reasonable terms in accordance with normal trade
      practices of the Company or such Subsidiary, as the case may be.
      

    


    “Investment
      Amount”
      means,
      with respect to each Investor, the Investment Amount indicated on such
      Investor’s signature page to this Agreement, as reflected on the Schedule of
      Investors attached hereto as Appendix
      A.

     

    “Investor
      Deliverables”
      has the
      meaning set forth in Section 2.2(b).

     

    “Investor
      Party”
      has the
      meaning set forth in Section 4.7.

     

    “Lead
      Investor Counsel”
      means Wells,
      Moore, Simmons & Hubbard, PLLC, with an office located at Highland Bluff
      North, Suite 200, 4450 Old Canton Road, Jackson, Mississippi 39211.

    


    “Lien”
      means
      any lien, charge, encumbrance, security interest, right of first refusal, right
      of participation or other restrictions of any kind.

     

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

     

    “Losses”
      means
      any loss, liability, obligation, claim, contingency, damage, cost or expense,
      including all judgments, amounts paid in settlements, court costs and reasonable
      attorneys’ fees and costs of investigation related thereto.

     

    “Make
      Good Escrow Agreement” means
      the
      Make Good Escrow Agreement, dated as of the date hereof, among the Company,
      the
      escrow agent identified therein (the “Make
      Good Escrow Agent”),
      the
      Make Good Pledgor and the Investors, in the form of Exhibit
      C
      hereto.

     

    “Make
      Good Pledgor” means
      Wubo Cao. 


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


    “Make
      Good Shares”
      means
      any of the 2008 Make Good Shares or the 2009 Make Good Shares.

     

    “Material
      Adverse Effect”
      means
      any of (i) a material and adverse effect on the legality, validity or
      enforceability of any Transaction Document, (ii) a material and adverse effect
      on the results of operations, assets, properties, prospects, business or
      condition (financial or otherwise) of the Company and the Subsidiaries, taken
      as
      a whole, or (iii) an adverse impairment to the Company’s ability to perform on a
      timely basis its obligations under any Transaction Document or the Exchange
      Agreement.

     

    “Money
      Laundering Laws”
has
      the
      meaning set forth in Section 3.1(bb).

     

    “New
      York Courts”
      means
      the state and federal courts sitting in the City of New York, Borough of
      Manhattan.

     

    “Notes”
      means
      the Company’s Convertible Notes due May __, 2011 in the aggregate principal
      amount of US$30 million, being offered and sold to the Investors pursuant to
      this Agreement in the form of Exhibit
      B
      hereto.

     

    “Notice”
      has the
      meaning set forth in Section 4.17.

     

    “November
      Private Placement”
      means
      the issuance in November 2007 of the Debentures and the November
      Warrants.

     

    “November
      2007 Securities Purchase Agreement”
      means
      the Securities Purchase Agreement dated as of November 6, 2007 by and among
      the
      Company and the Investors parties thereto.

     

    “November
      2007 Transaction Documents”
      means
      the Transaction Documents as defined in the November 2007 Securities Purchase
      Agreement.

     

    “November
      Warrants”
      means
      the Company’s three year warrants to purchase an aggregate of 10,000,000 shares
      of the Company’s Common Stock at an initial exercise price of US$0.32 per
      share.

    


    “OFAC”
      has the
      meaning set forth in Section 3.1(aa).

     

    “Outside
      Date”
      means
      the fifteenth calendar day (if such calendar day is a Trading Day and if not,
      then the first Trading Day following such fifteenth calendar day) following
      the
      date of this Agreement.

     

    “Permitted
      Indebtedness” means
      (a)
      the indebtedness set forth on Schedule 3.1(m), (b) the indebtedness evidenced
      by
      the Debentures and the Notes, (c) lease obligations and purchase money
      indebtedness of up to US$1,500,000 per year, incurred in connection with the
      acquisition of capital assets and lease obligations with respect to newly
      acquired or leased assets and (d) other indebtedness not to exceed US$5,000,000
      in the aggregate.


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    “Permitted
      Investment”
means
      (i) capital expenditures by the Company or any of its Subsidiaries not to exceed
      US$5,000,000 in the aggregate in any rolling twelve (12) month period;
provided,
      however,
      that
      proceeds from Asset Sales reinvested by the Company shall not be deemed to
      be
      capital expenditures for purposes of this clause (i); (ii) Investments in the
      Company by any then existing Subsidiary of the Company, Investments in any
      then
      existing Subsidiary of the Company by the Company or Investments by any then
      existing Subsidiary of the Company in any other then existing Subsidiary of
      the
      Company; (iii) investments in cash and cash equivalents;(iv) Investments in
      securities of trade creditors or customers received pursuant to any plan of
      reorganization or similar arrangement upon the bankruptcy or insolvency of
      such
      trade creditors or customers; and (v) Investments in the Notes and/or the
      Debentures.

     

    “Permitted
      Liens”
      means
      the individual and collective reference to the following: (a) Liens for taxes,
      assessments and other governmental charges or levies not yet due or Liens for
      taxes, assessments and other governmental charges or levies being contested
      in
      good faith and by appropriate proceedings for which adequate reserves (in the
      good faith judgment of the management of the Company) have been established
      in
      accordance with GAAP; (b) Liens imposed by law which were incurred in the
      ordinary course of the Company’s business, such as carriers’, warehousemen’s and
      mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
      the ordinary course of the Company’s business, and which (x) do not individually
      or in the aggregate materially detract from the value of such property or assets
      or materially impair the use thereof in the operation of the business of the
      Company and its Subsidiaries or (y) are being contested in good faith by
      appropriate proceedings, which proceedings have the effect of preventing for
      the
      foreseeable future the forfeiture or sale of the property or asset subject
      to
      such Lien; and (c) Liens incurred in connection with Permitted
      Indebtedness.

     

    “Permitted
      Sale”
      has the
      meaning set forth in the definition of Asset Sale.

     

    “Person”
      means an
      individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    "Placement
      Agent" means
      the
      Persons referenced in Schedule 3.1(t).

     

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

     

    “Proceeding”
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an investigation or partial proceeding, such as a deposition), whether commenced
      or threatened.

     

    “Qualified
      CFO”
      has the
      meaning set forth in Section 4.12(b).

     

    “Registration
      Rights Agreement”
      means
      the Registration Rights Agreement, dated as of the date hereof, among the
      Company and the Investors, in the form of Exhibit
      D
      hereto.


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    “Registration
      Statement”
      means a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Investors of the
      Shares.

     

    “Related
      Parties” means
      Yantai Jiangbo Pharmaceuticals Co., Ltd. (“Yantai Jiangbo”), Laiyang Jiangbo
      Medicals Co., Ltd. (“Laiyang Jiangbo”) and Laiyang Jiangbo Western and Chinese
      Pharmacy Co., Ltd. (“Jiangbo Pharmacies”).

     

    “Related
      Party Transaction” means
      any
      transaction between the Company or any of its Subsidiaries on the one hand
      and
      any Related Party on the other hand. 

     

    “Rule
      144”
      means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “Sale
      and Leaseback Transaction” means
      any
      direct or indirect arrangement with any Person or to which any such Person
      is a
      party, providing for the leasing to the Company or a Subsidiary of the Company
      of any property, whether owned by the Company or any Subsidiary as of the date
      of this Agreement or later acquired, which has been or is to be sold or
      transferred by the Company or such Subsidiary to such Person or to any other
      Person from whom funds have been or are to be advanced by such Person on the
      security of such property.

     

    “Schedule
      of Investors”
      means
      that schedule attached hereto as Appendix
      A setting
      forth the Investment Amount, the principal amount of Notes and the Warrant
      Shares with respect to each Investor.

     

    “SEC
      Reports”
      has the
      meaning set forth in Section 3.1(h).

     

    “Securities”
      means
      the Notes, the Warrants, the Shares, the Make Good Shares, if ever Make Good
      Shares are due to be delivered pursuant to the Transaction Documents and the
      Settlement Shares, if ever Settlement Shares are due to be delivered pursuant
      to
      the Transaction Documents.

     

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

     

    “Settlement
      Shares”
      has the
      meaning set forth in Section 4.11A.

     

    “Share
      Delivery Date”
      has the
      meaning set forth in Section 4.1(c).

     

    “Shares”
      means,
      collectively, the Conversion Shares and the Warrant Shares.

     

    “Short
      Sales”
      include,
      without limitation, all “short sales” as defined in Rule 200 promulgated under
      Regulation SHO under the Exchange Act and all types of direct and indirect
      stock
      pledges, forward sale contracts, options, puts, calls, swaps and similar
      arrangements (including on a total return basis), and sales and other
      transactions through non-US broker dealers or foreign regulated
      brokers.


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    “Subsequent
      Financing”
means
      any offer and sale of debt or equity securities, or securities convertible
      into
      equity securities of the Company or any subsidiary of the Company (the
“Future
      Securities”),
      but
      excluding any financing which is incidental to a debt financing with a bank
      or
      other institutional lender.

     

    


    “Subsidiary”
      of any
      Person means any “subsidiary” as defined in Rule 1-02(x) of the Regulation S-X
      promulgated by the Commission under the Exchange Act of such Person.
      Notwithstanding anything to the contrary set forth in any Transaction Document,
      BVI, WOFE and their respective subsidiaries, whether now owned or hereafter
      acquired are each considered a Subsidiary of the Company. 

     

    “Total
      Holdback Amount”
      has the
      meaning set forth in Section 4.12.

     

    “Trading
      Day”
      means
      (i) a day on which the Common Stock is traded on a Trading Market or (ii) if
      the
      Common Stock is not quoted on any Trading Market, a day on which the Common
      Stock is quoted in the over-the-counter market as reported by the Pink Sheets
      LLC (or any similar organization or agency succeeding to its functions of
      reporting prices); provided,
      that in
      the event that the Common Stock is not listed or quoted as set forth in (i)
      and
      (ii) hereof, then Trading Day shall mean a Business Day.

     

    “Trading
      Market”
      means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
      or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
      on the date in question.

     

    “Transaction
      Documents”
      means
      this Agreement, the Registration Rights Agreement, the Notes, the Closing Escrow
      Agreement, the Lockup Agreement, the Make Good Escrow Agreement, the Holdback
      Escrow Agreement, the Warrants, and any other documents or agreements executed
      in connection with the transactions contemplated hereunder. 

     

    “Transfer
      Agent”
      means
      Computershare Trust Company, the current transfer agent of the Company with
      a
      mailing address of 30 Indiana Street, Suite 800, Golden , Colorado 80401 and
      any
      successor transfer agent of the Company.

    


    “VWAP”
      means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted for trading as reported by Bloomberg L.P. (based on a
      Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
      time); (b)  if the Common Stock is not then quoted for trading on the OTC
      Bulletin Board and if prices for the Common Stock are then reported in the
“Pink
      Sheets” published by Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (c) in all other cases, the fair
      market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Holder and reasonably acceptable to
      the
      Company.


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    


    Warrants”
      means
      the Company’s five year Common Stock purchase warrants to purchase an aggregate
      of 75,000,000 shares of the Company’s Common Stock at an initial exercise price
      of US$0.25 per share, in the form of Exhibit
      F
      hereto,
      being offered and sold to the Investors by the Company hereunder.

     

    “Warrant
      Shares”
      means
      the shares of the Company’s Common Stock for which the Warrants may be exercised
      in accordance with the terms hereof and of the Warrants.

     

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

     

    “WOFE
      Founders”
      means
      Wubo Cao.

     

    “WOFE
      Purchase Price”
      has the
      meaning set forth in Section 4.16(a).

     

    ARTICLE
      2.

    PURCHASE
      AND SALE

     

    2.1. Closing.
      Subject
      to the terms and conditions set forth in this Agreement, at the Closing the
      Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, (a) Notes in the principal
      amount designated for such Investor in the Schedule of Investors; and (b) a
      Warrant to acquire that number of Warrant Shares designated for such Investor
      in
      the Schedule of Investors. The Closing shall take place at the offices of
      Company U.S. Counsel on the Closing Date or at such other location or time
      as
      the parties may agree.

     

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

     

    (i) Notes
      dated the Closing Date, in the names of the Investors in the principal amount
      designated for each such Investor in the Schedule of Investors;

     

    (ii) Warrants,
      dated the Closing Date, in the names of the Investors to purchase that number
      of
      Warrant Shares designated for each such Investor in the Schedule of
      Investors;

     

    (iii) the
      legal
      opinion of Company U.S. Counsel, in agreed form, addressed to the Investors
      and
      the Placement Agent;

     

    (iv) the
      legal
      opinion of Company Florida Counsel in agreed form addressed to the Investors
      and
      the Placement Agent; and

     

    (v) the
      legal
      opinion of special PRC counsel to WOFE, in agreed form, addressed to the
      Investors and the Placement Agent.

     

    (b) By
      the
      Closing, each Investor shall deliver or cause to be delivered the agreements
      specified in Section 5.2(d), each duly signed by such Investor (collectively,
      the “Investor
      Deliverables”).


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    (c) Within
      two Trading Days following the date of this Agreement, each Investor shall
      deliver to the Closing Escrow Agent for deposit and disbursement in accordance
      with the Closing Escrow Agreement, its Investment Amount, in United States
      dollars and in immediately available funds, by wire transfer to an account
      designated in writing by the Company for such purpose.

     

    ARTICLE
      3.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1. Representations
      and Warranties of the Company.
      The
      Company, BVI and WOFE hereby jointly and severally make the following
      representations and warranties to each Investor:

     

    (a) Subsidiaries.
      None of
      the Existing Company Entities have any direct or indirect Subsidiaries other
      than as specified in Schedule
      3.1(a).
      Except
      as disclosed in Schedule
      3.1(a),
      (i) the
      Company owns, directly or indirectly, all of the capital stock of each other
      Existing Company Entity, and each other Existing Company Entity owns, directly
      or indirectly, all of the capital stock of its respective Subsidiaries, in
      each
      case free and clear of any and all Liens, and (ii) all the issued and
      outstanding shares of capital stock of each Existing Company and each Subsidiary
      are validly issued and are fully paid, non-assessable and free of preemptive
      and
      similar rights. The Company owns 100% of the capital stock of BVI, free and
      clear of all Liens. BVI owns 100% of the capital stock of WOFE, free and clear
      of all Liens. 

     

    (b) Organization
      and Qualification.
      Each
      Existing Company Entity is duly incorporated or otherwise organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation or organization (as applicable), with the requisite power and
      authority to own and use its respective properties and assets and to carry
      on
      its respective business as currently conducted and as to be conducted as
      specified in the Exchange Agreement, Entrustment Agreements and Current Report
      on Form 8-K to be filed in accordance with Section 4.5 herein. No Existing
      Company Entity is in violation of any of the provisions of its respective
      certificate or articles of incorporation, bylaws or other organizational or
      charter documents. Each Existing Company Entity is duly qualified to conduct
      its
      respective businesses and is in good standing as a foreign corporation or other
      entity in each jurisdiction in which the nature of the business conducted or
      property owned by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing, as the case may be, could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect.

     

    (c) Authorization;
      Enforcement.
      Each
      Existing Company Entity which is or is to become party to any Transaction
      Document and the Exchange Agreement has the requisite corporate and other power
      and authority to enter into and to consummate the transactions contemplated
      by
      each such Transaction Document and the Exchange Agreement to which it is a
      party
      and otherwise to carry out its obligations thereunder. The execution and
      delivery of the Transaction Documents, by each Existing Company Entity to be
      party thereto and the consummation by each of them of the transactions
      contemplated thereby have been duly authorized by all necessary action on the
      part of such Existing Company Entity, and no further action is required by
      any
      of them in connection with such authorization. Each Transaction Document and
      the
      Exchange Agreement has been (or upon delivery will have been) duly executed
      by
      the Company, each other Existing Company Entity required to execute the same
      and
      each Subsidiary (to the extent any of them is a party thereto) and, when
      delivered in accordance with the terms hereof, will constitute the valid and
      binding obligation of the Company, such Existing Company Entity and such
      Subsidiary, enforceable against each in accordance with its terms, except as
      such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, liquidation or similar laws relating to, or
      affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application. The execution and delivery
      of
      the Exchange Agreement by each party thereto and the consummation by each of
      them of the transactions contemplated thereby have been duly authorized by
      all
      necessary action on the part of each such party thereto, and no further action
      is required by any of them in connection with such authorization. The Exchange
      Agreement has
      been
      duly executed by each party thereto and will constitute the valid and binding
      obligation of each party thereto enforceable against each party thereto in
      accordance with its terms, except as such enforceability may be limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
      application.


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    (d) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      and each other Existing Company Entity and Subsidiary (to the extent a party
      thereto) and the consummation by the Company, and such other Existing Company
      Entities and Subsidiaries, of the transactions contemplated thereby do not
      and
      will not (i) conflict with or violate any provision of the Company’s, such
      Existing Company Entity’s or any Subsidiary’s certificate or articles of
      incorporation, bylaws or other organizational or charter documents, or (ii)
      except for the November 2007 Transaction Documents, conflict with, or constitute
      a default (or an event that with notice or lapse of time or both would become
      a
      default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation (with or without notice, lapse of time or both)
      of,
      any agreement, credit facility, debt or other instrument (evidencing an Existing
      Company Entity or Subsidiary debt or otherwise) or other understanding to which
      any Existing Company Entity or any Subsidiary is a party or by which any
      property or asset of the Company or any Subsidiary is bound or affected, or
      (iii) result in a violation of any law, rule, regulation, order, judgment,
      injunction, decree or other restriction of any United States or PRC court or
      governmental authority to which the Company or a Subsidiary is subject
      (including federal and state securities laws and regulations), or by which
      any
      property or asset of the Company or a Subsidiary is bound or affected; except
      in
      the case of each of clauses (ii) and (iii), such as could not, individually
      or
      in the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect. 

     

    (e) Filings,
      Consents and Approvals.
      No
      Existing Company Entity is required to obtain any consent, waiver, authorization
      or order of, give any notice to, or make any filing or registration with, any
      United States or PRC court or other federal, state, local or other governmental
      authority or other Person in connection with the execution, delivery and
      performance by the Company and each Subsidiary to the extent a party thereto
      of
      the Transaction Documents, other than (i) the filing with the Commission of
      one
      or more Registration Statements in accordance with the requirements of the
      Registration Rights Agreement, (ii) filings required by state securities laws,
      (iii) the filing of a Notice of Sale of Securities on Form D with the Commission
      under Regulation D of the Securities Act, (iv) the filings required in
      accordance with Section 4.5, (v) filings, consents and approvals required by
      the
      rules and regulations of the applicable Trading Market and (vi) those that
      have
      been made or obtained prior to the date of this Agreement. 


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    (f) Issuance
      of the Notes and the Warrants.
      The
      issuance of the Notes and the Warrants has been duly authorized and, when issued
      and paid for in accordance with the Transaction Documents, the Notes and
      Warrants will be duly and validly issued, fully paid and nonassessable and
      free
      and clear of all Liens. The Company has reserved from its duly authorized
      capital stock a
      number
      of shares of Common Stock equal to at least 100% of the sum of the maximum
      number of (i) Conversion Shares issuable upon conversion of the
      Notes
      pursuant
      to this Agreement and the terms and conditions of the Notes and (ii) Warrant
      Shares issuable
      upon exercise of the Warrants pursuant to this Agreement and the terms and
      conditions of the Warrants. When issued upon conversion of the Notes, the
      Conversion Shares will be duly and validly issued, fully paid and nonassessable
      and free and clear of all Liens. When issued upon exercise of the Warrants,
      the
      Warrant Shares
      will be
      duly and validly issued, fully paid and nonassessable and free
      and
      clear of all Liens.

     

    (g) Capitalization.
      The
      number of shares and type of all authorized, issued and outstanding capital
      stock of the Company, and all shares of Common Stock reserved for issuance
      under
      the Company’s various option and incentive plans, is specified in Schedule
      3.1(g).
      Except
      as specified in Schedule
      3.1(g),
      no
      securities of any Existing Company Entity are entitled to preemptive or similar
      rights, and no Person has any right of first refusal, preemptive right, right
      of
      participation, or any similar right to participate in the transactions
      contemplated by the Transaction Documents. Except as specified in Schedule
      3.1(g)
      and
      other than the Debentures and the November Warrants, there are no outstanding
      options, warrants, scrip rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities, rights or obligations
      convertible into or exchangeable for, or giving any Person any right to
      subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
      understandings or arrangements by which the Company or any Subsidiary is or
      may
      become bound to issue additional shares of Common Stock, or securities or rights
      convertible or exchangeable into shares of Common Stock. The issue and sale
      of
      the Notes and the Warrants hereunder will not, immediately or with the passage
      of time, obligate the Company or any Subsidiary to issue shares of Common Stock
      or other securities to any Person (other than the Investors) and will not result
      in a right of any holder of Company or Subsidiary securities to adjust the
      exercise, conversion, exchange or reset price under such securities. Except
      as
      set forth in Schedule
      3.1(g)
      and
      other than the November Private Placement, no Existing Company Entity has issued
      any capital stock in a private placement transaction, including, without
      limitation, in a transaction commonly referred to in the PRC as a “1 1⁄2
transaction.”

     

    (h) SEC
      Reports; Financial Statements.
      The
      Company has filed all reports required to be filed by it under the Securities
      Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
      for the twelve months preceding the date hereof (or such shorter period as
      the
      Company was required by law to file such reports) (the foregoing materials
      being
      collectively referred to herein as the “SEC
      Reports”
      and,
      together with the Schedules to this Agreement (if any), the “Disclosure
      Materials”)
      on a
      timely basis or has timely filed a valid extension of such time of filing and
      has filed any such SEC Reports prior to the expiration of any such extension.
      As
      of their respective dates, the SEC Reports complied in all material respects
      with the requirements of the Securities Act and the Exchange Act and the rules
      and regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company and
      each
      Subsidiary included in the SEC Reports comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with GAAP applied on
      a
      consistent basis during the periods involved, except as may be otherwise
      specified in such financial statements or the notes thereto, and fairly present
      in all material respects the financial position of the Company and its
      consolidated Subsidiaries as of and for the dates thereof and the results of
      operations and cash flows for the periods then ended, subject, in the case
      of
      unaudited statements, to normal, immaterial, year-end audit adjustments. The
      BVI
      Financial Statements comply in all material respects with applicable accounting
      requirements and the rules and regulations of the Commission with respect
      thereto as in effect at the time of filing. The BVI Financial Statements have
      been prepared in accordance with GAAP applied on a consistent basis during
      the
      periods involved, except as may be otherwise specified in such financial
      statements or the notes thereto, and fairly present in all material respects
      the
      financial position of BVI and its consolidated Subsidiaries as of and for the
      dates thereof and the results of operations and cash flows for the periods
      then
      ended, subject, in the case of unaudited statements, to normal, immaterial,
      year-end audit adjustments.


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    (i) Press
      Releases.
      The
      press releases disseminated by the Company during the twelve months preceding
      the date of this Agreement taken as a whole do not contain any untrue statement
      of a material fact or omit to state a material fact required to be stated
      therein or necessary in order to make the statements therein, in light of the
      circumstances under which they were made and when made, not
      misleading.

     

    (j) Material
      Changes.
      Except
      as
      specifically disclosed in the SEC Reports, since December 31, 2007, (i) there
      has been no event, occurrence or development that has had or that could
      reasonably be expected to result in a Material Adverse Effect, (ii) no Existing
      Company Entity has incurred any liabilities (contingent or otherwise) other
      than
      (A) trade payables, accrued expenses and other liabilities incurred in the
      ordinary course of business consistent with past practice and (B) liabilities
      not required to be reflected in the Company’s or its Subsidiaries’ financial
      statements pursuant to GAAP or required to be disclosed in filings made with
      the
      Commission, (iii) no Existing Company Entity has altered its method of
      accounting or the identity of its auditors, (iv) no Existing Company Entity
      has
      declared or made any dividend or distribution of cash or other property to
      its
      stockholders or purchased, redeemed or made any agreements to purchase or redeem
      any shares of its capital stock, and (v) no Existing Company Entity has issued
      any equity securities to any officer, director or Affiliate, except pursuant
      to
      existing Company stock option plans. The Company does not have pending before
      the Commission any request for confidential treatment of
      information.

     

    (k) Litigation.
      Except
      as disclosed in the SEC Reports or on Schedule
      3.1 (k),
      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 any Existing Company Entity, the prosecution or outcome
      of
      which may have a Material Adverse Effect.


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    (l) Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of any Existing Company Entity. Except
      as
      disclosed in the SEC Reports, no Existing Company Entity has any employment
      or
      labor contracts, agreements or other understandings with any Person.


     

    (m) Indebtedness;
      Compliance.
      Except
      as disclosed on Schedule
      3.1(m)
      and
      other than the Debentures, no Existing Company Entity is a party to any
      indenture, debt, capital lease obligations, mortgage, loan or credit agreement
      by which it or any of its properties is bound. No Existing Company Entity (i)
      is
      in default under or in violation of (and no event has occurred that has not
      been
      waived that, with notice or lapse of time or both, would result in a default
      by
      such Existing Company Entity under), nor has any Existing Company Entity
      received notice of a claim that it is in default under or that it is in
      violation of, any indenture, loan or credit agreement or any other agreement
      or
      instrument to which it is a party or by which it or
      any of
      its properties is bound (whether
      or not such default or violation has been waived), (ii) is in violation of
      any
      order of any court, arbitrator or governmental body, or (iii) is or has been
      in
      violation of any statute, rule or regulation of any governmental authority,
      except for violations which individually or in the aggregate could not have
      or
      reasonably be expected to result in a Material Adverse Effect.

     

    (n) Regulatory
      Permits.
      The
      Existing Company Entities possess all certificates, authorizations and permits
      issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect, and no Existing Company Entity has received any notice
      of proceedings relating to the revocation or modification of any such
      permits.

     

    (o) Title
      to Assets.
      The
      Existing Company Entities have valid land use rights for all real property
      that
      is material to their respective businesses and good and marketable title in
      all
      personal property owned by them that is material to their respective businesses,
      in each case free and clear of all Liens, except for Liens as do not materially
      affect the value of such property and do not materially interfere with the
      use
      made and proposed to be made of such property by such Existing Company Entity.
      Any real property and facilities held under lease by any Existing Company Entity
      are held by them under valid, subsisting and enforceable leases of which such
      Existing Company Entity is in compliance, except as could not, individually
      or
      in the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect.

     

    (p) Patents
      and Trademarks.
      Schedule
      3.1(p)
      sets
      forth all of the patents, patent applications, trademarks, trademark
      applications, service marks, trade names, copyrights, licenses and other similar
      rights that the Existing Company Entities own or have the rights to use
      (collectively, the “Intellectual
      Property Rights”).
      The
      Intellectual Property Rights constitute all of the patents, patent applications,
      trademarks, trademark applications, service marks, trade names, copyrights,
      licenses and other similar rights that are necessary for use by the Existing
      Company Entities in connection with their respective businesses as described
      in
      the SEC Reports. No Existing Company Entity has received a written or oral
      notice that the Intellectual Property Rights used by any of them violates or
      infringes upon the rights of any Person. Except as set forth in Schedule
      3.1(p),
      all
      such Intellectual Property Rights are enforceable and there is no existing
      infringement by another Person of any of the Intellectual Property Rights.
      To
      the knowledge of the Existing Company Entities, no former or current employee,
      no former or current consultant, and no third-party joint developer of any
      Existing Company Entity has any Intellectual Property Rights made, developed,
      conceived, created or written by the aforesaid employee, consultant or
      third-party joint developer during the period of his or her retention by, or
      joint venture with, such Existing Company Entity which can be asserted against
      any Existing Company Entity. The Intellectual Property Rights and the owner
      thereof or agreement through which they are licensed to any of the Existing
      Company are set forth on Schedule
      3.1(p).
      By the
      Closing, WOFE shall have entered into agreements by which it is granted
      irrevocable, exclusive, royalty-free licenses on all Intellectual Property
      Rights that are registered to or owned by any Person other than WOFE or its
      predecessor. Such agreements together with the agreements referenced in
Schedule
      3.1(p)
      are
      collectively the “Intellectual
      Property Rights Licensing Agreements.”
The
      Existing Company Entities will take such action as may be required, including
      making and maintaining the filings set forth in Schedule
      3.1(p)
      and
      shall cause any such transfers of Intellectual Property Rights to WOFE to
      be granted as is required in order for WOFE to become the registered owner
      (in
      its current name) of all such Intellectual Property Rights (including, without
      limitation, the entering into of any Intellectual Property Right Licensing
      Agreements as may be necessary and the filing and maintaining of any information
      with the relevant PRC authority which relate to the change of name for those
      Intellectual Property Rights currently in the name of WOFE’s
      predecessor).


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


    (q) Transactions
      With Affiliates and Employees; Customers.
      Except
      as set forth in the SEC Reports, none of the officers, directors or 5% or more
      shareholders of any Existing Company Entity, and, to the knowledge of the
      Company, none of the employees of any Existing Company Entity, is presently
      a
      party to any transaction with any Existing Company Entity (other than for
      services as employees, officers and directors), including any contract,
      agreement or other arrangement providing for the furnishing of services to
      or
      by, providing for rental of real or personal property to or from, or otherwise
      requiring payments to or from any such Person or, to the knowledge of the
      Company, any entity in which any officer, director, or such employee or
      shareholder has a substantial interest or is an officer, director, trustee
      or
      partner. None of the Existing Company Entities owes any money or other
      compensation to any of their respective officers or directors or shareholders,
      except to extent of ordinary course compensation arrangements specified in
      Schedule
      3.1(q).
      No
      material customer of any Existing Company Entity has indicated their intention
      to diminish their relationship with such Existing Company Entity and no Existing
      Company Entity has any knowledge from which it could reasonably conclude that
      any such customer relationship may be adversely affected.

     

    (r) Internal
      Accounting Controls.
      The
      Existing Company Entities maintain a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization, and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences. The Company has established disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)) for the Company Entities and designed such disclosure controls and
      procedures to ensure that material information relating to the Company Entities
      is made known to the certifying officers by others within those entities,
      particularly during the period in which the Company’s Form 10-KSB or 10-QSB, as
      the case may be, is being prepared. The Company’s certifying officers have
      evaluated the effectiveness of the Company’s controls and procedures in
      accordance with Item 307 of Regulation S-B under the Exchange Act for the
      Company’s most recently ended fiscal quarter or fiscal year-end (such date, the
“Evaluation
      Date”).
      The
      Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
      conclusions of the certifying officers about the effectiveness of the disclosure
      controls and procedures based on their evaluations as of the Evaluation Date.
      Since the Evaluation Date, there have been no significant changes in the
      Existing Company Entities’ internal controls (as such term is defined in Item
      308(c) of Regulation S-B under the Exchange Act) or, to the Company’s knowledge,
      in other factors that could significantly affect any Company Entity’s internal
      controls.

     


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    


    (s) Solvency.
      Based
      on the financial condition of the Company, including the Existing Company
      Entities, as of the Closing Date (and assuming that the Closing shall have
      occurred), (i) each Existing Company Entity’s fair saleable value of their
      respective assets exceeds the amount that will be required to be paid on or
      in
      respect of such Existing Company Entity’s existing debts and other liabilities
      (including known contingent liabilities) as they mature, (ii) each Existing
      Company Entity’s assets do not constitute unreasonably small capital to carry on
      their respective business for the current fiscal year as now conducted and
      as
      proposed to be conducted including its capital needs taking into account the
      particular capital requirements of the business conducted by such Existing
      Company Entity, and projected capital requirements and capital availability
      thereof, and (iii) the current cash flow of such Existing Company Entity,
      together with the proceeds such Existing Company Entities would receive, were
      they to liquidate all of their respective assets, after taking into account
      all
      anticipated uses of the cash, would be sufficient to pay all amounts on or
      in
      respect of its debt when such amounts are required to be paid. The Existing
      Company Entities do not intend to incur debts beyond their respective ability
      to
      pay such debts as they mature (taking into account the timing and amounts of
      cash to be payable on or in respect of its debt).

     

    (t) Certain
      Fees.
      Except
      as described in Schedule
      3.1(t),
      no
      brokerage or finder’s fees or commissions are or will be payable by any Existing
      Company Entity to any broker, financial advisor or consultant, finder, placement
      agent, investment banker, bank or other Person with respect to the transactions
      contemplated by this Agreement. The Investors shall have no obligation with
      respect to any fees or with respect to any claims (other than such fees or
      commissions owed by an Investor pursuant to written agreements executed by
      such
      Investor which fees or commissions shall be the sole responsibility of such
      Investor) made by or on behalf of other Persons for fees of a type contemplated
      in this Section that may be due in connection with the transactions contemplated
      by this Agreement.

     

    (u) Certain
      Registration Matters.
      Assuming the accuracy of the Investors’ representations and warranties set forth
      in Sections 3.2(b)-(e), no registration under the Securities Act is required
      for
      the offer and sale of the Notes and the Warrants by the Company to the Investors
      under the Transaction Documents. The Company is eligible to register the Shares
      for resale by the Investors under Form S-1 promulgated under the Securities
      Act.
      Except as specified in Schedule
      3.1(u),
      no
      Existing Company Entity has granted or agreed to grant to any Person any rights
      to (including “piggy-back” registration rights), and no Person other than
      Investors pursuant to the Registration Rights Agreement have the right to,
      have
      any securities of the Company registered with the Commission or any other
      governmental authority that have not been satisfied.


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    


    (v) Listing
      and Maintenance Requirements.
      Except
      as specified in the SEC Reports, the Company has not, in the two years preceding
      the date hereof, received notice from any Trading Market to the effect that
      the
      Company is not in compliance with the listing or maintenance requirements
      thereof. The Company is, and has no reason to believe that it will not in the
      foreseeable future continue to be, in compliance with the listing and
      maintenance requirements for continued listing of the Common Stock on the
      Trading Market on which the Common Stock is currently listed or quoted. The
      issuance and sale of the Notes and the Warrants under the Transaction Documents
      does not contravene the rules and regulations of the Trading Market on which
      the
      Common Stock is currently listed or quoted, and no approval of the stockholders
      of the Company thereunder is required for the Company to issue and deliver
      to
      the Investors the Notes and the Warrants as contemplated by the Transaction
      Documents.

     

    (w) Investment
      Company.
      The
      Company is not, and is not an Affiliate of, and immediately following the
      Closing will not have become, an “investment company” within the meaning of the
      Investment Company Act of 1940, as amended.

     

    (x) Make
      Good Shares.
      Make
      Good Pledgor is the sole record and beneficial owner of the Make Good Shares,
      and holds such shares free and clear of all Liens.

     

    (y) Foreign
      Corrupt Practices Act.
      No
      Existing Company Entity, nor to the knowledge of the Company, any agent or
      other
      person acting on behalf of any Existing Company Entity, has, directly or
      indirectly, (i) used any funds, or will use any proceeds from the sale of the
      Notes and the Warrants, for unlawful contributions, gifts, entertainment or
      other unlawful expenses related to foreign or domestic political activity,
      (ii)
      made any unlawful payment to foreign or domestic government officials or
      employees or to any foreign or domestic political parties or campaigns from
      corporate funds, (iii) failed to disclose fully any contribution made by the
      Company or any Subsidiary (or made by any Person acting on their behalf of
      which
      the Company is aware) which is in violation of law, or (iv) has violated in
      any
      material respect any provision of the Foreign Corrupt Practices Act of 1977,
      as
      amended, and the rules and regulations thereunder.

     

    (z) PFIC.
      No
      Existing Company Entity is or intends to become a “passive foreign investment
      company” within the meaning of Section 1297 of the U.S. Internal Revenue Code of
      1986, as amended.

     

    (aa) OFAC.
      No
      Existing Company Entity nor, to the knowledge of the Company, any director,
      officer, agent, employee, Affiliate or Person acting on behalf of any Existing
      Company Entity, is currently subject to any U.S. sanctions administered by
      the
      Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
      and
      the Company will not directly or indirectly use the proceeds of the sale of
      the
      Notes and the Warrants, or lend, contribute or otherwise make available such
      proceeds to any Subsidiary, joint venture partner or other Person or entity,
      towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any
      other country sanctioned by OFAC or for the purpose of financing the activities
      of any Person currently subject to any U.S. sanctions administered by
      OFAC.


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    (bb) Money
      Laundering Laws.
      The
      operations of each Existing Company Entity are and have been conducted at all
      times in compliance with the money laundering statutes of applicable
      jurisdictions, the rules and regulations thereunder and any related or similar
      rules, regulations or guidelines, issued, administered or enforced by any
      applicable governmental agency (collectively, the “Money
      Laundering Laws”)
      and no
      action, suit or proceeding by or before any court or governmental agency,
      authority or body or any arbitrator involving any Existing Company Entity with
      respect to the Money Laundering Laws is pending or, to the best knowledge of
      the
      Company, threatened.

     

    (cc) Other
      Representations and Warranties Relating to WOFE.
      

     

    (i) All
      material consents, approvals, authorizations or licenses requisite under PRC
      law
      for the due and proper establishment and operation of WOFE have been duly
      obtained from the relevant PRC governmental authorities and are in full force
      and effect. Each of the Entrustment Agreements has been duly executed by each
      party thereto and, when delivered in accordance with the terms hereof, will
      constitute the valid and binding obligation of such Person, enforceable against
      each in accordance with its terms, except as such enforceability may be limited
      by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
      or
      similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.
      The
      Entrustment Agreements fully and legally transfer from WOFE to BVI all of the
      right to transact in and with, sell, license, encumber, grants right in and
      to,
      dispose of, and otherwise deal in and with any and all of the assets (including,
      without limitation, the goodwill, intellectual property rights, profits,
      tangible and intangible assets, rights, claims, rebates, refunds and
      properties), and liabilities of the Company Entities. The Entrustment Agreements
      comply in all material respects with the laws and regulations of the
      PRC.

     

    (ii) All
      filings and registrations with the PRC governmental authorities required in
      respect of WOFE and its capital structure and operations including, without
      limitation, the registration with the Ministry of Commerce, the China Securities
      Regulatory Commission, the State Administration of Industry and Commerce, the
      State Administration for Foreign Exchange, tax bureau and customs authorities
      have been duly completed in accordance with the relevant PRC rules and
      regulations, except where, the failure to complete such filings and
      registrations does not, and would not, individually or in the aggregate, have
      a
      Material Adverse Effect.

     

    (iii) WOFE
      has
      complied with all relevant PRC laws and regulations regarding the contribution
      and payment of its registered share capital, the payment schedule of which
      has
      been approved by the relevant PRC governmental authorities. There are no
      outstanding rights of, or commitments made by the Company or any Subsidiary
      to
      sell any equity interest in WOFE.


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    


    (iv) WOFE
      is
      not in receipt of any letter or notice from any relevant PRC governmental or
      quasi-governmental authority notifying it of revocation of any licenses or
      qualifications issued to it or any subsidy granted to it by any PRC governmental
      authority for non-compliance with the terms thereof or with applicable PRC
      laws,
      or the need for compliance or remedial actions in respect of the activities
      carried out by WOFE, except such revocation does not, and would not,
      individually or in the aggregate, have a Material Adverse Effect.

     

    (v) WOFE
      has
      conducted its business activities within the permitted scope of business or
      has
      otherwise operated its business in compliance with all relevant legal
      requirements and with all requisite licenses and approvals granted by competent
      PRC governmental authorities other than such non-compliance that do not, and
      would not, individually or in the aggregate, have a Material Adverse Effect.
      As
      to licenses, approvals and government grants and concessions requisite or
      material for the conduct of any part of WOFE’s business which is subject to
      periodic renewal, the Company has no knowledge of any grounds on which such
      requisite renewals will not be granted by the relevant PRC governmental
      authorities.

     

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

     

    (dd) Disclosure.
      No
      representation or warranty made by the Company, BVI or WOFE in this Agreement
      and no certificate or document furnished or to be furnished to the Investors
      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.

     

    Each
      of
      the Investors acknowledge and agree that the Company, BVI and WOFE are not
      making and have not made any representations or warranties with respect to
      the
      transactions contemplated hereby other than those specifically set forth in
      this
      Section 3.1.

     

    3.2. Representations
      and Warranties of the Investors.
      Each
      Investor hereby, for itself and for no other Investor, represents and warrants
      to the Company as follows:

     

    (a) Organization;
      Authority.
      Such
      Investor is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with the requisite
      corporate, limited liability company or partnership power and authority to
      enter
      into and to consummate the transactions contemplated by the Transaction
      Documents to which it is a party or a signatory and otherwise to carry out
      its
      obligations thereunder. The execution, delivery and performance by such Investor
      of the transactions contemplated by this Agreement has been duly authorized
      by
      all necessary corporate or, if such Investor is not a corporation, such
      partnership, limited liability company or other applicable like action, on
      the
      part of such Investor. Each Transaction Document executed by such Investor
      has
      been duly executed by such Investor, and when delivered by such Investor in
      accordance with the terms hereof, will constitute the valid and legally binding
      obligation of such Investor, enforceable against it in accordance with its
      terms, except as such enforceability may be limited by applicable bankruptcy,
      insolvency, reorganization, moratorium, liquidation or similar laws relating
      to,
      or affecting generally the enforcement of, creditors’ rights and remedies or by
      other equitable principles of general application.


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    


    (b) Investment
      Intent.
      Such
      Investor is acquiring the Notes and the Warrants as principal for its own
      account and not with a view to or for distributing or reselling such Notes
      or
      Warrants or any part thereof, without prejudice, however, to such Investor’s
      right at all times to sell or otherwise dispose of all or any part of such
      Notes
      or Warrants in compliance with applicable federal and state securities laws.
      Subject to the immediately preceding sentence, nothing contained herein shall
      be
      deemed a representation or warranty by such Investor to hold the Notes or
      Warrants for any period of time. Such Investor is acquiring the Notes and the
      Warrants hereunder in the ordinary course of its business. Such Investor does
      not have any agreement or understanding, directly or indirectly, with any Person
      to distribute any of the Notes or the Warrants.

     

    (c) Investor
      Status.
      At the
      time such Investor was offered the Notes and the Warrants, it was, and at the
      date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
      Securities Act. Such Investor is not a registered broker-dealer under Section 15
      of the Exchange Act.

     

    (d) General
      Solicitation.
      Such
      Investor is not purchasing the Notes and the Warrants as a result of any
      advertisement, article, notice or other communication regarding the Notes and
      the Warrants published in any newspaper, magazine or similar media or broadcast
      over television or radio or presented at any seminar or any other general
      solicitation or general advertisement.

     

    (e) Access
      to Information.
      Such
      Investor acknowledges that it has reviewed the Disclosure Materials and has
      been
      afforded (i) the opportunity to ask such questions as it has deemed necessary
      of, and to receive answers from, representatives of the Company concerning
      the
      terms and conditions of the offering of the Notes and the Warrants and the
      merits and risks of investing in the Notes and the Warrants; (ii) access to
      information about the Company and the Subsidiaries and their respective
      financial condition, results of operations, business, properties, management
      and
      prospects sufficient to enable it to evaluate its investment; and (iii) the
      opportunity to obtain such additional information that the Company possesses
      or
      can acquire without unreasonable effort or expense that is necessary to make
      an
      informed investment decision with respect to the investment. Neither such
      inquiries nor any other investigation conducted by or on behalf of such Investor
      or its representatives or counsel shall modify, amend or affect such Investor’s
      right to rely on the truth, accuracy and completeness of the Disclosure
      Materials and the Existing Company Entities’ representations and warranties
      contained in the Transaction Documents.

     

    (f) Certain
      Trading Activities.
      Such
      Investor has not directly or indirectly, nor has any Person acting on behalf
      of
      or pursuant to any understanding with such Investor, engaged in any transactions
      in the securities of the Company (including, without limitations, any Short
      Sales involving the Company’s securities) since the earlier to occur of (i) the
      time that such Investor was first contacted by the Company or any Placement
      Agent regarding the investment in the Company contemplated by the Transaction
      Documents and (ii) the 30th
      day
      prior to the date of this Agreement. Such Investor covenants that neither it
      nor
      any Person acting on its behalf or pursuant to any understanding with it will
      engage in any transactions in the securities of the Company (including Short
      Sales) prior to the time that the transactions contemplated by this Agreement
      are publicly disclosed.


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    


    (g) Independent
      Investment Decision.
      Such
      Investor has independently evaluated the merits of its decision to purchase
      the
      Notes and the Warrants pursuant to the Transaction Documents, and such Investor
      confirms that it has not relied on the advice of any other Investor’s business
      and/or legal counsel in making such decision. Such Investor has not relied
      on
      the business or legal advice of the Company or any of its agents (including
      any
      Placement Agent) or counsel in making its investment decision hereunder, and
      confirms that no Placement Agent has made any representations or warranties
      to
      such Investor in connection with the transactions contemplated by the
      Transaction Documents.

     

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

     

    ARTICLE
      4.

    OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1. (a)
      The Securities may only be disposed of in compliance with state and federal
      securities laws. In connection with any transfer of the Securities other than
      pursuant to an effective registration statement, to the Company, to an Affiliate
      of an Investor or in connection with a pledge as contemplated in Section 4.1(b),
      the Company may require the transferor thereof to provide to the Company an
      opinion of counsel selected by the transferor, the form and substance of which
      opinion shall be reasonably satisfactory to the Company, to the effect that
      such
      transfer does not require registration of such transferred Securities under
      the
      Securities Act.

     

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

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
      ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT SECURED BY SUCH SECURITIES.


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    


    The
      Company acknowledges and agrees that an Investor may from time to time pledge,
      and/or grant a security interest in some or all of the Securities pursuant
      to a
      bona fide margin agreement in connection with a bona fide margin account and,
      if
      required under the terms of such agreement or account, such Investor may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such
      a pledge or transfer would not be subject to approval or consent of the Company
      and no legal opinion of legal counsel to the pledgee, secured party or pledgor
      shall be required in connection with the pledge, but such legal opinion may
      be
      required in connection with a subsequent transfer following default by the
      Investor transferee of the pledge. No notice shall be required of such pledge.
      At the appropriate Investor’s expense, the Company will execute and deliver such
      reasonable documentation as a pledgee or secured party of Securities may
      reasonably request in connection with a pledge or transfer thereof including
      the
      preparation and filing of any required prospectus supplement under Rule
      424(b)(3) of the Securities Act or other applicable provision of the Securities
      Act to appropriately amend the list of selling stockholders thereunder. Except
      as otherwise provided in Section 4.1(c), any Securities subject to a pledge
      or
      security interest as contemplated by this Section 4.1(b) shall continue to
      bear
      the legend set forth in this Section 4.1(b) and be subject to the restrictions
      on transfer set forth in Section 4.1(a).

     

    (c) Certificates
      or instruments evidencing Securities shall not contain any legend (including
      the
      legend set forth in Section 4.1(b)): (i) following their disposition pursuant
      to
      an effective registration statement (including the Registration Statement with
      respect to the Shares), or (ii) following a sale or transfer of such Securities
      pursuant to Rule 144. If an Investor shall make a sale or transfer of Securities
      either (x) pursuant to Rule 144 or (y) pursuant to a registration statement
      and
      in each case shall have delivered to the Company or the Transfer Agent the
      certificate or instrument representing the applicable Securities containing
      a
      restrictive legend which are the subject of such sale or transfer and a
      representation letter in customary form (the
      date
      of such sale or transfer and Securities delivery being the “Share
      Delivery Date”)
      and (1)
      the Company shall fail to deliver or cause to be delivered to such Investor
      a
      certificate or instrument representing such Securities that is free from all
      restrictive or other legends by the fifth Trading Day following the Share
      Delivery Date and (2) following such fifth Trading Day after the Share Delivery
      Date and prior to the time such Securities are received free from restrictive
      legends, the Investor, or any third party on behalf of such Investor, purchases
      (in an open market transaction or otherwise) shares of Common Stock to deliver
      in satisfaction of a sale by the Investor of such Securities (a "Buy-In"),
      then,
      in addition to any other rights available to the Investor under the Transaction
      Documents and applicable law, the Company shall pay in cash to the Investor
      (for
      costs incurred either directly by such Investor or on behalf of a third party)
      the amount by which the total purchase price paid for Common Stock as a result
      of the Buy-In (including brokerage commissions, if any) exceed the proceeds
      received by such Investor as a result of the sale to which such Buy-In relates.
      The Investor shall provide the Company written notice indicating the amounts
      payable to the Investor in respect of the Buy-In. The Company may not make
      any
      notation on its records or give instructions to any transfer agent of the
      Company that enlarge the restrictions on transfer set forth in this
      Section.


    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    


    4.2. Furnishing
      of Information.
      As long
      as any Investor owns any Securities, the Company covenants to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all reports required to be filed by the Company after the date hereof
      pursuant to the Exchange Act. As long as any Investor owns Securities, if the
      Company is not required to file reports pursuant to such laws, it will prepare
      and furnish to the Investors and make publicly available in accordance with
      Rule
      144(c) such information as is required for the Investors to sell the Securities
      under Rule 144. The Company further covenants that it will take such further
      action as any holder of Securities may reasonably request, all to the extent
      required from time to time to enable such Person to sell the Securities without
      registration under the Securities Act within the limitation of the exemptions
      provided by Rule 144.

     

    4.3. Integration.
      The
      Company shall not, and shall use its best efforts to ensure that no Affiliate
      of
      the Company shall, sell, offer for sale or solicit offers to buy or otherwise
      negotiate in respect of any security (as defined in Section 2 of the Securities
      Act) that would be integrated with the offer or sale of the Notes and the
      Warrants in a manner that would require the registration under the Securities
      Act of the sale of the Notes and the Warrants to the Investors, or that would
      be
      integrated with the offer or sale of the Notes and the Warrants for purposes
      of
      the rules and regulations of any Trading Market in a manner that would require
      stockholder approval of the sale of the Notes and the Warrants to the
      Investors.

     

    4.4. Subsequent
      Registrations.
      Except
      as required under the November 2007 Transaction Documents, the Company may
      not
      file any registration statement (other than on Form S-8) with the Commission
      with respect to any securities of the Company prior to the time that all the
      Shares are registered pursuant to one or more effective Registration
      Statement(s), and the prospectuses forming a portion of such Registration
      Statement(s) is available for the resale of all the Shares.

     

    4.5. Securities
      Laws Disclosure; Publicity.
      By 5:00
      p.m. (New York time) on the Trading Day following the day on which this
      Agreement is executed by the parties, (a) the Company shall issue a press
      release, in a form reasonably acceptable to Pope Investments LLC, a Delaware
      limited liability company (“Pope”), disclosing the transactions contemplated by
      the Transaction Documents (including, without limitation, details with respect
      to the make good provision and thresholds (i.e. 2008 Guaranteed Diluted EBT,
      2008 Guaranteed EBT, 2009 Guaranteed Diluted EBT, and 2009 Guaranteed EBT)
      contained in Section 4.11 herein) and (b) the Company will file a Current Report
      on Form 8-K, in a form reasonably acceptable to Pope, disclosing the material
      terms of the Transaction Documents, including details with respect to the make
      good provision and thresholds (i.e. 2008 Guaranteed Diluted EBT, 2008 Guaranteed
      EBT, 2009 Guaranteed Diluted EBT, and 2009 Guaranteed EBT) contained in Section
      4.11 herein (and attach as exhibits thereto this Agreement, the Registration
      Rights Agreement, the Closing Escrow Agreement, the Make Good Escrow Agreement,
      the Holdback Escrow Agreement, the Lockup Agreement the form of Warrants and
      all
      other then existing Transaction Documents) and the Closing. The Company
      covenants that following such disclosure, the Investors shall no longer be
      in
      possession of any material, non-public information with respect to any of the
      Company Entities. By 5:00 p.m. (New York time) on the Trading Day following
      the
      Closing Date, the Company shall file a Current Report on Form 8-K, in a form
      reasonably acceptable to Pope disclosing the occurrence of the Closing. In
      addition, the Company will make such other filings and notices in the manner
      and
      time required by the Commission and the Trading Market on which the Common
      Stock
      is listed.


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    


    4.6. Limitation
      on Issuance of Future Priced Securities.
      During
      the twelve months following the Closing Date, the Company shall not issue any
      “Future Priced Securities” as such term is described by NASD
      IM-4350-1.

     

    4.7. Indemnification
      of Investors.
      In
      addition to the indemnity provided in the Registration Rights Agreement, the
      Company Entities will jointly and severally indemnify and hold the Investors
      and
      their directors, officers, shareholders, partners, employees and agents (each,
      an “Investor
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation (collectively, “Losses”)
      that
      any such Investor Party may suffer or incur as a result of or relating to any
      misrepresentation, breach or inaccuracy of any representation, warranty,
      covenant or agreement made by any of the Company Entities in any Transaction
      Document. In addition to the indemnity contained herein, the Company will
      reimburse each Investor Party for its reasonable legal and other expenses
      (including the cost of any investigation, preparation and travel in connection
      therewith) incurred in connection therewith, as such expenses are incurred.
      Except as otherwise set forth herein, the mechanics and procedures with respect
      to the rights and obligations under this Section 4.7 shall be the same as those
      set forth in Section 5 of the Registration Rights Agreement.

     

    4.8. Non-Public
      Information.
      The
      Company covenants and agrees that neither it, any Company Entity nor any other
      Person acting on its or their behalf will provide any Investor or its agents
      or
      counsel with any information that the Company believes constitutes material
      non-public information, unless prior thereto such Investor shall have executed
      a
      written agreement regarding the confidentiality and use of such information.
      The
      Company understands and confirms that each Investor shall be relying on the
      foregoing representations in effecting transactions in securities of the
      Company.

     

    4.9. Listing
      of Securities.
      The
      Company agrees, (i) if the Company applies to have the Common Stock traded
      on
      any other Trading Market, it will include in such application the Shares, and
      will take such other action as is necessary or desirable to cause the Shares
      to
      be listed on such other Trading Market as promptly as possible, (ii) the Company
      will take all action reasonably necessary to continue the listing and trading
      of
      its Common Stock on a Trading Market and will comply in all material respects
      with the Company’s reporting, filing and other obligations under the bylaws or
      rules of the Trading Market and (iii) the Company will list on any Trading
      Market, and will maintain the listing of, any other securities which the holders
      of the Warrants shall be entitled to receive upon the exercise of the Warrants
      if such other securities issuable upon exercise of the Warrants are listed
      on
      such Trading Market.

     

    4.10. Use
      of
      Proceeds.
      The
      Company will use the net proceeds from the sale of the Notes and Warrants
      hereunder for working capital purposes in accordance with Schedule
      4.10
      and not
      for the satisfaction of any portion of the Company’s debt (other than payment of
      trade payables and accrued expenses in the ordinary course of the Company’s
      business and consistent with prior practices), or to redeem any Common Stock
      or
      Common Stock Equivalents.


    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    


    4.11. Make
      Good Shares.

     

    (a) The
      Make
      Good Pledgor
      agrees
      that in the event that either:
      

     

    (i)
      the
      earnings before taxes, calculated in accordance with GAAP, as reported in the
      2008 Financials plus (w) non-cash charges associated with the Company’s previous
      convertible debt and warrant issuances, (x) all costs and expenses associated
      with the transactions contemplated by this Agreement and the other Transaction
      Documents, including, all costs and non-cash charges associated with the
      exercise of the Warrants and (y) all costs and expenses associated with the
      settlement of all legal and other matters pertaining to the Company prior to
      or
      in connection with the completion of the Exchange (collectively, the
“Exchange
      Costs”),
      if the
      Make Good Pledgor has delivered to the Company shares of the Common Stock owned
      by him as and if required in accordance with Section 4.11A hereof less (z)
      all
      extraordinary gains, including but not limited to one time asset sales and
      accounting changes (“2008
      EBT”)
      is less
      than US$26,700,000 (“2008
      Guaranteed EBT”)
      or


     

    (ii)
      the
      fully diluted earnings before taxes per share, calculated by dividing 2008
      EBT
      by the weighted average number of fully diluted shares of Common Stock
      outstanding (which number shall not include (x) the 20,000,000 shares of Common
      Stock held in escrow pursuant to the November 2007 Transaction Documents unless
      and until such shares have been released to the investors pursuant to the
      November 2007 Securities Purchase Agreement and (y) shares of Common Stock
      which
      are issuable pursuant to any liquidated damages provision set forth in the
      November 2007 Transaction Documents unless and until, in either case an event
      occurs which requires the issuance of such shares of Common Stock) (“2008
      Diluted EBT”)
      is less
      than US$0.040 (“2008
      Guaranteed Diluted EBT”);
      then

     

    all
      of
      the 2008 Make Good Shares (as defined below) shall be transferred
      in accordance with the Make Good Escrow Agreement to the Investors on a pro
      rata
      basis (determined by dividing each Investor’s Investment Amount by the aggregate
      of all Investment Amounts delivered to the Company by the Investors hereunder)
      for no consideration other than their respective Investment Amounts paid at
      Closing. In
      the
      event that 2008 EBT is equal to or greater than 2008 Guaranteed EBT and 2008
      Diluted EBT is equal to or greater than the 2008 Guaranteed Diluted
      EBT,
      no
      transfer of the 2008 Make Good Shares shall be required by the Make
      Good
      Pledgor
      to the
      Investors under this Section or the Make Good Escrow Agreement and such 2008
      Make Good Shares shall be returned to the Make
      Good
      Pledgor
      in
      accordance with the Make Good Escrow Agreement. The “2008
      Make Good Shares”
      means
      the 60,000,000
      shares of
      Common
      Stock
      (as
      equitably adjusted for any stock splits, stock combinations, stock dividends
      or
      similar transactions)
      required
      to be deposited with the Make Good Escrow Agent pursuant to the Make Good Escrow
      Agreement.

     

    (b) The
      Make
      Good Pledgor
      agrees
      that in the event that either:

     

    (i)
      the
      earnings before taxes ,calculated in accordance with GAAP, as reported in the
      2009 Financials plus
      (w)
      non-cash charges associated with the Company’s previous convertible debt and
      warrant issuances, (x) all costs and expenses associated with the transactions
      contemplated by this Agreement and the other Transaction Documents, including
      all costs and non-cash charges associated with the exercise of the Warrants
      and
      (y) all Exchange Costs, if the Make Good Pledgor has delivered to the Company
      shares of the Common Stock owned by him as and if required in accordance with
      Section 4.11A hereof less
      (z) all
      extraordinary gains, including but not limited to one time asset sales and
      accounting changes (“2009
      EBT”)
      is less
      than US$38,400,000 (“2009
      Guaranteed EBT”)
      or



    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    


    (ii)
      the
      fully diluted earnings before taxes per share, calculated by dividing 2009
      EBT
      by the weighted average number of fully diluted shares of Common Stock
      outstanding (which number shall not include (x) the 20,000,000 shares of Common
      Stock held in escrow pursuant to the November 2007 Transaction Documents unless
      and until such shares are released from escrow to the investors parties to
      the
      November 2007 Securities Purchase Agreement and (y) shares of Common Stock
      which
      are issuable pursuant to any liquidated damages provision set forth in the
      November 2007 Transaction Documents unless and until, in either case an event
      occurs which requires the issuance of such shares of Common Stock)
      (“2009
      Diluted EBT”)
      is
      less than US$0.058 (or US$0.056
      if
      such 20,000,000 shares of Common Stock held in escrow pursuant to the November
      2007 Transaction Documents have been released from escrow to the investors
      parties to the November 2007 Securities Purchase Agreement)(“2009
      Guaranteed Diluted EBT”);
      then 

     

    all
      of
      the 2009 Make Good Shares (as defined below) shall be transferred
      in accordance with the Make Good Escrow Agreement to the Investors on a pro
      rata
      basis (determined by dividing each Investor’s Investment Amount by the aggregate
      of all Investment Amounts delivered to the Company by the Investors hereunder)
      for no consideration other than their respective Investment Amounts paid at
      Closing. In
      the
      event that 2009 EBT is equal to or greater than 2009 Guaranteed EBT and 2009
      Diluted EBT is equal to or greater than the 2009 Guaranteed Diluted
      EBT,
      no
      transfer of the 2009 Make Good Shares shall be required by the Make
      Good
      Pledgor
      to the
      Investors under this Section or the Make Good Escrow Agreement and such 2009
      Make Good Shares shall be returned to the Make
      Good
      Pledgor
      in
      accordance with the Make Good Escrow Agreement. The “2009
      Make Good Shares”
      means
      the 90,000,000 shares of Common Stock
      (as
      equitably adjusted for any stock splits, stock combinations, stock dividends
      or
      similar transactions)
      required
      to be deposited with the Make Good Escrow Agent pursuant to the Make Good Escrow
      Agreement.

     

     

    (c) Any
      such
      transfer of the 2008 Make Good Shares or the 2009 Make Good Shares shall be
      made
      to the Investors or the Make Good Pledgor, as applicable, within 10
      Business
      Days after
      the date
on
      which
      the
      2008
      Financials or 2009 Financials, as applicable, is filed with the Commission.
      Notwithstanding anything to the contrary contained herein, in determining
      whether the Company has achieved any of the 2008 Guaranteed Diluted EBT, 2008
      Guaranteed EBT, 2009 Guaranteed Diluted EBT, or 2009 Guaranteed EBT, the Company
      may disregard any compensation charge or expense required to be recognized
      by
      the Company under GAAP resulting from the release of the 2008 Make Good Shares
      or 2009 Make Good shares (as relevant) to the
      Make
      Good
      Pledgor if and to the extent such charge or expense is specified in the
      Company’s independent auditor’s report for the relevant year, as filed with the
      Commission.  

     

    (d) In
      connection with the foregoing,
      the Make
      Good Pledgor
      agrees
      that within 30 days following the Closing, the
      Make
      Good Pledgor will
      deposit all potential 2008 Make Good Shares and 2009 Make Good Shares into
      escrow in accordance with the Make Good Escrow Agreement along with bank
      signature stamped stock powers executed in blank (or such other signed
      instrument of transfer acceptable to the Company’s transfer agent), and the
      handling and disposition of the 2008 Make Good Shares and 2009 Make Good Shares
      shall be governed by this Section 4.11 and the Make Good Escrow
      Agreement.
      The
      Company shall notify the Investors as soon as the 2008 Make Good Shares and
      2009
      Make Good Shares have been deposited with the Make Good Escrow Agent. The Make
      Good Pledgor
      understands and agrees that the Investors right to receive 2008
      Make
      Good Shares and 2009 Make Good Shares
      pursuant
      to this Section 4.11 and the Make Good Escrow Agreement shall continue to run
      to
      the benefit of each Investor even if such Investor shall have transferred or
      sold all or any portion of its Notes, and that each Investor shall have the
      right to assign its rights to receive all or any such Notes to other Persons
      in
      conjunction with negotiated sales or transfers of any of its Notes.



    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    


    (e) The
      Company covenants and agrees that upon any transfer of 2008 Make Good Shares
      or
      2009 Make Good Shares to the Investors in accordance with the Make Good Escrow
      Agreement, the Company shall promptly instruct its transfer agent to reissue
      such 2008 Make Good Shares or 2009 Make Good Shares in the applicable Investor’s
      name and deliver the same as directed by such Investor.

     

    (f) If
      any
      term or provision of this Section 4.11 contradicts or conflicts with any term
      or
      provision of the Make Good Escrow Agreement, the terms of the Make Good Escrow
      Agreement shall control.

     

    4.11A. Responsibility
      For Certain Actions.
      Mr. Cao
      hereby agrees that he shall be solely and personally responsible for the direct
      payment or other satisfaction of any and all Exchange Costs. In furtherance
      of
      the foregoing:

     

    (a) If
      the
      Company is required to deliver shares of its Common Stock in satisfaction of
      any
      Exchange Costs, Mr. Cao agrees to deliver and transfer to the Investors on
      a pro
      rata basis based on their respective Investment Amounts, a number of shares
      of
      the Common Stock owned by him equal to the number of shares required to satisfy
      such Exchange Costs All shares of Common Stock required to be delivered by
      Mr.
      Cao pursuant to this Section 4.11A shall be collectively referred to herein
      as
      the “Settlement
      Shares”.

     

    (b) With
      respect to the Company’s fiscal year ended June 30, 2008, Mr. Cao agrees to
      deliver to the Investors on
      a pro
      rata basis (determined by dividing each Investor’s Investment Amount by the
      aggregate of all Investment Amounts delivered to the Company by the Investors
      under this Agreement) for no consideration other than payment of their
      respective Investment Amount paid at Closing, such
      number of shares of the Common Stock owned by him equal to the quotient obtained
      by dividing (i) the Exchange Costs as reported in the Annual Report on Form
      10-K
      (or such other form appropriate for such purpose as promulgated by the
      Commission) of the Company for the fiscal year ending June 30, 2008, as filed
      with the Commission (the “2008
      Annual Report”),
      by
      (ii) the
      VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
      to
      the date on which the 2008 Annual Report is filed with the Commission (the
      “2008 Settlement
      Shares”).


    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    


    (c) With
      respect to the Company’s fiscal year ended June 30, 2009, Mr. Cao agrees to
      deliver to the Investors on
      a pro
      rata basis (determined by dividing each Investor’s Investment Amount by the
      aggregate of all Investment Amounts delivered to the Company by the Investors
      under this Agreement) for no consideration other than payment of their
      respective Investment Amount paid at Closing, such
      number of shares of the Common Stock owned by him equal to the quotient obtained
      by dividing (i) the Exchange Costs as reported in the Annual Report on Form
      10-K
      (or such other form appropriate for such purpose as promulgated by the
      Commission) of the Company for the fiscal year ending June 30, 2009, as filed
      with the Commission (the “2009
      Annual Report”),
      by
      (ii) the
      VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
      to
      the date on which the 2009 Annual Report is filed with the Commission (the
      “2009 Settlement
      Shares”).

     

    (d) With
      respect to all of the Company’s fiscal years ended subsequent to June 30, 2009,
      Mr. Cao agrees to deliver to the Investors on
      a pro
      rata basis (determined by dividing each Investor’s Investment Amount by the
      aggregate of all Investment Amounts delivered to the Company by the Investors
      under this Agreement) for no consideration other than payment of their
      respective Investment Amount paid at Closing, such
      number of shares of the Common Stock owned by him equal to the quotient obtained
      by dividing (i) the Exchange Costs as reported in the Annual Report on Form
      10-K
      (or such other form appropriate for such purpose as promulgated by the
      Commission) of the Company for such fiscal year as filed with the Commission
      (each, a “Subsequent
      Annual Report”)
      ,
by
      (ii) the
      VWAP of the Common Stock for the twenty (20) Trading Days immediately prior
      to
      the date on which such Subsequent Annual Report is filed with the Commission
      (the “Subsequent Settlement
      Shares”).

     

    (e) The
      delivery, transfer and distribution
      of the
2008
      Settlement Shares, the 2009 Settlement Shares and the Subsequent Settlement
      Shares under subparagraphs
      (b), (c) and (d) of this Section, respectively, shall
      be
      made to the Investors within 10
      Business Days after
      the date
which
      the
      2008
      Annual Report or 2009 Annual Report or Subsequent Annual Report, as applicable,
      is filed with the Commission. The obligation to deliver the Settlement Shares
      to
      each Investor shall apply regardless of whether or not each such Investor shall
      own any of the Securities at the time any of such Settlement Shares are required
      to be delivered to the Investors under this Section

     

    4.12. Closing
      Escrow Holdback. The Company and Investors agree that, from the aggregate
      Investment Amounts to be delivered into escrow pursuant to the Closing Escrow
      Agreement, at the Closing US$4,000,000 (“Total
      Holdback Amount”)
      shall
      be deposited into escrow and administered in accordance with the Holdback Escrow
      Agreement in order to incentivize the Company to satisfy the following
      conditions: 

     

    (a) Independent
      Board of Directors.
      The
      Company covenants and agrees that no later than 120 days following the Closing
      Date, the Board of Directors of the Company shall be comprised of a minimum
      of
      five members (at least two of whom shall be fluent English speakers who
possess
      experience such that he or she can fulfill its fiduciary obligations and other
      responsibilities as a director of
      a
      United States publicly listed company incorporated in the United States), a
      majority of which shall be “independent directors” as such term is defined in
      NASDAQ Marketplace Rule 4200(a)(15) acceptable to Pope. Notwithstanding
      the foregoing, any approval rights that Pope may have with respect to the
      Company’s selection of any members of the Board of Directors shall cease as of
      the date upon which the Company’s Common Stock is listed on any national
      securities exchange, which shall include any of the Nasdaq markets. The
      Company further covenants and agrees to provide Pope with a Board of Directors
      observer right to participate in all of the meetings of the Board of Directors
      with expenses to be reimbursed, if any, in accordance with the Company’s Board
      of Directors reimbursement policy. Subject to the provisions of this Section
      4.12(a), the Company agrees that US$2,000,000 (the “Board
      Holdback Escrow Amount”)
      of
      the
      Total Holdback Amount delivered to the Escrow Agent
      pursuant
      to the Closing Escrow Agreement shall remain in escrow post Closing pursuant
      to
      and subject to the provisions of the Holdback Escrow Agreement until such time
      as the Company complies with the obligations set forth in this Section 4.12(a).
      


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    


    (b) Chief
      Financial Officer.
      The
      Company covenants and agrees that no later than six (6) months following the
      Closing Date, the Company will hire a full-time chief financial officer who
      has
      experience as the chief financial officer of a United States public reporting
      company and who is (i) a certified public accountant, (ii) fluent in English,
      and (iii) an expert in (x) GAAP and (y) auditing procedures and compliance
      for
      United States public companies (such chief financial officer being referred
      to
      as a “Qualified
      CFO”),
      which
      qualified CFO shall be acceptable to Pope. Pope shall have the right to require
      the Company to replace the Qualified CFO at its discretion if Pope believes
      that
      the Qualified CFO is not adequately performing his or her duties. Pope shall
      also have the right to approve any person appointed as the chief financial
      officer of any of the Company’s operating Subsidiaries located in the PRC and to
      require the Company to remove such person from his or her position at its
      discretion if Pope believes that such chief financial officer is not adequately
      performing his or her duties. Should
      the Qualified CFO be dismissed at any time while the Notes are outstanding,
      then
      the Company shall replace the Qualified CFO with a chief financial officer
      who
      fits the criteria set forth herein as soon as practicable. Notwithstanding
      the
      foregoing, any approval rights that Pope may have with respect to the Company’s
      selection or replacement of its CFO or the chief financial officer of any of
      the
      Company’s operating Subsidiaries located in the PRC shall cease as of the date
      upon which the Company’s Common Stock is listed on any national securities
      exchange, which shall include any of the Nasdaq markets. By
      9:00
      a.m. (New York time) on the second Trading Day following the hiring of such
      Qualified CFO, the Company will file a Current Report on Form 8-K disclosing
      the
      information required by Item 5.02 of Form 8-K. Subject to the provisions of
      this
      Section 4.12(b), the Company agrees that US$2,000,000 (the “CFO
      Holdback Escrow Amount”)
      of
      the
      Total Holdback Amount
      delivered to the Escrow Agent
      pursuant
      to the Closing Escrow Agreement shall remain in escrow post Closing pursuant
      to
      and subject to the provisions of the Holdback Escrow Agreement until such time
      as the Company complies with the obligations set forth in this Section 4.12(b).
      Pope hereby agrees that the Company has complied with this covenant as of the
      Closing Date by virtue of its hiring of Elsa Sung as the Company’s Chief
      Financial Officer. 

     

    4.13. Engagement
      of Outside Professionals. 

     

    (a) Investor
      Relations.
      The
      Company covenants and agrees that no later than sixty (60) days following the
      Closing Date, the Company shall hire either of CCG Elite, Hayden Communications,
      or Integrated Corporate Relations as the Company’s investor relations firm,
      shall retain them (or another similar firm) through at least December 31, 2010
      and shall pay such firm pursuant to the terms of the agreement between the
      Company and such firm.


    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    


    (b) Independent
      Public Accountant.
      The
      Company covenants and agrees that no later than sixty (60) days following the
      Closing Date, the Company shall hire Moore Stephens as the Company’s independent
      public auditors. Any changes in the removal or appointment of the Independent
      Public Accountant shall be made upon written instrument signed by the Company
      and Pope.

     

    4.14. Further
      Assurances. The Company will, and will cause all of the Company Entities and
      their management to, use their best efforts to satisfy all of the closing
      conditions under Section 5.1, and will not take any action which could frustrate
      or delay the satisfaction of such conditions. In addition, either prior to
      or
      following the Closing, the WOFE Founders and each Company Entity signatory
      hereto will, and will cause each other Company Entity and its management to,
      perform, or cause to be done and performed, all such further acts and things,
      and shall execute and deliver all such other agreements, certificates,
      instruments and documents, as any other party may reasonably request in order
      to
      carry out the intent and accomplish the purposes of this Agreement and the
      consummation of the transactions contemplated hereby. 

     

    4.16 Pope
      Right of Exclusivity in Participation.
      Subject
      to the November 2007 Transaction Documents, from
      the
      Closing Date until eighteen (18) months after the Effective Date (the
“RFR
      Period”),
      in the
      event that the Company seeks to raise additional funds through a Subsequent
      Financing, regardless of whether the Subsequent Financing is initiated by the
      Company or one or more investors (a “Proposed
      Financing”),
      other
      than Exempt Issuances, Pope shall have the exclusive right to participate in
      up
      to 50% of the amount to be raised in any Proposed Financing on the same terms
      as
      those offered to such investor(s) providing the financing in such Proposed
      Financing.

     

    4.17 Right
      of First Refusal.
      Subject
      to the November 2007 Transaction Documents and Section 4.16 of this Agreement,
      during the RFR Period,
      other
      than Exempt Issuances, the Investors shall have the right to participate in
      any
      Subsequent Financing as follows:

    


    (a) If
      the
      Subsequent Financing is initiated by the Company, the Company shall notify
      the
      Investors in writing of such Subsequent Financing and the Investors shall have
      five (5) business days following receipt of such notice to notify the Company
      of
      their desire to purchase all or part of the Future Securities in such Subsequent
      Financing. If the Investors so exercise their right to participate in such
      Subsequent Financing, for a period not exceeding twenty (20) business days,
      the
      Company shall negotiate in good faith with the Investors the terms of such
      Subsequent Financing.

    


    (b) If
      the
      Subsequent Financing is initiated by one or more investors, the Company shall
      notify the Investors in writing of the terms and conditions of the offer of
      the
      investor(s) to acquire Future Securities in such Subsequent Financing and the
      Investors shall have five (5) business days following receipt of such notice
      to
      execute a letter of intent to match the offer of such investor(s) or otherwise
      purchase Future Securities in such amount as would be necessary to maintain
      an
      Investor’s ownership percentage in the Company upon consummation of such
      Subsequent Financing. Percentage ownership shall be determined in a manner
      consistent with Rule 13(d) of the Exchange Act.



    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


    (c) If
      the
      Investors elect to purchase Future Securities in a Proposed Financing, they
      shall fund their purchase contemporaneously with and on the same terms and
      conditions as the other investor(s), if any. The Investors may exercise this
      right in proportion to their respective Investment Amounts pursuant to this
      Agreement or in such other ratio as they may, among themselves,
      determine.

    


    (d) If
      the
      Investors do not exercise their right of participation within the time limits
      set forth in subparagraphs (a) and (b) of this Section 4.17, or the Company
      and
      the Investors fail to reach agreement on the terms of the Subsequent Financing
      within the negotiation period set forth in subparagraph (a) of this Section
      4.17, the Company may sell Future Securities in the relevant Subsequent
      Financing at a price and on terms which are no more favorable to the investor(s)
      than the terms provided to the Investors. If the Company subsequently changes
      the price or terms so that the price or terms are more favorable to the
      investor(s), the Company shall provide the Investors with the opportunity to
      purchase the Future Securities on the revised terms in the manner set forth
      in
      this Section 4.19.

    


    4.18 Conversion
      Price Adjustment.
      For
      so
      long as the Notes shall be outstanding, except
      for
      Exempt Issuances, as to which this Section 4.18 does not apply, if the Company
      closes on the sale or issuance of Common Stock at a price per share, or if
      the
      Company issues additional convertible notes or preferred stock at a conversion
      or exercise price per share, after any adjustment thereto, which is less than
      the Conversion Price, (such lower sales, conversion or exercise price, as the
      case may be, shall be referred to as the “Lower
      Price”),
      the
      Conversion Price in effect from and after the date of such transaction shall
      be
      reduced to the Lower Price. 

    


    4.19 Tag
      Along Rights.

    


    (a) Mr.
      Cao
      (the “Selling
      Shareholder”)
      shall
      not, in any one transaction or any series of related transactions, directly
      or
      indirectly transfer to a third party, any or all of the shares of the Common
      Stock owned by him unless the terms and conditions of such transfer to such
      third party include an offer to each Investor to include, at the option of
      such
      Investor, in such transfer, a number of the shares of the Common Stock owned
      by
      such Investor, determined in accordance with subparagraph (b) of this Section
      4.19, on the same terms and conditions as those applying to the Selling
      Shareholder. Prior to effecting any transfer of shares subject to this Section
      4.19, the Selling Shareholder shall send a written notice of the terms of such
      proposed transfer (the “Tag-Along
      Notice”)
      to the
      Investors. At any time within 14 days after the receipt of the Tag-Along Notice,
      each Investor may accept the offer included in the Tag-Along Notice for up
      to
      such number of shares as is determined in accordance with the provisions of
      subparagraph (b) of this Section 4.19 by furnishing written notice of such
      acceptance to the Selling Shareholder and delivering to the Selling Shareholder
      the certificates representing the shares to be transferred pursuant to such
      offer, together with a limited power-of-attorney authorizing the Selling
      Shareholder to sell or otherwise dispose of such shares pursuant to the terms
      of
      such third party’s offer.

    


    (b) The
      Investors shall have the right, pursuant to subparagraph (a) of this Section
      4.19, to sell pro rata to their Investment Amounts shares then owned by the
      Investors and the Selling Shareholder shall reduce the number of shares he
      is to
      sell accordingly to allow for the shares of the Investors to be
      sold.



    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


    (c) Simultaneously
      with the consummation of the transfer of the shares held by the Selling
      Shareholder and any Investor to the third party pursuant to the third party’s
      offer, the Selling Shareholder shall notify such Investor thereof and shall
      cause the third party purchaser to remit to such Investor the total sale price
      of the shares transferred by such Investor to such third party. The Selling
      Shareholder may deduct from the sale price payable to such Investor pursuant
      to
      this Section 4.19 such Investor’s pro rata portion of the reasonable
      out-of-pocket fees and expenses payable by the Selling Shareholder in respect
      of
      the completion of such sale, including, without limitation, brokers’, legal and
      accounting fees and expenses.

    


    (d) If
      within
      14 days after the receipt of the Tag-Along Notice, an Investor has not accepted
      the offer contained in the Tag-Along Notice, such Investor shall be deemed
      to
      have waived any and all rights with respect to the transfer of shares described
      in the Tag-Along Notice and the Selling Shareholder shall have 60 days from
      the
      date of the Tag-Along Notice to transfer not more than the amount of shares
      described in the Tag-Along Notice on terms not more favorable to the Selling
      Shareholder than those set forth in the Tag-Along Notice. If, at the end of
      such
      time period the Selling Shareholder has not completed the transfer of shares
      held by him and any other Investor in accordance with the terms of the third
      party’s offer, the Selling Shareholder shall return to such Investor all
      certificates representing the shares which such Investor delivered for sale
      pursuant to this Section 4.19.

    


    (e) Notwithstanding
      anything contained in this Agreement to the contrary, the Selling Shareholder
      hereby agrees that he shall not, directly or indirectly, transfer by gift or
      otherwise to his spouse, lawful issue, parents, brothers or sisters
      (collectively, “Immediate
      Family Member”)
      and/or
      an Affiliate of the Selling Shareholder or Immediate Family Member any
      or
      all of the shares of the Common Stock owned by him unless and until such
      Immediate Family Member 
      and/or
      Affiliate agrees in writing to be bound by the terms and conditions of this
      Section 4.19.

    


    4.20 Related
      Party Transactions.
      (a) On
      and after November 30, 2008 neither the Company nor any of its Subsidiaries
      shall engage in any Related Party Transaction without the prior written consent
      of Pope. As a precondition to the Company or any of its Subsidiaries engaging
      in
      any Related Party Transaction, the Company shall obtain, from such Related
      Party, a commitment in writing that such Related Party will, at no time in
      the
      future, seek to enter the business of developing and manufacturing drugs. During
      the period commencing on the Closing Date and ending on November 30, 2008,
      the
      Company (i) may continue to make sales to Yantai Jiangbo and Laiyang Jiangbo,
      which sales shall constitute no more than 4% of the Company’s total sales in any
      fiscal quarter and (ii) shall provide to each Investor no less frequently than
      quarterly, receivables, payables and inventory reports which set forth the
      details of any transactions with Yantai Jiangbo and Laiyang Jiangbo that have
      occurred during such quarterly period.


    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    


    (b) The
      Company shall provide to each Investor a copy of the business license of each
      Related Party with whom the Company or any of its Subsidiaries is engaged in
      a
      Related Party Transaction. The Company will obtain from each Related Party
      with
      whom the Company or any of its Subsidiaries does business, a written commitment
      to refrain from the development and manufacturing of pharmaceutical products
      at
      any time in the future so long as they are under common control with the
      Company. 

    


    (c) Notwithstanding
      anything to the contrary contained in this Section 4.20, the Company may
      continue to make sales to Jiangbo Pharmacies, which sales shall constitute
      no
      more than 2% of the Company’s total sales in any fiscal quarter. In connection
      therewith, the Company shall provide to each Investor no less frequently than
      quarterly, receivables, payables and inventory reports which set forth the
      details of any transactions with Jiangbo Pharmacies that have occurred during
      such quarterly period.

    


    (d) Within
      sixty (60) days of the Closing Date, the Company shall apply to the appropriate
      PRC authorities to cause the transfer of the Jiangbo trademark to the Company,
      if such transfer to the Company is permitted under PRC law. The Company will
      use
      its reasonable best efforts to obtain approval of such transfer of the Jiangbo
      trademark within a reasonable period of time, if such transfer to the Company
      is
      permitted under PRC law.

    


    4.21 Additional
      Negative Covenants of the Company.
      So long
      as the Notes are outstanding, without the consent of Pope, the Company will
      not
      directly or indirectly:

    


    (a) other
      than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
      suffer to exist any indebtedness for borrowed money of any kind, including
      but
      not limited to, a guarantee, on or with respect to any of its property or assets
      now owned or hereafter acquired or any interest therein or any income or profits
      therefrom;

    


    (b) other
      than Permitted Liens, enter into, create, incur, assume or suffer to exist
      any
      Liens of any kind, on or with respect to any of its property or assets now
      owned
      or hereafter acquired or any interest therein, any equity interest of the
      Company or any of its Subsidiaries, or any income, profits or royalties
      therefrom;

    


    (c) repay,
      repurchase or offer to repay, repurchase or otherwise acquire or make any
      dividend or distribution in cash or stock in respect of any of its capital
      stock
      other than to the extent permitted or required under the Exchange Agreement,
      the
      Transaction Documents and the November 2007 Transaction Documents;

    


    (d) engage
      in
      any Asset Sale;

    


    (e)
       in
      the
      event that the aggregate consideration received by the Company or its
      Subsidiaries from all Permitted Sales to date has exceeded US$15,000,000, engage
      in any Permitted Sale;

    


    (f) enter
      into any merger or consolidation (A) in which the Company is not the continuing
      or surviving corporation or (B) pursuant to which any voting stock of the
      Company would be converted into cash, securities or other property, in each
      case, other than a consolidation or merger in which the holders of such voting
      stock immediately prior thereto have at least a majority of the voting stock,
      directly or indirectly, of the resulting or surviving corporation immediately
      after the consolidation or merger; 



    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    


    (g) liquidate,
      wind-up or dissolve itself (or suffer any liquidation or
      dissolution);

    


    (h) engage
      in
      any businesses which are not the same, similar or related to the businesses
      in
      which the Company and its Subsidiaries are engaged on the Closing Date;


    


    (i) amend
      its
      certificate of incorporation or bylaws so as to adversely affect any rights
      of
      the Investors;

     

    (j) create
      or
      otherwise cause or permit to exist or become effective any encumbrance or
      restriction on the ability of any Subsidiary of the Company to (a) pay dividends
      or make any other distributions on or in respect of its capital stock; (b)
      make
      any intercompany loans; or (c) transfer any of its property or assets to the
      Company or any other Subsidiary of the Company, except for such encumbrances
      or
      restrictions existing under or by reason of: (1)applicable law; (2) the
      Transaction Documents or the November 2007 Transaction Documents; (3) customary
      non-assignment provisions of any contract or any lease governing a leasehold
      interest of any Subsidiary of the Company; (4) agreements existing on the date
      of this Agreement to the extent and in the manner such agreements are in effect
      on the date of this Agreement; or (5) an agreement governing indebtedness
      incurred to refinance the indebtedness issued, assumed or incurred pursuant
      to
      an agreement referred to in clause (2), or(4) above; provided, however, that
      the
      provisions relating to such encumbrance or restriction contained in any such
      indebtedness are no less favorable to the Company in any material respect as
      determined by the Board of Directors of the Company in their reasonable and
      good
      faith judgment than the provisions relating to such encumbrance or restriction
      contained in agreements referred to in such clause (2) or(4) above;
      or

    


    (k) make
      any
      Investment other than Permitted Investment. 

     

    4.22 Taxes.
      So long
      as the Notes are outstanding ,the Company will promptly pay and discharge,
      or
      cause to be paid and discharged, when due and payable, all lawful taxes,
      assessments and governmental charges or levies imposed upon the income, profits,
      property or business of the Company; provided, however, that any such tax,
      assessment, charge or levy need not be paid if the validity thereof shall
      currently be contested in good faith by appropriate proceedings and if the
      Company shall have set aside on its books adequate reserves with respect
      thereto, and provided, further, that the Company will pay all such taxes,
      assessments, charges or levies forthwith upon the commencement of proceedings
      to
      foreclose any lien which may have attached as security therefor. 

    


    4.22 Intellectual
      Property.
      So long
      as the Notes are outstanding, the Company shall maintain in full force and
      effect the Intellectual Property Rights owned or possessed by it and reasonably
      deemed to be necessary to the conduct of its business, unless it is sold for
      value.


    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    


    


    4.23 Increase
      in Authorized Shares of Common Stock.
      The
      Company covenants and agrees that it shall take the actions necessary to
      increase the number of authorized shares of Common Stock to 900,000,000 shares,
      including, without limitation, obtaining the required consent of its
      shareholders, amending its charter documents (if required) and filing an
      information statement with the Commission. The Company acknowledges that it
      shall be an event of default under the Notes if the Company has not so increased
      its authorized shares of Common Stock by August 31, 2008.

     

    ARTICLE
      5.CONDITIONS
      PRECEDENT TO CLOSING

     

    5.1. Conditions
      Precedent to the Obligations of the Investors to Purchase Notes.
      The
      obligation of each Investor to acquire Notes and Warrants at the Closing is
      subject to the satisfaction or waiver by such Investor, at or before the
      Closing, of each of the following conditions: 

     

    (a) Representations
      and Warranties.
      The
      representations and warranties of the Existing Company Entities contained herein
      shall be true and correct in all material respects as of the date when made
      and
      as of the Closing as though made on and as of such date;

     

    (b) Performance.
      The
      Existing Company Entities and the Make Good Pledgor shall have performed,
      satisfied and complied in all material respects with all covenants, agreements
      and conditions required by the Transaction Documents to be performed, satisfied
      or complied with by it at or prior to the Closing;

     

    (c) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits the consummation of any
      of
      the transactions contemplated by the Transaction Documents;

     

    (d) Adverse
      Changes.
      Since
      the date of execution of this Agreement, no event or series of events shall
      have
      occurred that reasonably could have or result in a Material Adverse Effect
      or a
      material adverse change with respect to the Company or the
      Subsidiaries;

     

    (e) Due
      Diligence The
      Investors shall have completed business, legal and financial due diligence
      with
      respect to the Existing Company Entities to their satisfaction. 

     

    (f) PRC
      Opinion.
      The
      Company shall have delivered to the Investors, and the Investors shall be able
      to rely upon, the legal opinions that the Company shall have received from
      its
      legal counsel in the PRC (which, among other things, shall confirm the legality
      under applicable PRC law of the restructuring effected with BVI in connection
      with the Exchange and of the enforceability of the Entrustment Agreements)
      with
      such legal opinion being in a form reasonably acceptable to the Investors;
      

     

    (g) Closing
      Officer’s Certificate.
      At the
      Closing, the Company shall have delivered to each Investor an officer’s
      certificate to the effect that each of the conditions specified in Sections
      5.1(a) - 5.1(d) is satisfied in all respects; 

     

    (h) Company
      Agreements.
      The
      Company shall have delivered: 


    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    


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

     

    (ii) the
      Holdback Escrow Agreement, duly executed by the Company and the Escrow
      Agent;

     

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

     

    (iv) the
      Registration Rights Agreement; and

     

    (v) the
      Lockup Agreement, duly executed by the Company and Mr. Cao.

     

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

     

    (j) Mr.
      Cao Deliverables.
      Mr. Cao
      shall have delivered:

     

    (i) to
      the
      Escrow Agent the shares of his Common Stock in accordance with Section 4.11
      hereof;

     

    (ii) the
      Make
      Good Escrow Agreement duly executed by him; and

     

    (iii) this
      Agreement duly executed by him.

     

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

     

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

     

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

     

    (b) Performance.
      Each
      Investor shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by such Investor at or
      prior to the Closing;

     

    (c) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction that prohibits the consummation of any
      of
      the transactions contemplated by the Transaction Documents;


    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    


    (d) Investor
      Deliverables.
      Each
      Investor shall have delivered the Registration Rights Agreement, the Closing
      Escrow Agreement, the Holdback Escrow Agreement, and the Make Good Escrow
      Agreement, each duly executed by such Investor; and 

     

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

     

    ARTICLE
      6.

    MISCELLANEOUS

     

    6.1. Fees
      and Expenses.
      At the
      Closing, the Company shall reimburse Pope upon presentation to the Company
      of
a
      summary
      invoice
      therefor
      which is addressed to Pope by its counsel, up
      to
US$25,000
      for
      Pope’s legal fees in connection with the transactions contemplated by the
      Transaction Documents
      whether
      consummated or not (Pope may deduct such amount from the Investment Amount
      deliverable to the Company at Closing), it being understood that Wells,
      Moore, Simmons & Hubbard, PLLC
      has only
      rendered legal advice to Pope, and not to the Company or any other Investor
      in
      connection with the transactions contemplated hereby, and that each of the
      Company and the other Investors has relied for such matters on the advice of
      its
      own respective counsel.
      In
      addition, the Company shall at the Closing pay to Pope, upon presentation to
      the
      Company of reasonable documentation therefor,
      not more
      than US$20,000 to reimburse Pope for its out-of-pocket due diligence expenses
      in
      connection with the transactions contemplated by the Transaction Documents.
      Except
      as
      specified in the immediately preceding two sentences, each party shall pay
      the
      fees and expenses of its advisers, counsel, accountants and other experts,
      if
      any, and all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of the Transaction Documents.
      The Company shall pay all stamp and other taxes and duties levied in connection
      with the sale of the Notes and the Warrants. 

     

    6.2. Entire
      Agreement.
      The
      Transaction Documents, together with the Exhibits and Schedules thereto, contain
      the entire understanding of the parties with respect to the subject matter
      hereof and supersede all prior agreements, understandings, discussions and
      representations, oral or written, with respect to such matters, which the
      parties acknowledge have been merged into such documents, exhibits and
      schedules.

     

    6.3. Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b)
      the
      next Trading Day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      on
      a day that is not a Trading Day or later than 6:30 p.m. (New York City time)
      on
      any Trading Day, or (c) upon actual receipt by the party to whom such notice
      is
      required to be given, if sent by any means other than facsimile transmission.
      The address for such notices and communications shall be as
      follows:


    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    
      	
              If
                to the Company:

            	
              Genesis
                Pharmaceuticals Enterprises, Inc.

            
	 	
              Middle
                Section, Longmao Street, Area A, Laiyang 

              Waixiangxing
                Industrial Park

            
	 	
              Laiyang
                City, Yantai, Shandong Province, People’s 

              Republic
                of China 710075

            
	 	
              Facsimile:
                (954) 727-8448

            
	 	
              Attn.:
                President

            
	 	 
	
              With
                a copy to:

            	
              Loeb
                & Loeb LLP

            
	 	
              345
                Park Avenue

            
	 	
              New
                York, New York 10154

            
	 	
              Facsimile:
                (212) 407-4990

            
	 	
              Attn.:
                Mitchell Nussbaum, Esq.

            
	 	 
	
              If
                to an Investor:

               

            	
              To
                the address set forth under such Investor’s name on the 

              signature
                pages hereof;

            
	 	 
	
              With
                a copy to

            	
              Wells,
                Moore, Simmons & Hubbard, PLLC

            
	
              Lead
                Investor Counsel:

            	
              Highland
                Bluff North, Suite 200

            
	 	
              4450
                Old Canton Road

            
	 	
              Jackson,
                Mississippi 39211

            
	 	
              Facsimile:
                (601) 355-5850

            
	 	
              Attn:
                Calvin Wells, Esq.

            
	 	 
	
              If
                to the Placement Agent:

               

            	
              To
                the address set forth on Schedule 3.1(t) hereto;

               

            
	
              With
                a copy to:

            	
              Winston
                & Strawn LLP

            
	 	
              200
                Park Avenue

            
	 	
              New
                York, NY 10166

            
	 	
              Facsimile:
                (212) 294-4700

            
	 	
              Attn:
                Eric L. Cohen, Esq.

            


    

     

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

     

    6.4. Amendments;
      Waivers; No Additional Consideration.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed by the Company and Pope. No waiver of any default with respect
      to any provision, condition or requirement of this Agreement shall be deemed
      to
      be a continuing waiver in the future or a waiver of any subsequent default
      or a
      waiver of any other provision, condition or requirement hereof, nor shall any
      delay or omission of either party to exercise any right hereunder in any manner
      impair the exercise of any such right. No consideration shall be offered or
      paid
      to any Investor to amend or consent to a waiver or modification of any provision
      of any Transaction Document unless the same consideration is also offered to
      all
      Investors who then hold Notes. 

     

    6.5. Termination.
      This
      Agreement may be terminated prior to Closing:


    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    


    (a) by
      written agreement of the Investors and the Company; and

     

    (b) by
      an
      Investor (as to itself but no other Investor) upon written notice to the
      Company, if the Closing shall not have taken place by 6:30 p.m. Eastern time
      on
      the Outside Date; provided,
      that
      the right to terminate this Agreement under this Section 6.5(b) shall not
      be available to any Person whose failure to comply with its obligations under
      this Agreement has been the cause of or resulted in the failure of the Closing
      to occur on or before such time.

     

    In
      the
      event of a termination pursuant to Section 6.5(a), upon delivery of a joint
      written notice from the Company and the Investors to the Escrow Agent, or in
      the
      event of a termination pursuant to Section 6.5(b), upon delivery of written
      notice by an Investor to the Escrow Agent, such Investor shall have the right
      to
      a return of up to its entire Investment Amount deposited with the Escrow Agent
      pursuant to Section 2.2(c), without interest or deduction. The Company covenants
      and agrees to cooperate with such Investor in obtaining the return of its
      Investment Amount, and shall not communicate any instructions to the contrary
      to
      the Escrow Agent.

     

    In
      the
      event of a termination pursuant to this Section, the Company shall promptly
      notify all non-terminating Investors. Upon a termination in accordance with
      this
      Section 6.5, the Company and the terminating Investor(s) shall not have any
      further obligation or liability (including as arising from such termination)
      to
      the other and no Investor will have any liability to any other Investor under
      the Transaction Documents as a result therefrom.

     

    6.6. Construction.
      The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof. The language used in this Agreement will be deemed to be the language
      chosen by the parties to express their mutual intent, and no rules of strict
      construction will be applied against any party. This Agreement shall be
      construed as if drafted jointly by the parties, and no presumption or burden
      of
      proof shall arise favoring or disfavoring any party by virtue of the authorship
      of any provisions of this Agreement or any of the Transaction
      Documents.

     

    6.7. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of Pope. Subject
      to
      federal and state securities laws and as otherwise provided in the Transaction
      Documents,
      any
      Investor may assign any or all of its rights under this Agreement to any Person
      to whom such Investor assigns or transfers any Securities,
      provided
      such transferee agrees in writing to be bound, with respect to the transferred
      Securities, by the provisions hereof that apply to the “Investors.”

     

    6.8. No
      Third-Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      successors and permitted assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person, except as otherwise set
      forth
      in Section 4.7 (as to each Investor Party).

     

    6.9. Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement and any other Transaction Documents (whether
      brought against a party hereto or its respective Affiliates, employees or
      agents) shall be commenced exclusively in the New York Courts. Each party hereto
      hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein (including with respect
      to the enforcement of the any of the Transaction Documents), and hereby
      irrevocably waives, and agrees not to assert in any Proceeding, any claim that
      it is not personally subject to the jurisdiction of any such New York Court,
      or
      that such Proceeding has been commenced in an improper or inconvenient forum.
      Each party hereto hereby irrevocably waives personal service of process and
      consents to process being served in any such Proceeding by mailing a copy
      thereof via registered or certified mail or overnight delivery (with evidence
      of
      delivery) to such party at the address in effect for notices to it under this
      Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      Each party hereto hereby irrevocably waives, to the fullest extent permitted
      by
      applicable law, any and all right to trial by jury in any legal proceeding
      arising out of or relating to this Agreement or the transactions contemplated
      hereby. If either party shall commence a Proceeding to enforce any provisions
      of
      a Transaction Document, then the prevailing party in such Proceeding shall
      be
      reimbursed by the other party for its reasonable attorneys’ fees and other costs
      and expenses incurred with the investigation, preparation and prosecution of
      such Proceeding.


    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    


    6.10. Survival.
      The
      representations, warranties, agreements and covenants contained herein shall
      survive the Closing and the delivery of the Notes and the Warrants.

     

    6.11. Execution.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission, such signature shall create a valid and binding obligation of
      the
      party executing (or on whose behalf such signature is executed) with the same
      force and effect as if such facsimile signature page were an original
      thereof.

     

    6.12. Severability.
      If any
      provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

     

    6.13. Rescission
      and Withdrawal Right.
      Notwithstanding anything to the contrary contained in (and without limiting
      any
      similar provisions of) the Transaction Documents, whenever any Investor
      exercises a right, election, demand or option under a Transaction Document
      and
      the Company does not timely perform its related obligations within the periods
      therein provided, then such Investor may rescind or withdraw, in its sole
      discretion from time to time upon written notice to the Company, any relevant
      notice, demand or election in whole or in part without prejudice to its future
      actions and rights.


    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    


    6.14. Replacement
      of Notes.
      If any
      certificate or instrument evidencing any Notes or Warrants is mutilated, lost,
      stolen or destroyed, the Company shall issue or cause to be issued in exchange
      and substitution for and upon cancellation thereof, or in lieu of and
      substitution therefor, a new certificate or instrument, but only upon receipt
      of
      evidence reasonably satisfactory to the Company of such loss, theft or
      destruction and customary and reasonable indemnity, if requested. The applicants
      for a new certificate or instrument under such circumstances shall also pay
      any
      reasonable third-party costs associated with the issuance of such replacement
      Notes or Warrants. If a replacement certificate or instrument evidencing any
      Notes or Warrants is requested due to a mutilation thereof, the Company may
      require delivery of such mutilated certificate or instrument as a condition
      precedent to any issuance of a replacement.

     

    6.15. Remedies.
      In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, each of the Investors and the Company will
      be entitled to specific performance under the Transaction Documents. The parties
      agree that monetary damages may not be adequate compensation for any loss
      incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

     

    6.16. Payment
      Set Aside.
      To the
      extent that the Company makes a payment or payments to any Investor pursuant
      to
      any Transaction Document or an Investor enforces or exercises its rights
      thereunder, and such payment or payments or the proceeds of such enforcement
      or
      exercise or any part thereof are subsequently invalidated, declared to be
      fraudulent or preferential, set aside, recovered from, disgorged by or are
      required to be refunded, repaid or otherwise restored to the Company, a trustee,
      receiver or any other person under any law (including, without limitation,
      any
      bankruptcy law, state or federal law, common law or equitable cause of action),
      then to the extent of any such restoration the obligation or part thereof
      originally intended to be satisfied shall be revived and continued in full
      force
      and effect as if such payment had not been made or such enforcement or setoff
      had not occurred.

     

    6.17. Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor under any Transaction Document are several and
      not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase the Notes and the Warrants pursuant to the Transaction Documents has
      been made by such Investor independently of any other Investor. Nothing
      contained herein or in any Transaction Document, and no action taken by any
      Investor pursuant thereto, shall be deemed to constitute the Investors as a
      partnership, an association, a joint venture or any other kind of entity, or
      create a presumption that the Investors are in any way acting in concert or
      as a
      group with respect to such obligations or the transactions contemplated by
      the
      Transaction Documents. Each Investor acknowledges that no other Investor has
      acted as agent for such Investor in connection with making its investment
      hereunder and that no Investor will be acting as agent of such Investor in
      connection with monitoring its investment in the Notes and the Warrants or
      enforcing its rights under the Transaction Documents. Each Investor shall be
      entitled to independently protect and enforce its rights, including without
      limitation the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other Investor
      to
      be joined as an additional party in any proceeding for such purpose. The Company
      acknowledges that each of the Investors has been provided with the same
      Transaction Documents for the purpose of closing a transaction with multiple
      Investors and not because it was required or requested to do so by any
      Investor.


    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    


    6.18. Limitation
      of Liability.
      Notwithstanding anything herein to the contrary, the Company acknowledges and
      agrees that the liability of an Investor arising directly or indirectly, under
      any Transaction Document of any and every nature whatsoever shall be satisfied
      solely out of the assets of such Investor, and that no trustee, officer, other
      investment vehicle or any other Affiliate of such Investor or any investor,
      shareholder or holder of shares of beneficial interest of such a Investor shall
      be personally liable for any liabilities of such Investor.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOLLOW]


    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

     

    
      	
              GENESIS
                PHARMACEUTICALS ENTERPRISES, INC.

               

            
	
              By:

            	
              /s/
                Cao Wubo

            	
            
	 	
              Name:
                Cao Wubo

            
	 	
              Title:
                Chief Executive Officer

            
	 	 
	
              KARMOYA
                INTERNATIONAL LTD.

               

            
	
              By:

            	
              
                /s/
                  Cao Wubo

              

            	
            
	 	
              Name:
                Cao Wubo

            
	 	
              
                Title:
                  Chief Executive Officer

              

            
	 	 
	
              GENESIS
                JIANGBO (LAIYANG) BIOTECH

            
	
              TECHNOLOGIES
                CO., LTD.

            
	 	 
	
              By:

            	
              
                /s/
                  Cao Wubo

              

            	
            
	 	
              Name:
                Cao Wubo

            
	 	
              
                Title:
                  Chief Executive Officer

              

            
	 	 
	
              Only
                as to Sections 4.11, 4.11A and 4.19
                herein:

            


    

     

    
      	
              
                /s/
                  Cao Wubo

              

            	
            
	
              Cao
                Wubo, individually

            


    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR INVESTORS FOLLOWS]


    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      the date first indicated above.

    

      
        	
                NAME
                  OF INVESTOR

              
	
                 

              
	
                 

              
	 
	
                By:

              	 

	 	
                Name:

              
	 	
                Title:

              


      

      


      
        	
                Investment Amount: US$

              	
                 

              


      

      


      
        	
                Tax ID No.:

              	
                 

              


      

      


      
        	
                ADDRESS FOR NOTICE

              	 


      

      


      
        	
                c/o:

              	
                 

              


      

      


      
        	
                Street:

              	
                 

              


      

      


      
        	
                City/State/Zip:

              	
                 

              


      

      


      
        	
                Attention:

              	
                 

              


      

      


      
        	
                Tel:

              	
                 

              


      

      


      
        	
                Fax:

              	
                 

              


      

      


      
        	
                DELIVERY INSTRUCTIONS

              	 
	
                (if different from above)

              	 


      

    

    


    
      	
              c/o:

            	
               

            


    

    


    
      	
              Street:

            	
               

            


    

    


    
      	
              City/State/Zip:

            	
               

            


    

    


    
      	
              Attention:

            	
               

            


    

    


    
      	
              Tel:

            	
               

            


    


    
      
        
        

      

      
        45