Unassociated Document


    SUBSCRIPTION
      AGREEMENT

     

    THIS
      SUBSCRIPTION AGREEMENT
      (this
“Agreement”),
      dated
      as of August 2, 2007, by and among Ever-Glory International Group,
      Inc.,
      a
      Florida corporation
      (the
“Company”),
      and
      the subscribers identified on the signature page hereto (each a “Subscriber”
and
      collectively “Subscribers”).

     

    WHEREAS,
      the
      Company and the Subscribers are executing and delivering this Agreement in
      reliance upon an exemption from securities registration afforded by the
      provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
      D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“Commission”)
      under
      the Securities Act of 1933, as amended (the “1933
      Act”).

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Subscribers, as provided herein,
      and the Subscribers, in the aggregate, shall purchase up to $2,000,000 (the
      “Purchase
      Price”)
      of
      principal amount of promissory notes of the Company (“Note”
or
      “Notes”),
      a
      form of which is annexed hereto as Exhibit
      A,
      convertible into shares of the Company's Common Stock, $0.0001 par value (the
      “Common
      Stock”)
      at a
      per share conversion price set forth in the Note (“Conversion
      Price”);
      and
      share purchase warrants (the “Warrants”),
      in
      the form annexed hereto as Exhibit
      B,
      to
      purchase shares of Common Stock (the “Warrant
      Shares”).
      The
      Notes, shares of Common Stock issuable upon conversion of the Notes (the
“Shares”),
      the
      Warrants and the Warrant Shares are collectively referred to herein as the
      “Securities”;
      and

     

    WHEREAS,
      the
      aggregate proceeds of the sale of the Notes and the Warrants contemplated hereby
      shall be held in escrow pursuant to the terms of a Funds Escrow Agreement to
      be
      executed by the parties substantially in the form attached hereto as
Exhibit
      C
      (the
“Escrow
      Agreement”).

     

    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and other agreements contained in this
      Agreement the Company and the Subscribers hereby agree as follows:

     

    1. Closing
      Date.
      The
“Closing
      Date”
shall
      be the date that the Purchase Price is transmitted by wire transfer or otherwise
      credited to or for the benefit of the Company. The consummation of the
      transactions contemplated herein shall take place at the offices of Grushko
      & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
      upon the satisfaction or waiver of all conditions to closing set forth in this
      Agreement. Each Subscriber shall purchase and the Company shall sell to each
      Subscriber a Note in the Principal Amount designated on the signature page
      hereto for the Purchase Price indicated thereon, and Warrants as described
      in
      Section 2 of this Agreement. 

     

    2. Warrants.
      On the
      Closing Date, the Company will issue and deliver Class A Warrants to the
      Subscribers. One Class A Warrant will be issued for each Share which would
      be
      issued on the Closing Date assuming the complete conversion of the Note on
      the
      Closing Date the conversion price of the Notes in effect on the Closing Date.
      The exercise price of the Class A Warrants will be the closing bid price of
      Company’s stock on the date prior to the Closing Date as reported by Bloomberg,
      L.P., subject to adjustment as described in the Class A Warrant, provided
      however, that in no event shall the initial Warrant exercise price be less
      than
      $0.32 or greater than $0.38. The Class A Warrants shall be exercisable until
      five years after the issue date of the Warrants. 

     

    3. Security
      Interest.
      The
      Subscribers will be granted a security interest in all the assets of the
      Company, excluding ownership of Subsidiaries (as defined in Section 5(a) of
      this Agreement), and in the assets of the Subsidiaries which security interest
      will be memorialized in a “Security
      Agreement,”
a
      form
      of which is annexed hereto as Exhibit
      D.
      As
      further security the Company will arrange for the Pledge of shares of the
      Company owned by Kang Yi Hua, pursuant to a Stock Pledge Agreement, a form
      of
      which is attached hereto as Exhibit
      E.
      The
      Company will execute such other agreements, documents and financing statements
      reasonably requested by Subscribers, which will be filed at the Company’s
      expense with the jurisdictions, states and counties designated by the
      Subscribers. The Company will also execute all such documents reasonably
      necessary in the opinion of Subscriber to memorialize and further protect the
      security interest described herein. The Subscribers will appoint a Collateral
      Agent to represent them collectively in connection with the security interest
      to
      be granted to the Subscribers. The appointment will be pursuant to a
“Collateral
      Agent Agreement,”
a
      form
      of which is annexed hereto as Exhibit
      F.

     

    
      
        
        

      

      
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    4. Subscriber's
      Representations and Warranties.
      Each
      Subscriber hereby represents and warrants to and agrees with the Company only
      as
      to such Subscriber that:

    


    (a) Organization
      and Standing of the Subscribers.
      If the
      Subscriber is an entity, such Subscriber is a corporation, partnership or other
      entity duly incorporated or organized, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation or
      organization.

    


    (b) Authorization
      and Power.
      Each
      Subscriber has the requisite power and authority to enter into and perform
      this
      Agreement and to purchase the Notes and Warrants being sold to it hereunder.
      The
      execution, delivery and performance of this Agreement by such Subscriber and
      the
      consummation by it of the transactions contemplated hereby and thereby have
      been
      duly authorized by all necessary corporate or partnership action, and no further
      consent or authorization of such Subscriber or its Board of Directors,
      stockholders, partners, members, as the case may be, is required. This Agreement
      has been duly authorized, executed and delivered by Subscriber and constitutes,
      or shall constitute when executed and delivered, a valid and binding obligation
      of the Subscriber enforceable against the Subscriber in accordance with the
      terms thereof.

     

    (c) No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the consummation
      by
      such Subscriber of the transactions contemplated hereby or relating hereto
      do
      not and will not (i) result in a violation of such Subscriber’s charter
      documents or bylaws or other organizational documents or (ii) conflict with,
      or
      constitute a default (or an event which with notice or lapse of time or both
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of any agreement, indenture or
      instrument or obligation to which such Subscriber is a party or by which its
      properties or assets are bound, or result in a violation of any law, rule,
      or
      regulation, or any order, judgment or decree of any court or governmental agency
      applicable to such Subscriber or its properties (except for such conflicts,
      defaults and violations as would not, individually or in the aggregate, have
      a
      material adverse effect on such Subscriber). Such Subscriber is not required
      to
      obtain any consent, authorization or order of, or make any filing or
      registration with, any court or governmental agency in order for it to execute,
      deliver or perform any of its obligations under this Agreement or to purchase
      the Securities in accordance with the terms hereof, provided that for purposes
      of the representation made in this sentence, such Subscriber is assuming and
      relying upon the accuracy of the relevant representations and agreements of
      the
      Company herein.

    


    (d) Information
      on Company.
      The
      Subscriber has been furnished with or has had access at the EDGAR Website of
      the
      Commission to the Company's Form 10-KSB filed on March 16, 2007 for the fiscal
      year ended December 31, 2006, and the financial statements included therein
      for
      the year ended December 31, 2006, together with all subsequent filings made
      with
      the Commission available at the EDGAR website (hereinafter referred to
      collectively as the “Reports”).
      In
      addition, the Subscriber has received in writing from the Company such other
      information concerning its operations, financial condition and other matters
      as
      the Subscriber has requested in writing identified thereon as OTHER WRITTEN
      INFORMATION (such other information is collectively, the “Other
      Written Information”),
      and
      considered all factors the Subscriber deems material in deciding on the
      advisability of investing in the Securities. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (e) Information
      on Subscriber.
      The
      Subscriber is, and will be at the time of the conversion of the Notes and
      exercise of the Warrants, an “accredited
      investor”,
      as
      such term is defined in Regulation D promulgated by the Commission under the
      1933 Act, is experienced in investments and business matters, has made
      investments of a speculative nature and has purchased securities of United
      States publicly-owned companies in private placements in the past and, with
      its
      representatives, has such knowledge and experience in financial, tax and other
      business matters as to enable the Subscriber to utilize the information made
      available by the Company to evaluate the merits and risks of and to make an
      informed investment decision with respect to the proposed purchase, which
      represents a speculative investment. The Subscriber has the authority and is
      duly and legally qualified to purchase and own the Securities. The Subscriber
      is
      able to bear the risk of such investment for an indefinite period and to afford
      a complete loss thereof. The information set forth on the signature page hereto
      regarding the Subscriber is accurate.

     

    (f) Purchase
      of Notes and Warrants.
      On the
      Closing Date, the Subscriber will purchase the Notes and Warrants as principal
      for its own account for investment only and not with a view toward, or for
      resale in connection with, the public sale or any distribution
      thereof.

     

    (g) Compliance
      with Securities Act.
       The
      Subscriber understands and agrees that the Securities have not been registered
      under the 1933 Act or any applicable state securities laws, by reason of their
      issuance in a transaction that does not require registration under the 1933
      Act
      (based in part on the accuracy of the representations and warranties of
      Subscriber contained herein), and that such Securities must be held indefinitely
      unless a subsequent disposition is registered under the 1933 Act or any
      applicable state securities laws or is exempt from such registration.
The
      Subscribers will comply with all applicable rules and regulations in connection
      with the sales of the securities including laws relating to short
      sales.

    (h) Shares
      Legend.
      The
      Shares, and the Warrant Shares shall bear the following or similar
      legend:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW
      OR AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
      IS NOT REQUIRED.”

     

    (i) Warrants
      Legend.
      The
      Warrants shall bear the following or
      similar legend:

     

    “THIS
      WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
      AND
      THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
      OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
      REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR ANY APPLICABLE
      STATE
      SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
      COMPANY
      THAT
      SUCH REGISTRATION IS NOT REQUIRED.”

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (j) Note
      Legend.
      The
      Note shall bear the following legend:

     

    “THIS
      NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
      COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
      FOR
      SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE
      COMPANY
      THAT
      SUCH REGISTRATION IS NOT REQUIRED.”

     

    (k) Communication
      of Offer.
      The
      offer to sell the Securities was directly communicated to the Subscriber by
      the
      Company. At no time was the Subscriber presented with or solicited by any
      leaflet, newspaper or magazine article, radio or television advertisement,
      or
      any other form of general advertising or solicited or invited to attend a
      promotional meeting otherwise than in connection and concurrently with such
      communicated offer.

     

    (l) Authority;
      Enforceability.
      This
      Agreement and other agreements delivered together with this Agreement or in
      connection herewith have been duly authorized, executed and delivered by the
      Subscriber and are valid and binding agreements enforceable in accordance with
      their terms, subject to bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and similar laws of general applicability relating
      to
      or affecting creditors’ rights generally and to general principles of equity;
      and Subscriber has full power and authority necessary to enter into this
      Agreement and such other agreements and to perform its obligations hereunder
      and
      under all other agreements entered into by the Subscriber relating
      hereto.

    


    (m) Restricted
      Securities.
      Subscriber understands that the Securities have not been registered under the
      1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
      hypothecate or otherwise transfer any of the Securities unless pursuant to
      an
      effective registration statement under the 1933 Act, or unless an exemption
      from
      registration is available. Notwithstanding anything to the contrary contained
      in
      this Agreement, such Subscriber may transfer (without restriction and without
      the need for an opinion of counsel) the Securities to its Affiliates (as defined
      below) provided that each such Affiliate is an “accredited investor” under
      Regulation D and such Affiliate agrees to be bound by the terms and conditions
      of this Agreement. For the purposes of this Agreement, an “Affiliate”
of
      any
      person or entity means any other person or entity directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      such
      person or entity. Affiliate includes each subsidiary of the Company. For
      purposes of this definition, “control”
means
      the power to direct the management and policies of such person or firm, directly
      or indirectly, whether through the ownership of voting securities, by contract
      or otherwise.

    


    (n) No
      Governmental Review.
      Each
      Subscriber understands that no United States federal or state agency or any
      other governmental or state agency has passed on or made recommendations or
      endorsement of the Securities or the suitability of the investment in the
      Securities nor have such authorities passed upon or endorsed the merits of
      the
      offering of the Securities.

    


    (o) Correctness
      of Representations.
      Each
      Subscriber represents as to such Subscriber that the foregoing representations
      and warranties are true and correct as of the date hereof and, unless a
      Subscriber otherwise notifies the Company prior to the Closing Date shall be
      true and correct as of the Closing Date.

    


    (p) No-Shorting.
      Each
      Subscriber Agrees not to “short” or enter into any similar transactions
      regarding the Common Stock of the Company either directly or indirectly for
      as
      long as such Subscriber is holding any portion of the Notes.

     

    
      
        
        

      

      
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    (q) Survival.
      The
      foregoing representations and warranties shall survive the Closing Date for
      a
      period of three years.

     

    5. Company
      Representations and Warranties.
      The
      Company represents and warrants to and agrees with each Subscriber
      that:

     

    (a) Due
      Incorporation.
      The
      Company is a corporation or other entity duly incorporated or organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation or organization and has the requisite corporate power to own
      its
      properties and to carry on its business as presently
      conducted. The Company is duly qualified as a foreign corporation to do business
      and is in good standing in each jurisdiction where the nature of the business
      conducted or property owned by it makes such qualification necessary, other
      than
      those jurisdictions in which the failure to so qualify would not have a Material
      Adverse Effect. For purposes of this Agreement, a “Material
      Adverse Effect”
shall
      mean a material adverse effect on the financial condition, results of
      operations, properties or business of the Company and its Subsidiaries taken
      as
      a whole. For purposes of this Agreement, “Subsidiary”
means,
      with respect to any entity at any date, any corporation, limited or general
      partnership, limited liability company, trust, estate, association, joint
      venture or other business entity of which more than 30% of (i) the
      outstanding capital stock having (in the absence of contingencies) ordinary
      voting power to elect a majority of the board of directors or other managing
      body of such entity, (ii) in the case of a partnership or limited liability
      company, the interest in the capital or profits of such partnership or limited
      liability company or (iii) in the case of a trust, estate, association,
      joint venture or other entity, the beneficial interest in such trust, estate,
      association or other entity business is, at the time of determination, owned
      or
      controlled directly or indirectly through one or more intermediaries, by such
      entity. The Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
      5(a).

     

    (b) Outstanding
      Stock.
      All
      issued and outstanding shares of capital stock of the Company and Subsidiary
      have been duly authorized and validly issued and are fully paid and
      non-assessable.

     

    (c) Authority;
      Enforceability.
      This
      Agreement, the Notes, the Warrants, the Security Agreement, and Stock Pledge
      Agreements, the Escrow Agreement, and any other agreements delivered together
      with this Agreement or in connection herewith (collectively “Transaction
      Documents”)
      have
      been duly authorized, executed and delivered by the Company and are valid and
      binding agreements of the Company enforceable in accordance with their terms,
      subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
      moratorium and similar laws of general applicability relating to or affecting
      creditors' rights generally and to general principles of equity. The Company
      has
      full corporate power and authority necessary to enter into and deliver the
      Transaction Documents and to perform its obligations thereunder.

     

    (d) Additional
      Issuances.
      There
      are
      no outstanding agreements or preemptive or similar rights affecting the
      Company's Common Stock or equity and no outstanding rights, warrants or options
      to acquire, or instruments convertible into or exchangeable for, or agreements
      or understandings with respect to the sale or issuance of any shares of Common
      Stock or equity of the Company or Subsidiaries or other equity interest in
      the
      Company except as described in the Reports or on Schedule
      5(d).
      The
      Common Stock of the Company on a fully diluted basis outstanding as of the
      last
      Business Day preceding the Closing Date is set forth on Schedule
      5(d).

     

    (e) Consents.
      Except
      for the authorization of additional shares of Common Stock, no consent,
      approval, authorization or order of any court, governmental agency or body
      or
      arbitrator having jurisdiction over the Company, or any of its Affiliates,
      the
      OTC Bulletin Board (the “Bulletin
      Board”)
      nor
      the Company's shareholders is required for the execution by the Company of
      the
      Transaction Documents and compliance and performance by the Company of its
      obligations under the Transaction Documents, including, without limitation,
      the
      issuance and sale of the Securities. The Transaction Documents and the Company’s
      performance of its obligations thereunder has been approved by the Company’s
      directors.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (f) No
      Violation or Conflict.
      Assuming the representations and warranties of the Subscribers in Section 4
      are
      true and correct, neither the issuance and sale of the Securities nor the
      performance of the Company’s obligations under this Agreement and all other
      agreements entered into by the Company relating thereto by the Company
      will:

     

    (i) violate,
      conflict with, result in a breach of, or constitute a default (or an event
      which
      with the giving of notice or the lapse of time or both would be reasonably
      likely to constitute a default) under (A) the articles or certificate of
      incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
      any decree, judgment, order, law, treaty, rule, regulation or determination
      applicable to the Company of any court, governmental agency or body, or
      arbitrator having jurisdiction over the Company or over the properties or assets
      of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
      note or any other evidence of indebtedness, or any agreement, stock option
      or
      other similar plan, indenture, lease, mortgage, deed of trust or other
      instrument to which the Company or any of its Affiliates is a party, by which
      the Company or any of its Affiliates is bound, or to which any of the properties
      of the Company or any of its Affiliates is subject, or (D) the terms of any
      “lock-up” or similar provision of any underwriting or similar agreement to which
      the Company, or any of its Affiliates is a party; except the violation,
      conflict, breach, or default of which would not have a Material Adverse
      Effect;
      or

     

    (ii) result
      in
      the creation or imposition of any lien, charge or encumbrance upon the
      Securities or any of the assets of the Company or any of its Affiliates except
      as described herein; or

     

    (iii) except
      as
      described in Schedule
      5(d),
      result
      in the activation of any anti-dilution rights or a reset or repricing of any
      debt or security instrument of any other creditor or equity holder of the
      Company, nor result in the acceleration of the due date of any obligation of
      the
      Company; or

     

    (iv) will
      result in the triggering of any piggy-back registration rights of any person
      or
      entity holding securities of the Company or having the right to receive
      securities of the Company.

     

    (g) The
      Securities.
      The
      Securities upon issuance:

     

    (i) are,
      or
      will be, free and clear of any security interests, liens, claims or other
      encumbrances, subject to restrictions upon transfer under the 1933 Act and
      any
      applicable state securities laws;

    


    (ii) have
      been, or will be, duly and validly authorized and on the date of issuance of
      the
      Shares upon conversion of the Notes and the Warrant Shares and upon exercise
      of
      the Warrants, the Shares and Warrant Shares will be duly and validly issued,
      fully paid and non-assessable and if registered pursuant to the 1933 Act and
      resold pursuant to an effective registration statement will be free trading
      and
      unrestricted;

     

    (iii) will
      not
      have been issued or sold in violation of any preemptive or other similar rights
      of the holders of any securities of the Company;

     

    (iv) will
      not
      subject the holders thereof to personal liability by reason of being such
      holders; and

     

    
      
        
        

      

      
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    (v) assuming
      the representations warranties of the Subscribers as set forth in Section 4
      hereof are true and correct, will not result in a violation of Section 5 under
      the 1933 Act.

     

    (h) Litigation.
      There
      is no pending or, to the best knowledge of the Company, threatened action,
      suit,
      proceeding or investigation before any court, governmental agency or body,
      or
      arbitrator having jurisdiction over the Company, or any of its Affiliates that
      would affect the execution by the Company or the performance by the Company
      of
      its obligations under the Transaction Documents. Except as disclosed in the
      Reports, there is no pending or, to the best knowledge of the Company, basis
      for
      or threatened action, suit, proceeding or investigation before any court,
      governmental agency or body, or arbitrator having jurisdiction over the Company,
      or any of its Affiliates which litigation if adversely determined would have
      a
      Material Adverse Effect.

     

    (i) No
      Market Manipulation.
      The
      Company and its Affiliates have not taken, and will not take, directly or
      indirectly, any action designed to, or that might reasonably be expected to,
      cause or result in stabilization or manipulation of the price of the Common
      Stock to
      facilitate the sale or resale of the Securities or affect the price at which
      the
      Securities may be issued or resold.

     

    (j) Information
      Concerning Company.
      The
      Reports and Other Written Information contain all material information relating
      to the Company and its operations and financial condition as of their respective
      dates which information is required to be disclosed therein. Since the date
      of
      the financial statements included in the Reports, and except as modified in
      the
      Other Written Information or in the Schedules hereto, there has been no Material
      Adverse Event relating to the Company's business, financial condition or affairs
      not disclosed in the Reports. The Reports and Other Written Information do
      not
      contain any untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein,
      taken
      as a whole, not misleading in light of the circumstances when made.

     

    (k) Stop
      Transfer.
      The
      Company will not issue any stop transfer order or other order impeding the
      sale,
      resale or delivery of any of the Securities, except as may be required by any
      applicable federal or state securities laws and unless contemporaneous notice
      of
      such instruction is given to the Subscriber.

     

    (l) Defaults.
      The
      Company is not in violation of its articles of incorporation or bylaws. The
      Company is (i) not in default under or in violation of any other material
      agreement or instrument to which it is a party or by which it or any of its
      properties are bound or affected, which default or violation would have a
      Material Adverse Effect,
      (ii)
      not in default with respect to any order of any court, arbitrator or
      governmental body or subject to or party to any order of any court or
      governmental authority arising out of any action, suit or proceeding under
      any
      statute or other law respecting antitrust, monopoly, restraint of trade, unfair
      competition or similar matters, or (iii) to the Company’s knowledge not in
      violation of any statute, rule or regulation of any governmental authority
      which
      violation would have a Material Adverse Effect.

     

    (m) No
      Integrated Offering.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offer of the Securities pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the 1933 Act or any applicable
      stockholder approval provisions, including, without limitation, under the rules
      and regulations of the Bulletin Board which would impair the exemptions relied
      upon in this Offering or the Company’s ability to timely comply with its
      obligations hereunder. Nor will the Company nor any of its Affiliates take
      any
      action or steps that would cause the offer or issuance of the Securities to
      be
      integrated with other offerings which would impair the exemptions relied upon
      in
      this Offering or the Company’s ability to timely comply with its obligations
      hereunder. The Company will not conduct any offering other than the transactions
      contemplated hereby that will be integrated with the offer or issuance of the
      Securities, which would impair the exemptions relied upon in this Offering
      or
      the Company’s ability to timely comply with its obligations
      hereunder.

     

    
      
        
        

      

      
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    (n) No
      General Solicitation.
      Neither
      the Company, nor any of its Affiliates, nor to its knowledge, any person acting
      on its or their behalf, has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D under the 1933 Act)
      in
      connection with the offer or sale of the Securities.

     

    (o) No
      Undisclosed Liabilities.
      The
      Company has no liabilities or obligations which are material, individually
      or in
      the aggregate, which are not disclosed in the Reports and Other Written
      Information, other than those incurred in the ordinary course of the Company
      businesses since June 30, 2006 and which, individually or in the aggregate,
      would reasonably be expected to have a Material Adverse Effect,
      except
      as disclosed in the Reports or on Schedule
      5(o).

     

    (p) No
      Undisclosed Events or Circumstances.
      Since
      June 30, 2006, no event or circumstance has occurred or exists with respect
      to
      the Company or its businesses, properties, operations or financial condition,
      that, under applicable law, rule or regulation, requires public disclosure
      or
      announcement prior to the date hereof by the Company but which has not been
      so
      publicly announced or disclosed in the Reports.

     

    (q)
      Capitalization.
      The
      authorized and outstanding capital stock of the Company and Subsidiaries as
      of
      the date of this Agreement and the Closing Date (not including the Securities)
      are set forth in the Reports or on Schedule
      5(d).
      Except
      as set forth on Schedule
      5(d),
      there
      are no options, warrants, or rights to subscribe to, securities, rights or
      obligations convertible into or exchangeable for or giving any right to
      subscribe for any shares of capital stock of the Company or any of its
      Subsidiaries.

     

    (r) Dilution.
      The
      Company's executive officers and directors understand the nature of the
      Securities being sold hereby and recognize that the issuance of the Securities
      will have a potential dilutive effect on the equity holdings of other holders
      of
      the Company’s equity or rights to receive equity of the Company. The board of
      directors of the Company has concluded, in its good faith business judgment
      that
      the issuance of the Securities is in the best interests of the Company. The
      Company specifically acknowledges that its obligation to issue the Shares upon
      conversion of the Notes, and the Warrant Shares upon exercise of the Warrants,
      is binding upon the Company and enforceable regardless of the dilution such
      issuance may have on the ownership interests of other shareholders of the
      Company or parties entitled to receive equity of the Company.

     

    (s)
      No
      Disagreements with Accountants and Lawyers.
      There
      are no material disagreements of any kind presently existing, or reasonably
      anticipated by the Company to arise between the Company and the accountants
      and
      lawyers presently employed by the Company, including but not limited to disputes
      or conflicts over payment owed to such accountants and lawyers, nor have there
      been any such disagreements during the two years prior to the Closing
      Date.

    


    (t) Investment
      Company.
      Neither
      the Company nor any Affiliate of the Company is an “investment company” within
      the meaning of the Investment Company Act of 1940, as amended.

     

    (u) Foreign
      Corrupt Practices.
      Neither
      the Company, nor to the knowledge of the Company, any agent or other person
      acting on behalf of the Company, has (i) directly or indirectly, used any funds
      for unlawful contributions, gifts, entertainment or other unlawful expenses
      related to foreign or domestic political activity, (ii) made any unlawful
      payment to foreign or domestic government officials or employees or to any
      foreign or domestic political parties or campaigns from corporate funds, (iii)
      failed to disclose fully any contribution made by the Company (or made by any
      person acting on its behalf of which the Company is aware) which is in violation
      of law, or (iv) violated in any material respect any provision of the Foreign
      Corrupt Practices Act of 1977, as amended.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (v) Reporting
      Company.
      The
      Company is a publicly-held company subject to reporting obligations pursuant
      to
      Section 13 of the Securities Exchange Act of 1934, as amended (the “1934
      Act”)
      and
      has a class of Common Stock registered pursuant to Section 12(g) of the 1934
      Act. Pursuant to the provisions of the 1934 Act, the Company has timely filed
      all reports and other materials required to be filed thereunder with the
      Commission during the preceding twelve months.

    


    (w) Listing.
      The
      Company's Common Stock is quoted on the Bulletin Board under the symbol EGLY.OB.
      The Company has not received any oral or written notice that its Common Stock
      is
      not eligible nor will become ineligible for quotation on the Bulletin Board
      nor
      that its Common Stock does not meet all requirements for the continuation of
      such quotation. The Company satisfies all the requirements for the continued
      quotation of its Common Stock on the Bulletin Board.

    


    (x) DTC
      Status.
      The
      Company’s transfer agent is a participant in and the Common Stock is eligible
      for transfer pursuant to the Depository Trust Company Automated Securities
      Transfer Program. The name, address, telephone number, fax number, contact
      person and email address of the Company transfer agent is set forth on
Schedule
      5(x)
      hereto.

    


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

    


    (z) Company
      Predecessor and Subsidiaries.
      The
      Company makes each of the representations contained in Sections 5(a), (b),
      (c),
      (d), (e), (f), (h), (j), (l), (o), (p), (q), (s), (t), and (u) of this
      Agreement, as same relate to the Subsidiary of the Company. All representations
      made by or relating to the Company of a historical or prospective nature and
      all
      undertakings described in Sections 9(g) through 9(l) shall relate, apply and
      refer to the Company and its predecessors.

    


    (AA) Correctness
      of Representations.
      The
      Company represents that the foregoing representations and warranties are true
      and correct as of the date hereof in all material respects, and, unless the
      Company otherwise notifies the Subscribers prior to the Closing Date, shall
      be
      true and correct in all material respects as of the Closing Date.

     

    (BB) Survival.
      The
      foregoing representations and warranties shall survive the Closing Date for
      a
      period of three years.

     

    6. Regulation
      D Offering/Legal Opinion.
      The
      offer and issuance of the Securities to the Subscribers is being made pursuant
      to the exemption from the registration provisions of the 1933 Act afforded
      by
      Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
      D
      promulgated thereunder. On the Closing Date, the Company will provide an opinion
      reasonably acceptable to Subscriber from the Company's legal counsel opining
      on
      the availability of an exemption from registration under the 1933 Act as it
      relates to the offer and issuance of the Securities and other matters reasonably
      requested by Subscribers. A form of the legal opinion is annexed hereto as
      Exhibit
      G.
      The
      Company will provide, at the Company's expense, such other legal opinions in
      the
      future as are reasonably necessary for the issuance and resale of the Common
      Stock issuable upon conversion of the Notes and exercise of the Warrants
      pursuant to an effective registration statement, Rule 144 under the 1933 Act
      or
      an exemption from registration.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    7.1. Conversion
      of Note.

    


    (a) Upon
      the
      conversion of a Note or part thereof, the Company shall, at its own cost and
      expense, take all necessary action, including obtaining and delivering, an
      opinion of counsel to assure that the Company's transfer agent shall issue
      stock
      certificates in the name of Subscriber (or its permitted nominee) or such other
      persons as designated by Subscriber and in such denominations to be specified
      at
      conversion representing the number of shares of Common Stock issuable upon
      such
      conversion. The Company warrants that no instructions other than these
      instructions have been or will be given to the transfer agent of the Company's
      Common Stock and that the certificates representing such shares shall contain
      no
      legend other than the usual 1933 Act restriction from transfer legend. If and
      when the Subscriber sells the Shares, assuming (i) the Registration Statement
      (as defined below) is effective and the prospectus, as supplemented or amended,
      contained therein is current and (ii) the Subscriber or its agent confirms
      in
      writing to the transfer agent that the Subscriber has complied with the
      prospectus delivery requirements, the Company will reissue the Shares without
      restrictive legend and the Shares will be free-trading, and freely transferable.
      In the event that the Shares are sold in a manner that complies with an
      exemption from registration, the Company will promptly instruct its counsel
      to
      issue to the transfer agent an opinion permitting removal of the legend
      (indefinitely, if pursuant to Rule 144(k) of the 1933 Act, or for 90 days if
      pursuant to the other provisions of Rule 144 of the 1933 Act).

    


    (b) Subscriber
      will give notice of its decision to exercise its right to convert the Note,
      interest, or part thereof by telecopying, or otherwise delivering a completed
      Notice of Conversion (a form of which is annexed as Exhibit
      A
      to the
      Note) to the Company via confirmed telecopier transmission or otherwise pursuant
      to Section 13(a) of this Agreement. The Subscriber will not be
      required to surrender the Note
      until
      the Note has been fully converted or satisfied. Each date on which a Notice
      of
      Conversion is telecopied to the Company in accordance with the provisions hereof
      by 6 PM ET (or if received by the Company after 6 PM ET then the next business
      day) shall be deemed a “Conversion
      Date.”
The
      Company will itself or cause the Company’s transfer agent to transmit the
      Company's Common Stock certificates representing the Shares issuable upon
      conversion of the Note to the Subscriber via express courier for receipt by
      such
      Subscriber within three (3) business days after receipt by the Company of the
      Notice of Conversion (such third day being the “Delivery
      Date”).
      In
      the event the Shares are electronically transferable, then delivery of the
      Shares must
      be made
      by electronic transfer provided request for such electronic transfer has been
      made by the Subscriber.
      A Note representing the balance of the Note not so converted will be provided
      by
      the Company to the Subscriber if requested by Subscriber, provided the
      Subscriber delivers the
      original Note to the Company. In the event that a Subscriber elects not to
      surrender a Note for reissuance upon partial payment or conversion of a Note,
      the Subscriber hereby indemnifies the Company against any and all loss or damage
      attributable to a third-party claim in an amount in excess of the actual amount
      then due under the Note.

    


    (c) The
      Company understands that a delay in the delivery of the Shares in the form
      required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
      described in Section 7.2 hereof, respectively later than two business days
      after
      the Delivery Date or the Mandatory Redemption Payment Date (as hereinafter
      defined) could result in economic loss to the Subscriber. As compensation to
      the
      Subscriber for such loss, the Company agrees to pay (as liquidated damages
      and
      not as a penalty) to the Subscriber for late issuance of Shares in the form
      required pursuant to Section 7.1 hereof upon Conversion of the Note in the
      amount of $100 per business day after the Delivery Date for each $10,000 of
      Note
      principal amount (and proportionately for other amounts) being converted of
      the
      corresponding Shares which are not timely delivered. The Company shall pay
      any
      payments incurred under this Section in immediately available funds upon demand.
      Furthermore, in addition to any other remedies which may be available to the
      Subscriber, in the event that the Company fails for any reason to effect
      delivery of the Shares within seven (7) business days after the Delivery Date
      or
      make payment within seven (7) business days after the Mandatory Redemption
      Payment Date (as defined in Section 7.2 below), the Subscriber will be entitled
      to revoke all or part of the relevant Notice of Conversion or rescind all or
      part of the notice of Mandatory Redemption by delivery of a notice to such
      effect to the Company whereupon the Company and the Subscriber shall each be
      restored to their respective positions immediately prior to the delivery of
      such
      notice, except that the liquidated damages described above shall be payable
      through the date notice of revocation or rescission is given to the
      Company.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (d) The
      Company agrees and acknowledges that despite the pendency of a not yet effective
      Registration Statement which includes for registration the Registrable
      Securities (as defined in Section 11.1(iv)), the Subscriber is permitted to
      and
      the Company will issue to the Subscriber Shares upon conversion of the Note
      and
      Warrant Shares upon exercise of the Warrants. Such Shares will, if required
      by
      law, bear the legends described in Section 4 above and if the requirements
      of
      Rule 144 under the 1933 Act are satisfied be resalable thereunder.

    


    7.2. Mandatory
      Redemption at Subscriber’s Election.
      Upon
      the occurrence of: (i) a Change in Control (as defined below), or (ii) of the
      liquidation, dissolution or winding up of the Company, then at the Subscriber's
      election, the Company must pay to the Subscriber ten (10) business days after
      request by the Subscriber, a sum of money equal to 100% of the outstanding
      principal amount of the Note designated by the Subscriber together with accrued
      but unpaid interest thereon and all other sums due pursuant to the Transaction
      Documents (“Mandatory
      Redemption Payment”).
      Upon
      receipt of the Mandatory Redemption Payment, the corresponding Note principal
      and interest will be deemed paid and no longer outstanding. For purposes of
      this
      Section 7.2, “Change
      in Control”
shall
      mean (i) the Company becoming a Subsidiary of another entity (other than a
      corporation formed by the Company for purposes of reincorporation in another
      U.S. jurisdiction), or (ii) sale, lease or transfer of all or substantially
      all
      the assets of the Company.

    


    7.3. Maximum
      Conversion.
      The
      Subscriber shall not be entitled to convert on a Conversion Date that amount
      of
      the Note in connection with that number of shares of Common Stock which would
      be
      in excess of the sum of (i) the number of shares of Common Stock beneficially
      owned by the Subscriber and its Affiliates on a Conversion Date, and (ii) the
      number of shares of Common Stock issuable upon the conversion of the Note with
      respect to which the determination of this provision is being made on a
      Conversion Date, which would result in beneficial ownership by the Subscriber
      and its Affiliates of more than 4.99% of the outstanding shares of Common Stock
      of the Company on such Conversion Date. For the purposes of the provision to
      the
      immediately preceding sentence, beneficial ownership shall be determined in
      accordance with Section 13(d) of the Securities Exchange Act of 1934, as
      amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
      Subscriber shall not be limited to aggregate conversions of only 4.99% and
      aggregate conversions by the Subscriber may exceed 4.99%. The Subscriber may
      increase the permitted beneficial ownership amount up to 9.99% upon and
      effective after 61 days’ prior written notice to the Company. The Subscriber may
      allocate which of the equity of the Company deemed beneficially owned by the
      Subscriber shall be included in the 4.99% amount described above and which
      shall
      be allocated to the excess above 4.99%.

    


    7.4. Injunction
      Posting of Bond.
      In the
      event a Subscriber shall elect to convert a Note or part thereof, the Company
      may not refuse conversion or exercise based on any claim that such Subscriber
      or
      any one associated or affiliated with such Subscriber has been engaged in any
      violation of law, or for any other reason, unless, an injunction from a court,
      on notice, restraining and or enjoining conversion of all or part of such Note
      shall have been sought and obtained by the Company or at the Company’s request
      or with the Company’s assistance, and
      the
      Company has posted a surety bond for the benefit of such Subscriber in the
      amount of 120% of the outstanding principal and interest of the Note, or
      aggregate purchase price of the Shares which are sought to be subject to the
      injunction, which bond shall remain in effect until the completion of
      arbitration/litigation of the dispute and the proceeds of which shall be payable
      to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
      favor.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    7.5. Buy-In.
      In
      addition to any other rights available to the Subscriber, if the Company fails
      to deliver to the Subscriber such shares issuable upon conversion of a Note
      by
      the Delivery Date and if after seven (7) business days after the Delivery Date
      the Subscriber or a broker on the Subscriber’s behalf purchases (in an open
      market transaction or otherwise) shares of Common Stock to deliver in
      satisfaction of a sale by such Subscriber of the Common Stock which the
      Subscriber was entitled to receive upon such conversion (a “Buy-In”),
      then
      the Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber's total purchase price (including brokerage commissions, if any)
      for
      the shares of Common Stock so purchased exceeds (B) the aggregate principal
      and/or interest amount of the Note for which such conversion was not timely
      honored together
      with interest thereon at a rate of 15% per annum, accruing until such amount
      and
      any accrued interest thereon is paid in full (which amount shall be paid as
      liquidated damages and not as a penalty. For
      example, if the Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to an attempted
      conversion of $10,000 of note principal and/or interest, the Company shall
      be
      required to pay the Subscriber $1,000 plus interest. The Subscriber shall
      provide the Company written notice and evidence indicating the amounts payable
      to the Subscriber in respect of the Buy-In.

    


    7.6 Adjustments.
      The
      Conversion Price, Warrant exercise price and amount of Shares issuable upon
      conversion of the Notes and exercise of the Warrants shall be equitably adjusted
      and as otherwise described in this Agreement, the Notes and
      Warrants.

     

    7.7. Redemption.
      The
      Notes shall redeemable by the Company in accordance with the terms set forth
      in
      the Notes. 

    


    8. Broker/Due
      Diligence/Legal Fees.

     

    (a) Broker.
      The
      Company on the one hand, and each Subscriber (for himself only) on the other
      hand, agree to indemnify the other against and hold the other harmless from
      any
      and all liabilities to any persons claiming brokerage commissions or finder’s
      fees on account of services purported to have been rendered on behalf of the
      indemnifying party in connection with this Agreement or the transactions
      contemplated hereby or in connection with any investment in the Company at
      any
      time, whether or not such investment was consummated and arising out of such
      party’s actions. The Company represents that there are no parties entitled to
      receive fees, commissions, or similar payments in connection with the Offering
      except as identified on Schedule
      8(a)
      who will
      receive the amount of compensation described in Schedule 8(a). The Company
      is
      solely responsible for payment to the broker(s) identified on Schedule
      8(a).

     

     (b) Subscriber’s
      Legal Fees.
      The
      Company shall pay to Grushko & Mittman, P.C., a fee of $25,000
      (“Subscriber’s
      Legal Fees”)
      (of
      which $7,480 has been paid) as reimbursement for services rendered to the
      Subscribers in connection with this Agreement and the purchase and sale of
      the
      Notes and Warrants (the “Offering”).
      The
      Subscriber’s Legal Fees will be payable out of funds held pursuant to the Escrow
      Agreement. Grushko & Mittman, P.C. will be reimbursed at Closing for all
      lien searches, filing fees, and printing and shipping costs for the closing
      statements to be delivered to Subscribers.

     

    9. Covenants
      of the Company.
      The
      Company covenants and agrees with the Subscribers as follows:

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (a) Stop
      Orders.
      The
      Company will advise the Subscribers, within twenty-four hours after it receives
      notice of issuance by the Commission, any state securities commission or any
      other regulatory authority of any stop order or of any order preventing or
      suspending any offering of any securities of the Company, or of the suspension
      of the qualification of the Common Stock of the Company for offering or sale
      in
      any jurisdiction, or the initiation of any proceeding for any such
      purpose.

     

    (b) Listing/Quotation.
      The
      Company shall promptly secure the quotation or listing of the Shares and Warrant
      Shares upon each national securities exchange, or automated quotation system
      upon which they are or become eligible for quotation or listing (subject to
      official notice of issuance) and shall maintain same so long as any Warrants
      are
      outstanding. The Company will maintain the quotation or listing of its Common
      Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq Global
      Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock Exchange
      (whichever of the foregoing is at the time the principal trading exchange or
      market for the Common Stock (the “Principal
      Market”)),
      and
      will comply in all respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the Principal Market, as applicable.
      The Company will provide the Subscribers copies of all notices it receives
      notifying the Company of the threatened and actual delisting of the Common
      Stock
      from any Principal Market. As of the date of this Agreement and the Closing
      Date, the Bulletin Board is and will be the Principal Market.

     

    (c) Market
      Regulations.
      The
      Company shall notify the Commission, the Principal Market and applicable state
      authorities, in accordance with their requirements, of the transactions
      contemplated by this Agreement, and shall take all other necessary action and
      proceedings as may be required and permitted by applicable law, rule and
      regulation, for the legal and valid issuance of the Securities to the
      Subscribers and promptly provide copies thereof to Subscriber.

     

    (d) Filing
      Requirements.
      From
      the
      date of this Agreement and until the last to occur of (i) two (2) years after
      the Closing Date, (ii) until all the Shares and Warrant Shares have been resold
      or transferred by all the Subscribers pursuant to the Registration Statement
      or
      pursuant to Rule 144, without regard to volume limitations or (iii) the Notes
      are no longer outstanding (the date of occurrence of the last such event being
      the “End
      Date”),
      the
      Company will (A) cause its Common Stock to be registered under Section 12(b)
      or
      12(g) of the 1934 Act, (B) comply in all respects with its reporting and filing
      obligations under the 1934 Act, (C) voluntarily comply with all reporting
      requirements that are applicable to an issuer with a class of shares registered
      pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
      reporting requirements, and (D) comply with all requirements related to any
      registration statement filed pursuant to this Agreement. The Company will use
      its best efforts not to take any action or file any document (whether or not
      permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
      or suspend such registration or to terminate or suspend its reporting and filing
      obligations under said acts until the End Date. Until the End Date, the Company
      will continue the listing or quotation of the Common Stock on a Principal Market
      and will comply in all respects with the Company's reporting, filing and other
      obligations under the bylaws or rules of the Principal Market. The Company
      agrees to timely file a Form D with respect to the Securities if required under
      Regulation D and to provide a copy thereof to each Subscriber promptly after
      such filing.

     

    (e) Use
      of
      Proceeds.
      The
      proceeds of the Offering will be employed by the Company as described on
Schedule
      9(e).
      The
      Purchase Price may not and will not be used for accrued and unpaid officer
      and
      director salaries, payment of financing related debt, redemption of outstanding
      notes or equity instruments of the Company nor non-trade obligations outstanding
      on a Closing Date. For so long as any Notes are outstanding, without the prior
      consent of the holders of a majority in interest of the Notes, the Company
      will
      not prepay any financing related debt obligations nor redeem any equity
      instruments of the Company, if the Company has at such time or would have as
      a
      result of such prepayment or redemption, cash or cash equivalents of less than
      an amount equal to (i) USD $1,500,000 plus (ii) the total principal amount
      then
      outstanding under the Notes. 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (f) Reservation.
      Prior
      to the Closing Date, and at all times thereafter, the Company shall have
      reserved, pro rata,
      on
      behalf of each holder of a Note or Warrant, from its authorized but unissued
      Common Stock, a number of common shares equal to 120%
      of
      the amount of Common Stock necessary to allow each holder of a Note to be able
      to convert all such outstanding Notes and interest and reserve the amount of
      Warrant Shares issuable upon exercise of the Warrants. 

     

    (g)
       Increase
      in Authorization.
      Not
      later than 60 days after the Closing Date, the Company undertakes have increased
      its authorized Common Stock to 500,000,000 shares. The undertaking in this
      section 9(g) is a material term of this Agreement.

     

    (h) Taxes.
      From
      the date of this Agreement and until the End Date, 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.

     

    (i) Insurance.
      From
      the date of this Agreement and until the End Date, the Company will keep its
      assets which are of an insurable character insured by financially sound and
      reputable insurers against loss or damage by fire, explosion and other risks
      customarily insured against by companies in the Company’s line of business, in
      amounts sufficient to prevent the Company from becoming a co-insurer and not
      in
      any event less than one hundred percent (100%) of the insurable value of the
      property insured less reasonable deductible amounts; and the Company will
      maintain, with financially sound and reputable insurers, insurance against
      other
      hazards and risks and liability to persons and property to the extent and in
      the
      manner customary for companies in similar businesses similarly situated and
      to
      the extent available on commercially reasonable terms.

     

    (j) Books
      and Records.
      From the
      date of this Agreement and until the End Date, the Company will keep true
      records and books of account in which full, true and correct entries will be
      made of all dealings or transactions in relation to its business and affairs
      in
      accordance with generally accepted accounting principles applied on a consistent
      basis.

     

    (k) Governmental
      Authorities.
      From the
      date of this Agreement and until the End Date, the Company shall duly observe
      and conform in all material respects to all valid requirements of governmental
      authorities relating to the conduct of its business or to its properties or
      assets.

     

    (l) Intellectual
      Property.
      From
      the date of this Agreement and until the End Date, the Company shall maintain
      in
      full force and effect its corporate existence, rights and franchises and all
      licenses and other rights to use intellectual property owned or possessed by
      it
      and reasonably deemed to be necessary to the conduct of its business, unless
      it
      is sold for value.

     

    (m) Properties.
      From the
      date of this Agreement and until the End Date, the Company will keep its
      properties in good repair, working order and condition, reasonable wear and
      tear
      excepted, and from time to time make all necessary and proper repairs, renewals,
      replacements, additions and improvements thereto; and the Company will at all
      times comply with each provision of all leases to which it is a party or under
      which it occupies property if the breach of such provision could reasonably
      be
      expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (n) Confidentiality/Public
      Announcement.
      From the
      date of this Agreement and until the End Date, the Company agrees that except
      in
      connection with a Form 8-K and the registration statement or statements
      regarding the Subscribers’ securities or in correspondence with the SEC
      regarding same, it will not disclose publicly or privately the identity of
      the
      Subscribers unless expressly agreed to in writing by a Subscriber or only to
      the
      extent required by law and then only upon two days prior notice to Subscriber.
      In any event and subject to the foregoing, the Company undertakes to file a
      Form
      8-K or make a public announcement describing the Offering not later than the
      fourth business day after the Closing Date. Prior to filing or announcement,
      such Form 8-K or public announcement will be provided to Subscribers for their
      review and approval. In the Form 8-K or public announcement, the Company will
      specifically disclose the amount of Common Stock outstanding immediately after
      the Closing. Upon  delivery by the Company to Subscriber after the
      Closing Date of any notice or information, in writing, electronically or
      otherwise, and while a Note, Shares, Warrants, or Warrant Shares are held by
      Subscriber, unless the  Company has in good faith determined that the
      matters relating to such notice do not constitute material, nonpublic
      information relating to the Company or
      Subsidiaries, the Company  shall within one business day after
      any such delivery publicly disclose such  material,  nonpublic 
information on a Report on Form 8-K or otherwise. 
In
      the event that the Company believes that a
      notice or communication to Subscriber contains material, nonpublic
      information, relating to the Company or Subsidiaries, the Company shall so
      indicate to the Subscriber contemporaneously with delivery of such notice or
      information. In the absence of any such indication, the Subscriber shall be
      allowed to presume that all matters relating to such notice and information
      do
      not constitute material, nonpublic information relating to the Company or
      Subsidiaries.

     

    (o) Non-Public
      Information.
      The
      Company covenants and agrees that except for the Reports, Other Written
      Information and schedules and exhibits to this Agreement, which information
      thereon will be publicly disclosed not later than the Actual Effective date,
      neither it nor any other person acting on its behalf will at any time provide
      any Subscriber or its agents or counsel with any information that the Company
      believes constitutes material non-public information, unless prior thereto
      such
      Subscriber shall have agreed in writing to keep such information in confidence.
      The Company understands and confirms that each Subscriber shall be relying
      on
      the foregoing representations in effecting transactions in securities of the
      Company.

    (p) Negative
      Covenants.
      So long
      as a Note is outstanding, without the consent of the Subscriber, the Company
      will not directly or indirectly:

    


    (i) create,
      incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
      arrangement, lien, charge, claim, security interest, security title, mortgage,
      security deed or deed of trust, easement or encumbrance, or preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including any lease or title retention agreement, any financing
      lease having substantially the same economic effect as any of the foregoing,
      and
      the filing of, or agreement to give, any financing statement perfecting a
      security interest under the Uniform Commercial Code or comparable law of any
      jurisdiction) (each, a “Lien”)
      upon
      any of its property, whether now owned or hereafter acquired except for: (A)
      the
      Excepted Issuances (as defined in Section 12 hereof), (B) (a) Liens imposed
      by
      law for taxes that are not yet due or are being contested in good faith and
      for
      which adequate reserves have been established in accordance with generally
      accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
      material men’s, repairmen’s and other like Liens imposed by law, arising in the
      ordinary course of business and securing obligations that are not overdue by
      more than 30 days or that are being contested in good faith and by appropriate
      proceedings; (c) pledges and deposits made in the ordinary course of business
      in
      compliance with workers’ compensation, unemployment insurance and other social
      security laws or regulations; (d) deposits to secure the performance of bids,
      trade contracts, leases, statutory obligations, surety and appeal bonds,
      performance bonds and other obligations of a like nature, in each case in the
      ordinary course of business; (e) Liens created with respect to the financing
      of
      the purchase of new property in the ordinary course of the Company’s business up
      to the amount of the purchase price of such property; and (f) easements, zoning
      restrictions, rights-of-way and similar encumbrances on real property imposed
      by
      law or arising in the ordinary course of business that do not secure any
      monetary obligations and do not materially detract from the value of the
      affected property (each of (a) through (f), a “Permitted
      Lien”)
      and
      (C) indebtedness for borrowed money which is not senior or pari passu, in right
      of payment to the Notes, or in distribution of the Company’s assets to the
      holders of the Notes;

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (ii) amend
      its
      certificate of incorporation, bylaws or its charter documents so as to
      materially and adversely affect any rights of the Subscribers, except to
      increase the number of shares authorized for issuance;

    


    (iii) repay,
      repurchase or offer to repay, repurchase or otherwise acquire make pay any
      dividend or distribution in respect of any of its Common Stock, preferred stock,
      or other equity securities other than to the extent permitted or required under
      the Transaction Documents; 

    


    (iv) engage
      in
      any transactions with any officer, director, employee or any Affiliate of the
      Company, including any contract, agreement or other arrangement providing for
      the furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner, in each case in excess of $100,000
      other than (i) for payment of salary or consulting fees for services rendered,
      (ii) reimbursement for expenses incurred on behalf of the Company, and (iii)
      for
      other employee benefits, including stock option agreements under any stock
      option plan of the Company; or

     

    (v) prepay
      or
      redeem any financing related debt or past due obligations outstanding as of
      the
      Closing Date.     

     

    (q) Further
      Registration Statements.
      Except
      for a registration statement filed on behalf of the Subscribers pursuant to
      Section 11 of this Agreement, and as set forth on Schedule
      11.1
      hereto,
      the Company will not, without the consent of the Subscribers, file with the
      Commission or with state regulatory authorities any registration statements
      or
      amend any already filed registration statement to increase the amount of Common
      Stock registered therein, or reduce the price of which such Common Stock is
      registered therein, (including but not limited to Forms S-8), until the
      expiration of the “Exclusion
      Period,”
which
      shall be defined as the sooner of (i) the Registration Statement having been
      current and available for use in connection with the resale of all of the
      Registrable Securities (as defined in Section 11.1(i)) for a period of eighty
      (80) days, or (ii) until all the Shares and Warrant Shares have been resold
      or
      transferred by the Subscribers pursuant to the Registration Statement or Rule
      144, without regard to volume limitations. The Exclusion Period will be tolled
      or reinstated, as the case may be, during the pendency of an Event of Default
      as
      defined in the Note.

     

    (r) Blackout.
      The
      Company undertakes and covenants that, until the end of the Exclusion Period,
      the Company will not enter into any acquisition, merger, exchange or sale or
      other transaction or fail to take any action that could have the effect of
      delaying the effectiveness of any pending Registration Statement or causing
      an
      already effective Registration Statement to no longer be effective or current
      for a period of twenty or more days in the aggregate during any three hundred
      and sixty-five day period.

     

    (s) Offering
      Restrictions.
      For the
      180 day period after the Closing and/or during the pendency of an Event of
      Default, except for the Excepted Issuances, the Company will not enter into
      an
      agreement to issue nor issue any equity, convertible debt or other securities
      convertible into Common Stock or equity of the Company nor modify any of the
      foregoing which may be outstanding at anytime, without the prior written consent
      of the Subscriber, which consent may be withheld for any reason. For so long
      as
      the Notes are outstanding, except for the Excepted Issuances, the Company will
      not enter into any Equity Line of Credit or similar agreement, nor issue nor
      agree to issue any floating or Variable Priced Equity Linked Instruments nor
      any
      of the foregoing or equity with price reset rights (collectively, the
“Variable
      Rate Restrictions”),
      without the prior written consent of holders of a majority in interest of the
      then outstanding Notes. For
      purposes hereof, “Equity Line of Credit” shall include any transaction involving
      a written agreement between the Company and an investor or underwriter whereby
      the Company has the right to “put” its securities to the investor or underwriter
      over an agreed period of time and at an agreed price or price formula, and
      “Variable Priced Equity Linked Instruments” shall include: (A) any debt or
      equity securities which are convertible into, exercisable or exchangeable for,
      or carry the right to receive additional shares of Common Stock either (1)
      at
      any conversion, exercise or exchange rate or other price that is based upon
      and/or varies with the trading prices of or quotations for Common Stock at
      any
      time after the initial issuance of such debt or equity security, or (2) with
      a
      fixed conversion, exercise or exchange price that is subject to being reset
      at
      some future date at any time after the initial issuance of such debt or equity
      security due to a change in the market price of the Company’s Common Stock since
      date of initial issuance, and (B) any amortizing convertible security which
      amortizes prior to its maturity date, where the Company is required or has
      the
      option to (or the investor in such transaction has the option to require the
      Company to) make such amortization payments in shares of Common Stock which
      are
      valued at a price that is based upon and/or varies with the trading prices
      of or
      quotations for Common Stock at any time after the initial issuance of such
      debt
      or equity security (whether or not such payments in stock are subject to certain
      equity conditions). The only officer, director, employee and consultant stock
      option or stock incentive plan currently in effect or contemplated by the
      Company is described on Schedule
      5(d).

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (t) Limited
      Standstill.
      The
      Company will deliver to the Subscribers on or before the Closing Date and
      enforce the provisions of an irrevocable lockup agreement (“Lockup
      Agreement”)
      in the
      form annexed hereto as Exhibit
      H,
      with
      the persons identified on Schedule
      9(t).

    


    (u) Branded
      Retail Division.
      The
      Company will deliver to the Subscribers on or before the Closing Date a copy
      of
      a letter of intent obtained by the Company to purchase Escela V Fashion Co.,
      Ltd., a corporation based in the PRC (“Option”)
      in the
      form annexed hereto as Exhibit
      I.
      The
      Company may not modify the terms of the Option without the consent of the
      Subscribers which may withheld for any reason.

     

    (v) Non-Compete.
      The
      Company will deliver to the Subscribers on or before the Closing Date and
      enforce the provisions of an irrevocable non-compete agreement (“Non-Compete
      Agreement”)
      in the
      form annexed hereto as Exhibit
      I,
      with
      the persons identified on Schedule
      9(v).

    


    (w) Seniority.
      Except
      for Permitted Liens and as otherwise provided for herein, until the Notes are
      fully satisfied or converted, the Company shall not grant nor allow any security
      interest to be taken in the assets of the Company; nor issue any debt, equity
      or
      other instrument which would give the holder thereof directly or indirectly,
      a
      right in any assets of the Company, superior to any right of the holder of
      a
      Note in or to such assets. For purposes of this Agreement, “Permitted
      Lien”
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 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; (c) liens
      incurred in connection with lease obligations and purchase money indebtedness
      of
      up to $100,000, in the aggregate, incurred in connection with the acquisition
      of
      capital assets and lease obligations with respect to newly acquired or leased
      assets, provided that such liens are not secured by assets of the Company other
      than the assets so acquired or leased; and (d) liens on the Company’s equity
      interest in its Subsidiaries or on the assets of the Subsidiaries.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (w) Notices.
      For so
      long as the Subscribers hold any Securities, the Company must maintain as United
      States address and United States fax number for notices purposes under the
      Transaction Documents. 

     

    (x) DTC
      Program.
      At all
      times that Notes or Warrants are outstanding, the Company will employ as the
      transfer agent for the Common Stock, Shares and Warrant Shares a participant
      in
      the Depository Trust Company Automated Securities Transfer Program.

     

    10. Covenants
      of the Company and Subscriber Regarding Indemnification.

     

    (a) The
      Company agrees to indemnify, hold harmless, reimburse and defend the
      Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
      persons, and principal shareholders, against any claim, cost, expense,
      liability, obligation, loss or damage (including reasonable legal fees) of
      any
      nature, incurred by or imposed upon the Subscriber or any such person which
      results, arises out of or is based upon (i) any material misrepresentation
      by
      Company or breach of any warranty by Company in this Agreement or in any
      Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any breach
      or
      default in performance by the Company of any covenant or undertaking to be
      performed by the Company hereunder, or any other agreement entered into by
      the
      Company and Subscriber relating hereto.

     

    (b) Each
      Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
      and each of the Company’s officers, directors, agents, Affiliates, control
      persons against any claim, cost, expense, liability, obligation, loss or damage
      (including reasonable legal fees) of any nature, incurred by or imposed upon
      the
      Company or any such person which results, arises out of or is based upon (i)
      any
      material misrepresentation by such Subscriber in this Agreement or in any
      Exhibits or Schedules attached hereto, or other agreement delivered pursuant
      hereto; or (ii) after any applicable notice and/or cure periods, any breach
      or
      default in performance by such Subscriber of any covenant or undertaking to
      be
      performed by such Subscriber hereunder, or any other agreement entered into
      by
      the Company and Subscribers, relating hereto.

     

    (c) In
      no
      event shall the liability of any Subscriber or permitted successor hereunder
      or
      under any Transaction Document or other agreement delivered in connection
      herewith be greater in amount than the dollar amount of the net proceeds
      actually received by such Subscriber upon the sale of Registrable Securities
      (as
      defined herein).

     

    (d) The
      procedures set forth in Section 11.6 shall apply to the indemnification set
      forth in Sections 10(a) and 10(b) above.

     

    11.1. Registration
      Rights.
      The
      Company hereby grants the following registration rights to holders of the
      Securities.

     

    (i) On
      one
      occasion, for a period commencing 240 days after the Closing Date, but not
      later
      than twenty four (24) months after the Closing Date, upon a written request
      therefor from any record holder or holders of more than 50% of the Shares issued
      and issuable upon conversion of the outstanding Notes, outstanding Warrant
      Shares, and Purchased Shares, the Company shall prepare and file with the
      Commission a registration statement under the 1933 Act registering the
      Registrable Securities, as defined in Section 11.1(iv) hereof, which are the
      subject of such request for unrestricted public resale by the holder thereof.
      For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities shall
      not
      include Securities which are (A) registered for resale in an effective
      registration statement, (B) included for registration in a pending registration
      statement, or (C) which have been issued without further transfer restrictions
      after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the
      receipt of such request, the Company shall promptly give written notice to
      all
      other record holders of the Registrable Securities that such registration
      statement is to be filed and shall include in such registration statement
      Registrable Securities for which it has received written requests within ten
      (10) days after the Company gives such written notice. Such other requesting
      record holders shall be deemed to have exercised their demand registration
      right
      under this Section 11.1(i).

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (ii) If
      the
      Company at any time proposes to register any of its securities under the 1933
      Act for sale to the public, whether for its own account or for the account
      of
      other security holders or both, except with respect to registration statements
      on Forms S-4, S-8 or another form not available for registering the Registrable
      Securities for sale to the public, provided the Registrable Securities are
      not
      otherwise registered for resale by the Subscribers or Holder pursuant to an
      effective registration statement, each such time it will give at least fifteen
      (15) days' prior written notice to the record holder of the Registrable
      Securities of its intention so to do. Unless objected to by written request
      of
      the holder, received by the Company within ten (10) days after the giving of
      any
      such notice by the Company, to register any of the Registrable Securities not
      previously registered, the Company will cause such Registrable Securities as
      to
      which registration shall have been so requested to be included with the
      securities to be covered by the registration statement proposed to be filed
      by
      the Company, all to the extent required to permit the sale or other disposition
      of the Registrable Securities so registered by the holder of such Registrable
      Securities (the “Seller”
or
      “Sellers”).
      In
      the event that any registration pursuant to this Section 11.1(ii) shall be,
      in
      whole or in part, an underwritten public offering of Common Stock of the
      Company, the number of shares of Registrable Securities to be included in such
      an underwriting may be reduced by the managing underwriter if and to the extent
      that the Company and the underwriter shall reasonably be of the opinion that
      such inclusion would adversely affect the marketing of the securities to be
      sold
      by the Company therein; provided, however, that the Company shall notify the
      Seller in writing of any such reduction. Notwithstanding the foregoing
      provisions, or Section 11.4 hereof, the Company may withdraw or delay or suffer
      a delay of any registration statement referred to in this Section 11.1(ii)
      without thereby incurring any liability to the Seller.

     

    (iii) If,
      at
      the time any written request for registration is received by the Company
      pursuant to Section 11.1(i), the Company has determined to proceed with the
      actual preparation and filing of a registration statement under the 1933 Act
      in
      connection with the proposed offer and sale for cash of any of its securities
      for the Company's own account and the Company actually does file such other
      registration statement, such written request shall be deemed to have been given
      pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights of
      the
      holders of Registrable Securities covered by such written request shall be
      governed by Section 11.1(ii).

    


    (iv) The
      Company shall file with the Commission one or more Forms SB-2 registration
      statements (as defined below) (or such other form that it is eligible to use)
      in
      order to register the Registrable Securities for resale and distribution under
      the 1933 Act. The Registration Statement with respect to the Common Stock
      issuable upon conversion of the Notes (“Note
      Registration Statement”)
      must
      be filed not later than sixty (60) days after the Closing Date (“Note
      Filing Date”)
      and
      declared effective by the Commission not later than the third Business Day
      after
      receipt by the Company or its counsel of a written or oral communication from
      the Commission that the Registration Statement will not be reviewed or that
      the
      Commission has no comments or further comments that would impede the declaration
      of effectiveness of the Registration Statement (“Note
      Effective Date”).
      The
      Registration Statement with respect to the Warrant Shares (“Warrant
      Registration Statement”)
      must
      be filed not later than three hundred (300) days after the Closing Date
      (“Warrant
      Filing Date”)
      and
      declared effective by the Commission not later than the sooner of (y) the third
      Business Day after receipt by the Company or its counsel of a written or oral
      communication from the Commission that the Registration Statement will not
      be
      reviewed or that the Commission has no comments or further comments that would
      impede the declaration of effectiveness of the Registration Statement, or (z)
      one hundred and twenty (120) days after the filing date of such Registration
      Statement (“Warrant
      Effective Date”).
      Each
      of the Note Registration Statement and Warrant Registration Statement is
      referred to herein as Registration Statement. The Note Filing Date and Warrant
      Filing Date are referred to herein as the “Filing
      Date”.
      The
      Note Effective Date and Warrant Effective Date are referred to herein as the
      “Effective
      Date”.
      The
      Company will register not less than a number of shares of Common Stock in the
      aforedescribed Registration Statements that is equal to 120%
      of
      the Shares issuable upon conversion of the Notes issued to the Subscribers
      and
      100% of the Warrant Shares issuable pursuant to this Agreement upon exercise
      of
      the Warrants (collectively the “Registrable
      Securities”).
      The
      Registrable Securities shall be reserved and set aside exclusively for the
      benefit of each Subscriber and Warrant holder, pro rata,
      and not
      issued, employed or reserved for anyone other than each such Subscriber and
      Warrant holder. The Registration Statement will be amended or additional
      registration statements will be filed by the Company as soon as reasonably
      practicable, and in any event no later that 30 days after such need arises,
      as
      necessary to register additional shares of Common Stock to allow the public
      resale of all Common Stock included in and issuable by virtue of the Registrable
      Securities. Except with the written consent of holders of a majority of the
      Registrable Securities, or as described on Schedule
      11.1
      hereto,
      no securities of the Company other than (a) the Registrable Securities, and
      (b)
      securities issued in connection with an underwritten public offering of the
      Company, will be included in the Registration Statement. The date each
      Registration Statement is declared effective by the Commission shall be referred
      to herein as the “Actual
      Effective Date.”

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (v) The
      amount of Registrable Securities required to be included in the Registration
      Statement as described in Section 11.1(iv) ("Initial Registrable Securities")
      shall be limited to not less than 100% of the maximum amount ("Rule 415 Amount")
      of Common Stock which may be included in a single Registration Statement without
      exceeding registration limitations imposed by the Commission pursuant to Rule
      415 of the 1933 Act but in any event not less than 6,000,000 shares of Common
      Stock.  In the event that less than all of the Initial Registrable
      Securities are included in the Registration Statement as a result of the
      limitation described in this Section 11.1(v), then the Company will be required
      to file additional Registration Statements each registering the Rule 415 Amount
      (each such Registration Statement a "Subsequent Registration Statement"),
      seriatim, until all of the Initial Registrable Securities have been
      registered.  The Filing Date and Effective Date of each such additional
      Registration Statement shall be, respectively, fourteen (14) and sixty (60)
      days
      after the first day such Subsequent Registration Statement may be filed without
      objection by the Commission based on Rule 415 of the 1933 Act.

     

    11.2. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions of Section 11.1(i) or
      11.1(ii) to effect the registration of any Registrable Securities under the
      1933
      Act, the Company will, as expeditiously as possible: 

     

    (a) subject
      to the timelines provided in this Agreement, prepare and file with the
      Commission a registration statement required by Section 11, with respect to
      such
      securities and use its best efforts to promptly cause such registration
      statement to become and remain effective for the period of the distribution
      contemplated thereby (determined as herein provided), promptly provide to the
      holders of the Registrable Securities copies of all filings and Commission
      letters of comment and notify Subscribers (by e-mail addresses provided by
      Subscribers) and Grushko & Mittman, P.C. (by email to Counslers@aol.com)
      on or
      before the first business day thereafter that the Company receives notice that
      (i) the Commission has no comments or no further comments on the Registration
      Statement, and (ii) the registration statement has been declared effective
      (failure to timely provide notice as required by this Section 11.2(a) shall
      be a
      material breach of the Company’s obligation and an Event of Default as defined
      in the Notes
      and
      a Non-Registration Event as defined in Section 11.4 of this Agreement);


     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (b) prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective until such registration
      statement has been effective for a period of two (2) years, and comply with
      the
      provisions of the 1933 Act with respect to the disposition of all of the
      Registrable Securities covered by such registration statement in accordance
      with
      the Sellers’ intended method of disposition set forth in such registration
      statement for such period; 

     

    (c) furnish
      to the Sellers, at the Company’s expense, such number of copies of the
      registration statement and the prospectus included therein (including each
      preliminary prospectus) as such persons reasonably may request in order to
      facilitate the public sale or their disposition of the securities covered by
      such registration statement or make them electronically available; 

     

    (d) use
      its
commercially
      reasonable best efforts to register or qualify the Registrable Securities
      covered by such registration statement under the securities or “blue sky” laws
      of New York and such jurisdictions as the Sellers shall request in writing,
      provided, however, that the Company shall not for any such purpose be required
      to qualify generally to transact business as a foreign corporation in any
      jurisdiction where it is not so qualified or to consent to general service
      of
      process in any such jurisdiction; 

     

    (e) if
      applicable, list the Registrable Securities covered by such registration
      statement with any securities exchange on which the Common Stock of the Company
      is then listed; 

     

    (f) notify
      the Subscribers within two hours of the Company’s becoming aware that a
      prospectus relating thereto is required to be delivered under the 1933 Act,
      of
      the happening of any event of which the Company has knowledge as a result of
      which the prospectus contained in such registration statement, as then in
      effect, includes an untrue statement of a material fact or omits to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances then existing or which
      becomes subject to a Commission, state or other governmental order suspending
      the effectiveness of the registration statement covering any of the
      Shares;

     

    (g) provided
      same would not be in violation of the provision of Regulation FD under the
      1934
      Act, make available for inspection by the Sellers, and any attorney, accountant
      or other agent retained by the Seller or underwriter, all publicly available,
      non-confidential financial and other records, pertinent corporate documents
      and
      properties of the Company, and cause the Company's officers, directors and
      employees to supply all publicly available, non-confidential information
      reasonably requested by the seller, attorney, accountant or agent in connection
      with such registration statement; and 

     

    (h) provide
      to the Sellers copies of the Registration Statement and amendments thereto
      five
      business days prior to the filing thereof with the Commission.

     

    11.3. Provision
      of Documents.
      In
      connection with each registration described in this Section 11, each Seller
      will
      furnish to the Company in writing such information and representation letters
      with respect to itself and the proposed distribution by it as reasonably shall
      be necessary in order to assure compliance with federal and applicable state
      securities laws. 

     

    11.4. Non-Registration
      Events.
      The
      Company and the Subscribers agree that the Sellers will suffer damages if a
      required Registration Statement is not filed by the Filing Date and not declared
      effective by the Commission by the Effective Date, and any Registration
      Statement required under Section 11.1(i) or 11.1(ii) is not filed within 60
      days
      after written request and declared effective by the Commission within 120 days
      after such request, and maintained in the manner and within the time periods
      contemplated by Section 11 hereof, and it would not be feasible to ascertain
      the
      extent of such damages with precision. Accordingly, if: 

     

    
      
        
        

      

      
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    (A)
       a
      required Registration Statement is not filed on or before the applicable Filing
      Date, 

     

    (B)
       a
      required Registration Statement is not declared effective on or before the
      applicable Effective Date, 

     

    (C)
       if
      a
      Registration Statement described in Sections 11.1(i) or 11.1(ii) is not filed
      within 60 days after such written request, or is not declared effective within
      120 days after such written request, 

     

    (D)
       any
      Registration Statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv)
      is
      filed and declared effective but shall thereafter cease to be effective without
      being succeeded within twenty (20) business days by an effective replacement
      or
      amended registration statement or for a period of time which shall exceed thirty
      (30) trading days in the aggregate per year (defined as a period of 365 days
      commencing on the Actual Effective Date; or 

     

    (E)
       the
      Company fails to register for unrestricted resale on behalf of the Subscribers
      at least 120%
      of
      the amount of Common Shares issuable upon full conversion of all sums due under
      the Notes with respect to the Note Registration Statement and 100% of the
      Warrant Shares issuable upon exercise of the Warrants with respect to the
      Warrant Registration Statement
      (each
      such event referred to in clauses A through E of this Section 11.4 is referred
      to herein as a “Non-Registration
      Event”);
      

     

    then
      the
      Company shall deliver to the holder of Registrable Securities, as Liquidated
      Damages, an amount equal to two percent (2%) for each thirty (30) days (or
      such
      lesser prorated amount for any period of less than thirty (30) days) of the
      Purchase Price of the outstanding Notes and purchase price of Shares issued
      upon
      conversion of the Notes owned of record by such holder which are subject to
      such
      Non-Registration Event. The Liquidated Damages payable to each Subscriber
      pursuant to this Section 11.4 shall not exceed ten percent (10%) of the initial
      principal amount of the Note issued to each such Subscriber. The Company must
      pay the Liquidated Damages in cash. The Liquidated Damages must be paid within
      ten (10) days after the end of each thirty (30) day period or shorter part
      thereof for which Liquidated Damages are payable. In the event a Registration
      Statement is filed by the Filing Date but is withdrawn prior to being declared
      effective by the Commission, then such Registration Statement will be deemed
      to
      have not been filed. All
      oral
      or written comments received from the Commission relating to the Registration
      Statement must be satisfactorily responded to within
      ten (10) business days after receipt of comments from the Commission.
      Failure
      to
      timely respond to Commission comments is a Non-Registration Event for which
      Liquidated Damages shall accrue and be payable by the Company to the holders
      of
      Registrable Securities at the same rate set forth above. Liquidated Damages
      will
      not accrue nor be payable pursuant to this Section 11.4 nor will a
      Non-Registration Event be deemed to have occurred for times during which
      Registrable Securities are transferable by the holder of Registrable Securities
      pursuant to Rule 144(k) under the 1933 Act.

     

    11.5. Expenses.
      All
      expenses incurred by the Company in complying with Section 11, including,
      without limitation, all registration and filing fees, printing expenses, fees
      and disbursements of counsel and independent public accountants for the Company,
      fees and expenses (including reasonable counsel fees) incurred in connection
      with complying with state securities or “blue sky” laws, fees of the National
      Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
      and registrars, costs of insurance and fee of one counsel not to exceed $5,000,
      for all Sellers are called “Registration
      Expenses.”
All
      underwriting discounts and selling commissions applicable to the sale of
      Registrable Securities, including any fees and disbursements of any additional
      counsel to the Seller, are called "Selling
      Expenses."
      The
      Company will pay all Registration Expenses in connection with the registration
      statement under Section 11. Selling Expenses in connection with each
      registration statement under Section 11 shall be borne by the Seller and may
      be
      apportioned among the Sellers in proportion to the number of shares sold by
      the
      Seller relative to the number of shares sold under such registration statement
      or as all Sellers thereunder may agree.

     

    
      
        
        

      

      
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    11.6. Indemnification
      and Contribution.

     

    (a) In
      the
      event of a registration of any Registrable Securities under the 1933 Act
      pursuant to Section 11, the Company will, to the extent permitted by law,
      indemnify and hold harmless the Seller, each officer of the Seller, each
      director of the Seller, each underwriter of such Registrable Securities
      thereunder and each other person, if any, who controls such Seller or
      underwriter within the meaning of the 1933 Act, against any losses, claims,
      damages or liabilities, joint or several, to which the Seller, or such
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in any registration statement
      under which such Registrable Securities were registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading
      in light of the circumstances when made, and will subject to the provisions
      of
      Section 11.6(c) reimburse the Seller, each such underwriter and each such
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action; provided, however, that the Company shall not be liable
      to
      the Seller to the extent that any such damages arise out of or are based upon
      an
      untrue statement or omission made in any preliminary prospectus if (i) the
      Seller failed to send or deliver a copy of the final prospectus delivered by
      the
      Company to the Seller with or prior to the delivery of written confirmation
      of
      the sale by the Seller to the person asserting the claim from which such damages
      arise, (ii) the final prospectus would have corrected such untrue statement
      or
      alleged untrue statement or such omission or alleged omission, or (iii) to
      the
      extent that any such loss, claim, damage or liability arises out of or is based
      upon an untrue statement or alleged untrue statement or omission or alleged
      omission so made in conformity with information furnished by any such Seller,
      or
      any such controlling person in writing specifically for use in such registration
      statement or prospectus. 

     

    (b) In
      the
      event of a registration of any of the Registrable Securities under the 1933
      Act
      pursuant to Section 11, each Seller severally but not jointly will, to the
      extent permitted by law, indemnify and hold harmless the Company, and each
      person, if any, who controls the Company within the meaning of the 1933 Act,
      each officer of the Company who signs the registration statement, each director
      of the Company, each underwriter and each person who controls any underwriter
      within the meaning of the 1933 Act, against all losses, claims, damages or
      liabilities, joint or several, to which the Company or such officer, director,
      underwriter or controlling person may become subject under the 1933 Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in the registration statement
      under which such Registrable Securities were registered under the 1933 Act
      pursuant to Section 11, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof, or arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein not misleading,
      and will reimburse the Company and each such officer, director, underwriter
      and
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action, provided, however, that the Seller will be liable hereunder
      in any such case if and only to the extent that any such loss, claim, damage
      or
      liability arises out of or is based upon an untrue statement or alleged untrue
      statement or omission or alleged omission made in reliance upon and in
      conformity with information pertaining to such Seller, as such, furnished in
      writing to the Company by such Seller specifically for use in such registration
      statement or prospectus, and provided, further, however, that the liability
      of
      the Seller hereunder shall be limited to the net proceeds actually received
      by
      the Seller from the sale of Registrable Securities covered by such registration
      statement.

     

    
      
        
        

      

      
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    (c) Promptly
      after receipt by an indemnified party hereunder of notice of the commencement
      of
      any action, such indemnified party shall, if a claim in respect thereof is
      to be
      made against the indemnifying party hereunder, notify the indemnifying party
      in
      writing thereof, but the omission so to notify the indemnifying party shall
      not
      relieve it from any liability which it may have to such indemnified party other
      than under this Section 11.6(c) and shall only relieve it from any liability
      which it may have to such indemnified party under this Section 11.6(c), except
      and only if and to the extent the indemnifying party is prejudiced by such
      omission. In case any such action shall be brought against any indemnified
      party
      and it shall notify the indemnifying party of the commencement thereof, the
      indemnifying party shall be entitled to participate in and, to the extent it
      shall wish, to assume and undertake the defense thereof with counsel reasonably
      satisfactory to such indemnified party, and, after notice from the indemnifying
      party to such indemnified party of its election so to assume and undertake
      the
      defense thereof, the indemnifying party shall not be liable to such indemnified
      party under this Section 11.6(c) for any legal expenses subsequently incurred
      by
      such indemnified party in connection with the defense thereof other than
      reasonable costs of investigation and of liaison with counsel so selected,
      provided, however, that, if the defendants in any such action include both
      the
      indemnified party and the indemnifying party and the indemnified party shall
      have reasonably concluded that there may be reasonable defenses available to
      it
      which are different from or additional to those available to the indemnifying
      party or if the interests of the indemnified party reasonably may be deemed
      to
      conflict with the interests of the indemnifying party, the indemnified parties,
      as a group, shall have the right to select one separate counsel and to assume
      such legal defenses and otherwise to participate in the defense of such action,
      with the reasonable expenses and fees of such separate counsel and other
      expenses related to such participation to be reimbursed by the indemnifying
      party as incurred.

     

    (d) In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the 1933 Act in any case in which either (i) a Seller, or any controlling
      person of a Seller, makes a claim for indemnification pursuant to this Section
      11.6 but it is judicially determined (by the entry of a final judgment or decree
      by a court of competent jurisdiction and the expiration of time to appeal or
      the
      denial of the last right of appeal) that such indemnification may not be
      enforced in such case notwithstanding the fact that this Section 11.6 provides
      for indemnification in such case, or (ii) contribution under the 1933 Act may
      be
      required on the part of the Seller or controlling person of the Seller in
      circumstances for which indemnification is not provided under this Section
      11.6;
      then, and in each such case, the Company and the Seller will contribute to
      the
      aggregate losses, claims, damages or liabilities to which they may be subject
      (after contribution from others) in such proportion so that the Seller is
      responsible only for the portion represented by the percentage that the public
      offering price of its securities offered by the registration statement bears
      to
      the public offering price of all securities offered by such registration
      statement, provided, however, that, in any such case, (y) the Seller will not
      be
      required to contribute any amount in excess of the public offering price of
      all
      such securities sold by it pursuant to such registration statement; and (z)
      no
      person or entity guilty of fraudulent misrepresentation (within the meaning
      of
      Section 11(f) of the 1933 Act) will be entitled to contribution from any person
      or entity who was not guilty of such fraudulent misrepresentation.

     

    11.7. Delivery
      of Unlegended Shares.

     

    (a) Within
      three (3) business days (such third business day being the “Unlegended
      Shares Delivery Date”)
      after
      the business day on which the Company has received (i) a notice that Warrant
      Shares have been sold pursuant to a registration statement or Rule 144 under
      the
      1933 Act, (ii) a representation that the prospectus delivery requirements,
      or
      the requirements of Rule 144, as applicable and if required, have been
      satisfied, and (iii) the original share certificates representing the shares
      of
      Common Stock that have been sold, and (iv) in the case of sales under Rule
      144,
      customary representation letters of the Subscriber and/or Subscriber’s broker
      regarding compliance with the requirements of Rule 144, the Company at its
      expense, (y) shall deliver, and shall cause legal counsel selected by the
      Company to deliver to its transfer agent (with copies to Subscriber) an
      appropriate instruction and opinion of such counsel, directing the delivery
      of
      shares of Common Stock without any legends including the legend set forth in
      Section 4 above, reissuable pursuant to any effective and current Registration
      Statement described in Section 11 of this Agreement or pursuant to Rule 144
      under the 1933 Act (the “Unlegended
      Shares”);
      and
      (z) cause the transmission of the certificates representing the Unlegended
      Shares together with a legended certificate representing the balance of the
      submitted Warrant Shares certificate, if any, to the Subscriber at the address
      specified in the notice of sale, via express courier, by electronic transfer
      or
      otherwise on or before the Unlegended Shares Delivery Date. 

     

    
      
        
        

      

      
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    (b) In
      lieu
      of delivering physical certificates representing the Unlegended Shares, if
      the
      Company’s transfer agent is participating in the Depository Trust Company
      (“DTC”)
      Fast
      Automated Securities Transfer program, upon request of a Subscriber, so long
      as
      the certificates therefor do not bear a legend and the Subscriber is not
      obligated to return such certificate for the placement of a legend thereon,
      the
      Company must cause its transfer agent to electronically transmit the Unlegended
      Shares by crediting the account of Subscriber’s prime Broker with DTC through
      its Deposit Withdrawal Agent Commission system. Such delivery must be made
      on or
      before the Unlegended Shares Delivery Date.

    


    (c) The
      Company understands that a delay in the delivery of the Unlegended Shares
      pursuant to Section 11 hereof after the Unlegended Shares Delivery Date could
      result in economic loss to Subscriber. As compensation to Subscriber for such
      loss, the Company agrees to pay late payment fees (as liquidated damages and
      not
      as a penalty) to the Subscriber for late delivery of Unlegended Shares in the
      amount of $100 per business day after the Delivery Date for each $10,000 of
      Purchase Price (as defined in the Warrants) (and proportionately for other
      amounts) of the Unlegended Shares subject to the delivery default. If during
      any
      360 day period, the Company fails to deliver Unlegended Shares as required
      by
      this Section 11.7 for an aggregate of thirty (30) days, then each Subscriber
      or
      assignee holding Securities subject to such default may, at its option, require
      the Company to redeem all or any portion of the Warrant Shares subject to such
      default at a price per share equal to 120% of the Purchase Price of such Warrant
      Shares (“Unlegended
      Redemption Amount”).

    


    (d) In
      addition to any other rights available to a Subscriber, if the Company fails
      to
      deliver to a Subscriber Unlegended Shares as required pursuant to this
      Agreement, within seven (7) business days after the Unlegended Shares Delivery
      Date and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an
      open market transaction or otherwise) shares of Common Stock to deliver in
      satisfaction of a sale by such Subscriber of the shares of Common Stock which
      the Subscriber was entitled to receive from the Company (a “Buy-In”), then the
      Company shall pay in cash to the Subscriber (in addition to any remedies
      available to or elected by the Subscriber) the amount by which (A) the
      Subscriber's total purchase price (including brokerage commissions, if any)
      for
      the shares of Common Stock so purchased exceeds (B) the aggregate purchase
      price
      of the shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares together with interest thereon at a rate of 15% per annum,
      accruing until such amount and any accrued interest thereon is paid in full
      (which amount shall be paid as liquidated damages and not as a penalty). For
      example, if a Subscriber purchases shares of Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
      price of shares of Common Stock delivered to the Company for reissuance as
      Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
      plus interest. The Subscriber shall provide the Company written notice
      indicating the amounts payable to the Subscriber in respect of the
      Buy-In.

    


    (e) In
      the
      event a Subscriber shall request delivery of Unlegended Shares as described
      in
      Section 11.7 and the Company is required to deliver such Unlegended Shares
      pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
      Shares based on any claim that such Subscriber or any one associated or
      affiliated with such Subscriber has been engaged in any violation of law, or
      for
      any other reason, unless, an injunction or temporary restraining order from
      a
      court, on notice, restraining and or enjoining delivery of such Unlegended
      Shares or exercise of all or part of said Warrant shall have been sought and
      obtained by the Company or at the Company’s request or with the Company’s
      assistance, and the Company has posted a surety bond for the benefit of such
      Subscriber in the amount of 120% of the amount of the aggregate purchase price
      of the Common Stock and Warrant Shares which are subject to the injunction
      or
      temporary restraining order, which bond shall remain in effect until the
      completion of arbitration/litigation of the dispute and the proceeds of which
      shall be payable to such Subscriber to the extent Subscriber obtains judgment
      in
      Subscriber’s favor.

     

    
      
        
        

      

      
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    12. (a) Right
      of First Refusal.
      Until
      one year after the Actual Effective Date, the Subscribers shall be given not
      less than ten business days prior written notice of any proposed sale by the
      Company of its Common Stock or other securities or equity linked debt
      obligations, except in connection with (i) full or partial consideration in
      connection with a merger, acquisition, consolidation or purchase of
      substantially all of the securities
      or assets of corporation or other entity which holders of such securities or
      debt are not at any time granted registration rights, (ii)
      the
      Company’s issuance of securities in connection with strategic license agreements
      and other partnering arrangements so long as such issuances are not for the
      purpose of raising capital and which holders of such securities or debt are
      not
      at any time granted registration rights, (iii) the Company’s issuance of Common
      Stock or the issuances or grants of options to purchase Common Stock to
      employees, directors, and consultants , not to exceed, in the aggregate, two
      percent (2%) of the amount of shares outstanding immediately prior to closing,
      as compensation for services, (iv) as a result of the exercise of Warrants
      or
      conversion of Notes which are granted or issued pursuant to this Agreement,
      (v)
      the Company’s issuance of Common Stock
      in
      connection with an acquisitions of an entity other than an affiliate, having
      a
      fair market value not less than $8,000,000, (vi) the
      Company’s issuance of Common Stock
      to
      non-affiliates in connection with services rendered or to be rendered to the
      Company, not
      to
      exceed, in the aggregate, two percent (2%) of the amount of shares outstanding
      immediately prior to closing, and (vii) the Company’s issuance of securities in
      connection with a bona fide underwritten public offering resulting in gross
      proceeds in excess of $5,000,000 (collectively the foregoing are “Excepted
      Issuances”).
      The
      Subscribers who exercise their rights pursuant to this
      Section
      12(a) shall have the right during the ten business days following receipt of
      the
      notice to purchase in cash or by using the outstanding balance including
      principle, interest, liquidated damages and any other amount then owing to
      such
      Subscriber by the Company, in the aggregate up to all of such offered Common
      Stock, debt or other securities in accordance with the terms and conditions
      set
      forth in the notice of sale in the same proportion to each other as their
      purchase of Notes in the Offering. In the event such terms and conditions are
      modified during the notice period, the Subscribers shall be given prompt notice
      of such modification and shall have the right during the ten business days
      following the notice of modification to exercise such right.

    


    (b) Right
      of Participation. Until
      five years after the Closing Date, the Subscribers shall be given not less
      than
      ten business days prior written notice of any proposed sale by the Company
      of
      its Common Stock or other securities or equity linked debt obligations, except
      for Excepted Issuances. The
      Subscribers who exercise their rights pursuant to this
      Section
      12(b) shall have the right during the ten business days following receipt of
      the
      notice to participate in such offered Common Stock, debt or other securities
      in
      accordance with the terms and conditions set forth in the notice of sale by
      using the outstanding balance including principle, interest, liquidated damages
      and any other amount then owing to such Subscriber by the Company, to pay for
      such participation. In the event such terms and conditions are modified during
      the notice period, the Subscribers shall be given prompt notice of such
      modification and shall have the right during the ten business days following
      the
      notice of modification to exercise such right.

     

    (c) Favored
      Nations Provision.
      Other
      than in connection with the Excepted Issuances, if at any time the Notes or
      Warrants are outstanding, the Company shall agree to or issue (the “Lower Price
      Issuance”) any Common Stock or securities convertible into or exercisable for
      shares of Common Stock (or modify any of the foregoing which may be outstanding)
      to any person or entity at a price per share or conversion or exercise price
      per
      share which shall be less than the Conversion Price in respect of the Shares
      ,
      or if less than the Warrant exercise price in respect of the Warrant Shares,
      without the consent of each Subscriber, then the Company shall issue, for each
      such occasion, additional shares of Common Stock to each Subscriber respecting
      those Notes, Warrants and Shares that remain outstanding at the time of the
      Lower Price Issuance so that the average per share purchase price of the shares
      of Common Stock issued to the Subscriber (of only the Common Stock or Warrant
      Shares still owned by the Subscriber) is equal to such other lower price per
      share and the Conversion Price and Warrant exercise price shall automatically
      be
      reduced to such other lower price. The average Purchase Price of the Shares
      and
      average exercise price in relation to the Warrant Shares shall be calculated
      separately for the Shares and Warrant Shares. The foregoing calculation and
      issuance shall be made separately for Shares received upon conversion of the
      Notes and separately for Warrant Shares. The delivery to the Subscriber of
      the
      additional shares of Common Stock shall be not later than the closing date
      of
      the transaction giving rise to the requirement to issue additional shares of
      Common Stock. The Subscriber is granted the registration rights described in
      Section 11 hereof in relation to such additional shares of Common Stock. For
      purposes of the issuance and adjustment described in this paragraph, the
      issuance of any security of the Company carrying the right to convert such
      security into shares of Common Stock or of any warrant, right or option to
      purchase Common Stock shall result in the issuance of the additional shares
      of
      Common Stock upon the sooner of the agreement to or actual issuance of such
      convertible security, warrant, right or option and again at any time upon any
      subsequent issuances of shares of Common Stock upon exercise of such conversion
      or purchase rights if such issuance is at a price lower than the Conversion
      Price or Warrant exercise price in effect upon such issuance. The rights of
      the
      Subscriber set forth in this Section 12 are in addition to any other rights
      the
      Subscriber has pursuant to this Agreement, the Note, any Transaction Document,
      and any other agreement referred to or entered into in connection herewith
      or to
      which the Subscriber and Company are parties. The Subscriber is also given
      the
      right to elect to substitute any term or terms of any other offering in
      connection with which the Subscriber has rights as described in Section 12(a),
      for any term or terms of the Offering in connection with Securities owned by
      Subscriber as of the date the notice described in Section 12(a) is required
      to
      be given to Subscriber.

     

    
      
        
        

      

      
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    (d) Maximum
      Exercise of Rights.
      In the
      event the exercise of the rights described in Sections 12(a), 12(b) or 12(c)
      would
      or
      could result in the issuance of an amount of Common Stock of the Company that
      would exceed the maximum amount that may be issued to a Subscriber calculated
      in
      the manner described in Section 7.3 of this Agreement, then the issuance of
      such
      additional shares of Common Stock of the Company to such Subscriber will be
      deferred in whole or in part until such time as such Subscriber is able to
      beneficially own such Common Stock without exceeding the applicable maximum
      amount set forth calculated in the manner described in Section 7.3 of this
      Agreement. The determination of when such Common Stock may be issued shall
      be
      made by each Subscriber as to only such Subscriber.

     

    13. Miscellaneous.

     

    (a) Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice. Any notice or other communication required or permitted
      to be
      given hereunder shall be deemed effective (a) upon hand delivery or delivery
      by
      facsimile, with accurate confirmation generated by the transmitting facsimile
      machine, at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to such address, or upon actual
      receipt of such mailing, whichever shall first occur. The addresses for such
      communications shall be: 

    


    
      	To Company:  	Ever-Glory International Group, Inc.,

              100
                N. Barranca Ave # 810 

              West
                Covina, CA 91791, 

              Attn:
                Edward Kang 

              Fax:
                (626)839-9118

            


    

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    


    
      	With a copy by fax to:	
              Attn:
                Edgar D. Park, Esq.

              Richardson
                & Patel LLP

              10900
                Wilshire Boulevard, Suite 500

              Los
                Angeles, CA 90024

              Fax:
                (310) 208-1154

            


    

    
      


      
        	To Subscribers:	
                To
                  the addresses and fax numbers set 
                  forth
                    on the signature pages
                    hereto.

                

              


      

                     
        
          	With a copy by fax
                  to:	
                  Grushko
                    & Mittman, P.C. 
                    551
                      Fifth Avenue, Suite 1601

                    New
                      York, New York 10176

                    Fax:
                      (212) 697-3575

                  

                

                      

      

    

    (b) Entire
      Agreement; Assignment.
      This
      Agreement and other documents delivered in connection herewith represent the
      entire agreement between the parties hereto with respect to the subject matter
      hereof and may be amended only by a writing executed by both parties. Neither
      the Company nor the Subscribers have relied on any representations not contained
      or referred to in this Agreement and the documents delivered herewith. No right
      or obligation of the Company shall be assigned without prior notice to and
      the
      written consent of the Subscribers. 

     

    (c) Counterparts/Execution.
      This
      Agreement may be executed in any number of counterparts and by the different
      signatories hereto on separate counterparts, each of which, when so executed,
      shall be deemed an original, but all such counterparts shall constitute but
      one
      and the same instrument. This Agreement may be executed by facsimile signature
      and delivered by facsimile transmission.

     

    (d) Law
      Governing this Agreement.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state and county of New York.
      The
      parties to this Agreement hereby irrevocably waive any objection to jurisdiction
      and venue of any action instituted hereunder and shall not assert any defense
      based on lack of jurisdiction or venue or based upon forum
      non conveniens.
      The
      parties executing this Agreement and other agreements referred to herein or
      delivered in connection herewith on behalf of the Company agree to submit to
      the
      in personam jurisdiction of such courts and hereby irrevocably waive trial
      by
      jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney's fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

     

    (e) Specific
      Enforcement, Consent to Jurisdiction.
      The
      Company and Subscriber acknowledge and agree that irreparable damage would
      occur
      in the event that any of the provisions of this Agreement were not performed
      in
      accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to seek an injunction
      or
      injunctions to prevent or cure breaches of the provisions of this Agreement
      and
      to enforce specifically the terms and provisions hereof, this being in addition
      to any other remedy to which any of them may be entitled by law or equity.
      Subject to Section 13(d) hereof, the Company hereby irrevocably waives, and
      agrees not to assert in any such suit, action or proceeding, any claim that
      it
      is not personally subject to the jurisdiction in New York of such court, that
      the suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of the suit, action or proceeding is improper. Nothing in this Section
      shall affect or limit any right to serve process in any other manner permitted
      by law.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (f) Independent
      Nature of Subscribers.  
        The
      Company acknowledges that the obligations of each Subscriber under the
      Transaction Documents are several and not joint with the obligations of any
      other Subscriber, and no Subscriber shall be responsible in any way for the
      performance of the obligations of any other Subscriber under the Transaction
      Documents. The
      Company acknowledges that each Subscriber has represented that the decision
      of
      each Subscriber to purchase Securities has been made by such Subscriber
      independently of any other Subscriber and independently of any information,
      materials, statements or opinions as to the business, affairs, operations,
      assets, properties, liabilities, results of operations, condition (financial
      or
      otherwise) or prospects of the Company which may have been made or given by
      any
      other Subscriber or by any agent or employee of any other Subscriber, and no
      Subscriber or any of its agents or employees shall have any liability to any
      Subscriber (or any other person) relating to or arising from any such
      information, materials, statements or opinions.  The
      Company acknowledges that nothing contained in any Transaction Document, and
      no
      action taken by any Subscriber pursuant hereto or thereto (including, but not
      limited to, the (i) inclusion of a Subscriber in the Registration Statement
      and
      (ii) review by, and consent to, such Registration Statement by a Subscriber)
      shall be deemed to constitute the Subscribers as a partnership, an association,
      a joint venture or any other kind of entity, or create a presumption that the
      Subscribers are in any way acting in concert or as a group with respect to
      such
      obligations or the transactions contemplated by the Transaction Documents. 
The Company acknowledges that each Subscriber shall be entitled to independently
      protect and enforce its rights, including without limitation, the rights arising
      out of the Transaction Documents, and it shall not be necessary for
      any other Subscriber to be joined as an additional party in any proceeding
      for
      such purpose.  The Company acknowledges that it has elected to provide all
      Subscribers with the same terms and Transaction Documents for the convenience
      of
      the Company and not because Company was required or requested to do so by the
      Subscribers.  The Company acknowledges that such procedure with respect to
      the Transaction Documents in no way creates a presumption that the Subscribers
      are in any way acting in concert or as a group with respect to the Transaction
      Documents or the transactions contemplated thereby.

     

    (g) Damages.
      In the
      event the Subscriber is entitled to receive any liquidated damages pursuant
      to
      the Transactions, the Subscriber may elect to receive the greater of actual
      damages or such liquidated damages.

     

    (h) Consent.
      As used
      in the Agreement, “consent of the Subscribers” or similar language means the
      consent of Subscribers holding a majority in interest of the Notes held by
      Subscribers. 

     

    (i) Equal
      Treatment.
      No
      consideration shall be offered or paid to any person to amend or consent to
      a
      waiver or modification of any provision of the Transaction Documents unless
      the
      same consideration is also offered and paid to all the Subscribers and their
      permitted successors and assigns.

     

    (j) Maximum
      Payments.
      Nothing
      contained herein or in any document referred to herein or delivered in
      connection herewith shall be deemed to establish or require the payment of
      a
      rate of interest or other charges in excess of the maximum permitted by
      applicable law. In the event that the rate of interest or dividends required
      to
      be paid or other charges hereunder exceed the maximum permitted by such law,
      any
      payments in excess of such maximum shall be credited against amounts owed by
      the
      Company to the Subscriber and thus refunded to the Company.

     

    (k) Calendar
      Days.
      All
      references to “days” in the Transaction Documents shall mean calendar days
      unless otherwise stated. The terms “business days” and “trading days” shall mean
      days that the New York Stock Exchange is open for trading for three or more
      hours. Time periods shall be determined as if the relevant action, calculation
      or time period were occurring in New York City.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    SIGNATURE
      PAGE TO SUBSCRIPTION AGREEMENT

     

    


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

     

    
      	 	 	 
	 	
              EVER-GLORY
                INTERNATIONAL GROUP, INC.

              
                a
                  Florida corporation

              

            
	 
 	 
 	 
 
	 	By:  	 
	 	 	
              

              Yi
                Hua Kang

              Chief
                Executive Officer

            
	 	 	 
	 	 	 
	 	
              Dated:
                August 2, 2007

            


       

       

       

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    


    SUBSCRIBER
      SIGNATURE PAGE

    


    


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

    


    


    Name
      of
      Purchaser:                     
__________________________________________________

    


    Signature
      of Authorized 

    Signatory
      of Purchaser:             
      __________________________________________________

    


    Name
      of
      Authorized Signatory:  __________________________________________________

    


    Title
      of
      Authorized Signatory:    __________________________________________________

    


    


    Facsimile
      Number of Subscriber: _________________________________

    


    Address
      for Notice of Subscriber:  

    


     

    


    Address
      for Delivery of Securities for Subscriber (if not same as above):

    


     

    Subscription
      Amount:       _____________

    


    Principal
      Amount:            
 _____________

    


    Class
      A
      Warrant Shares:  _____________

    


    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    


    LIST
      OF EXHIBITS AND SCHEDULES

     

    

      
        	
                Exhibit
                  A

              	
                Form
                  of Note

              
	 	 
	
                Exhibit
                  B

              	
                Form
                  of Class A Warrant

              
	 	 
	
                Exhibit
                  C

              	
                Escrow
                  Agreement

              
	 	 
	
                Exhibit
                  D

              	
                Form
                  of Security Agreement

              
	 	 
	
                Exhibit
                  E

              	
                Form
                  of Stock Pledge Agreement

              
	 	 
	
                Exhibit
                  F 

              	
                Form
                  of Collateral Agent Agreement

              
	 	 
	
                Exhibit
                  G

              	
                Form
                  of Legal Opinion

              
	 	 
	
                Exhibit
                  H

              	
                Form
                  of Lockup Agreement

              
	 	 
	
                Exhibit
                  I

              	
                Copy
                  of Option

              
	 	 
	
                Exhibit
                  J

              	
                Form
                  of Non-Compete Agreement

              
	 	 
	
                Schedule
                  5(a)

              	
                Subsidiaries

              
	 	 
	
                Schedule
                  5(d)

              	
                Additional
                  Issuances / Capitalization / Reset Rights

              
	 	 
	
                Schedule
                  5(o)

              	
                Undisclosed
                  Liabilities

              
	 	 
	
                Schedule
                  5(x)

              	
                Transfer
                  Agent

              
	 	 
	
                Schedule
                  8(a)

              	
                Brokerage
                  Fee

              
	 	 
	
                Schedule
                  9(e)

              	
                Use
                  of Proceeds

              
	 	 
	
                Schedule
                  9(t)

              	
                Person
                  signing a Lockup Agreement

              
	 	 
	
                Schedule
                  9(v)

              	
                Persons
                  signing a Non-Compete Agreement 

              
	 	 
	
                Schedule
                  11.1

              	
                Other
                  Registrable Securities

              


      

    

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    


    SCHEDULES
      TO SUBSCRIPTION AGREEMENT

    


    


    Schedule
      5(a)

     

    
 

    
      	Name of Company  	State
              of Incorporation  
	 	 
	Perfect Dream Limited	British
              Virgin Islands 
	Nanjing New-Taliun Garments Company
              Limited 	China
	Goldenway Nanjing Garments Company
              limited       	China


    

     

    


    Schedule
      5(d)

    


    The
      Company agreed to issue 20,830,000 shares of common stock (in addition to cash
      consideration) to Ever-Glory Enterprises (HK) Ltd, a British Virgin Islands
      corporation (“Seller”) in connection with the acquisition, through its wholly
      owned subsidiary, Perfect Dream Ltd, a British Virgin Islands corporation
      (“Perfect Dream”), of all of the Seller’s interest in Nanjing New-Tailun
      Garments Co, Ltd, a Chinese limited liability company (“New-Tailun”) pursuant to
      an Agreement for the Purchase and Sale of Stock (the “Agreement”) with the
      Seller pursuant to which Company has agreed to acquire and Seller has agreed
      to
      sell all of the Seller’s interest in New-Tailun. Further details concerning this
      acquisition are available in the Company’s current report on Form 8-K filed with
      SEC on November 13, 2006, in addition to the Company’s other filings with the
      SEC. 

    


    In
      connection with the Company’s acquisition of Nanjing
      Catch-Luck Garments Co, Ltd., a Chinese limited liability company (“Catch-Luck”)
      by Perfect Dream, Ltd., a British Virgin Island company (“Perfect Dream”), a
      wholly-owned subsidiary of the Company, pursuant to the terms of an Agreement
      for the Purchase and Sale of Stock (the “Purchase Agreement”), dated June 26,
      2006, by and among the Company, Perfect Dream, Ever-Glory Enterprises (HK)
      Ltd.,
      a British Virgin Islands company and Catch-Luck, the Company agreed in addition
      to the payment of cash consideration, to issue a total of $9.4 million dollars
      of its common stock (subject to the satisfaction of certain conditions), based
      on the preceding 30-day average of the high bid and the low ask price for the
      Company’s shares as quoted on the Over-the-Counter Bulletin Board as of the
      Closing of the acquisition. Further details concerning this acquisition are
      available in the Company’s current
      report on Form 8-K filed with SEC on July 29, 2006, in addition to the Company’s
      other filings with the SEC. 

    


     

    Schedule
      5(o)

     

    None.
      

    


    Schedule
      5(x)

    


    Holladay
      Stock Transfer, Inc. 

    2939
      N.
      67th Place Scottsdale, AZ 85251

    Telephone:
      (480) 481-3940 

    Fax
      number: (480) 481-3941

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    


    Schedule
      8(a)

    


    The
      Company will pay, upon Closing, a commission of USD $126,000, plus USD$15,000
      in
      reimbursement of expenses, to E-Tech Securities, Inc.

    


    The
      Company will pay, upon Closing, a finder’s commission of USD $54,000 to Sino
      Venture Group LLC.

    


    


    Schedule
      9(e)

    


    The
      total
      net proceeds received by the Company resulting from the issuance of securities
      pursuant to the Subscription Agreement dated July 26, 2007 shall be used for
      the
      following purposes: 

    


    
      	A.  	
              The
                Company shall engage a law firm to serve as corporate counsel to
                the
                Company reasonably acceptable to the Subscribers, which the parties
                agree
                may include (i) Richardson & Patel LLP and/or (ii) Crone Rozymko LLP.
                

            


    

    


    
      	B.  	
              The
                Company shall engage an auditing firm reasonably acceptable to the
                Subscribers, which shall include a firm to be identified by the Company
                that is PCAOB certified and well qualified to audit U.S. public reporting
                companies. 

            


    

    


    
      	C.  	
              The
                Company shall engage CCG Investor Relations or a similar investor
                relations firm. 

            


    

    


    
      	D.  	
              The
                Company shall use a portion of the funds to establish a U.S. branch
                office
                and hire full time executive level personnel, to among other objectives,
                enhance the Company’s presence in the financial and other markets.
                

            


    

     

    


    Schedule
      9(t)

    


    Mr.
      Yihua
      Kang

    


    Schedule
      9(v)

    


    Mr.
      Yihua
      Kang

    


    Schedule
      11.1

    


    Securities
      of the Company issued in connection with a bona fide underwritten public
      offering resulting in gross proceeds to the Company in excess of USD $5,000,000.
      

    


    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    


    EXHIBIT
      G

    LOCKUP
      AGREEMENT

    


    This
      AGREEMENT (the “Agreement”) is made as of the ____ day of July, 2007, by ______
      (“Holder”), in connection with his ownership of shares of Ever-Glory
      International Group, Inc.,
      a
      Florida
      corporation (the “Company”).

    


    NOW,
      THEREFORE, for good and valuable consideration, the sufficiency and receipt
      of
      which consideration are hereby acknowledged, Holder agrees as
      follows:

    


    1. Background.

    


    a.
       Holder
      is
      the beneficial owner of the amount of shares of the Common Stock, $.0001 par
      value, of the Company (“Common Stock”) designated on the signature page
      hereto.

    


    b. Holder
      acknowledges that the Company has entered into or will enter into at or about
      the date hereof agreements with subscribers to the Company’s Notes, some of
      which are convertible into Common Stock (“Notes”) and Warrants (the
“Subscribers”). Holder understands that, as a condition to proceeding with the
      Offering, the Subscribers have required, and the Company has agreed to obtain
      on
      behalf of the Subscribers an agreement from the Holder to refrain from selling
      any securities of the Company from the date of the Subscription Agreement until
      one year after the Closing Date (as defined in the Subscription Agreement)
      (the
“Restriction Period”). 

    


    2. Share
      Restriction. 

    


    a. Holder
      hereby agrees that during the Restriction Period, the Holder will not sell
      or
      otherwise dispose of any shares of Common Stock or any options, warrants or
      other rights to purchase shares of Common Stock or any other security of the
      Company which Holder owns or has a right to acquire as of the date hereof,
      other
      than in connection with an offer made to all shareholders of the Company in
      connection with merger, consolidation or similar transaction involving the
      Company. Holder further agrees that the Company is authorized to and the Company
      agrees to place “stop orders” on its books to prevent any transfer of shares of
      Common Stock or other securities of the Company held by Holder in violation
      of
      this Agreement. The Company agrees not to allow to occur any transaction
      inconsistent with this Agreement.

    


    b. Any
      subsequent issuance to and/or acquisition by Holder of Common Stock or options
      or instruments convertible into Common Stock will be subject to the provisions
      of this Agreement.

    


    c. Notwithstanding
      the foregoing restrictions on transfer, the Holder may, at any time and from
      time to time during the Restriction Period, transfer the Common Stock (i) as
      bona fide gifts or transfers by will or intestacy, (ii) to any trust for the
      direct or indirect benefit of the undersigned or the immediate family of the
      Holder, provided that any such transfer shall not involve a disposition for
      value, (iii) to a partnership which is the general partner of a partnership
      of
      which the Holder is a general partner, provided, that, in the case of any gift
      or transfer described in clauses (i), (ii) or (iii), each donee or transferee
      agrees in writing to be bound by the terms and conditions contained herein
      in
      the same manner as such terms and conditions apply to the undersigned. For
      purposes hereof, “immediate family” means any relationship by blood, marriage or
      adoption, not more remote than first cousin.

    


    3. Miscellaneous.

    


    a. At
      any
      time, and from time to time, after the signing of this Agreement Holder will
      execute such additional instruments and take such action as may be reasonably
      requested by the Subscribers to carry out the intent and purposes of this
      Agreement.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    b. This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York without regard to principles of conflicts of laws. Any action
      brought by either party against the other concerning the transactions
      contemplated by this Agreement shall be brought only in the state courts of
      New
      York or in the federal courts located in the state of New York. The parties
      to
      this Agreement hereby irrevocably waive any objection to jurisdiction and venue
      of any action instituted hereunder and shall not assert any defense based on
      lack of jurisdiction or venue or based upon forum
      non conveniens.
      The
      parties executing this Agreement and other agreements referred to herein or
      delivered in connection herewith agree to submit to the in personam jurisdiction
      of such courts and hereby irrevocably waive trial by jury.
      The
      prevailing party shall be entitled to recover from the other party its
      reasonable attorney's fees and costs. In the event that any provision of this
      Agreement or any other agreement delivered in connection herewith is invalid
      or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

    


    c. The
      restrictions on transfer described in this Agreement are in addition to and
      cumulative with any other restrictions on transfer otherwise agreed to by the
      Holder or to which the Holder is subject to by applicable law.

    


    d. This
      Agreement shall be binding upon Holder, its legal representatives, successors
      and assigns.

    


    e. This
      Agreement may be signed and delivered by facsimile and such facsimile signed
      and
      delivered shall be enforceable.

    


    f.
      The
      Company agrees not to take any action or allow any act to be taken which would
      be inconsistent with this Agreement.

    


    g.
      The
      Holder acknowledges that this Lockup Agreement is being entered into for the
      benefit of the Subscribers identified in the Subscription Agreement dated August
      2, 2007 between the Company and the Subscribers, may be enforced by the
      Subscribers and may not be amended without the consent of the Subscriber, which
      may be withheld for any reason.

    


    h.
      In
      the
      event that the Holder is required by an underwriter to enter into a lockup
      agreement in connection with an underwritten public offering of the Company
      (“Underwriter Lockup”), this Lockup Agreement shall be superseded by the
      Underwriter Lockup upon entry into the Underwriter Lockup, provided that the
      restrictions under such Underwriter Lockup shall not lapse prior to the end
      of
      the Restriction Period set forth in this Lockup Agreement. If the Underwriter
      Lockup lapses prior to the end of the Restriction Period, this Lockup Agreement
      shall once again be enforceable until the end of the Restriction
      Period.

    


    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, and intending to be legally bound hereby, Holder has executed
      this Agreement as of the day and year first above written.

    


    HOLDER:

    


    ________________________________

    (Signature
      of Holder) 

    


    ________________________________

    (Print
      Name of Holder)    

    


          ________________________________

    Number
      of
      Shares of Common Stock

    Beneficially
      Owned

    


    


    


    


    COMPANY:

    


    EVER-GLORY
      INTERNATIONAL GROUP, INC.

    


    By:______________________________

    Yi
      Hua
      Kang

    Chief
      Executive Officer

     

    
      
        
        

      

      
        37