SUPPLEMENTARY
      AGREEMENT

     

    This
      SUPPLEMENTARY AGREEMENT (this “Agreement”) is made and entered into effective as
      of January 20, 2006 (the “Effective Date”) with reference to original agreement
      dated on November 2, 2004 (the “Original”), as amended by the supplementary
      agreement dated June 22, 2005 (the “Amendment”) by and between New Dragon Asia
      Corp., a Florida corporation (the “Company”) and Peter Mak, an individual
      (“Executive” and, together with the Company, the “Parties”).

     

    NOW,
      THEREFORE, in consideration of the various covenants and agreements hereinafter
      set forth, the Parties hereto agree to the supplementary clauses as
      follows:

     

    1.  Term.
      The
      Company hereby employs Executive, and Executive hereby accepts employment with
      the Company, for a term extending until December 31, 2008 (the “Term”) amending
      such term as reference to the clause No. 1 of the Original and subsequently
      amended by clause 1 of the Amendment. 

     

    2.  Stock
      Options.
      As of
      the Effective Date of this Agreement, the Company hereby grants to Executive
      the
      right to purchase additional 2,000,000 shares of the Common Stock at an exercise
      price of US$1.60 (the “Options”). The term of the Options is for a period of six
      years. The Options granted hereunder shall be fully vested and immediately
      exercisable according to the terms hereof at such times and under such
      conditions set forth in Exhibit A hereto.

     

    3.  Governing
      Law.
      This
      Agreement shall be construed in accordance with and governed by the laws of
      the
      People’s Republic of China.

     

    4.  Notices.
      Any
      notice required or permitted to be given hereunder shall be given in writing
      and
      may be given by telex, telegram, facsimile transmission or similar method if
      confirmed by mail as herein provided and addressed as follows:

    
      	
               

              If
                to the Company:

            	
               

              New
                Dragon Asia Corp.

              Suite
                2808, International Chamber of Commerce Tower

              Fuhua
                Three Road,

              Shenzhen,
                PRC, 518048

              Telephone:
                86-755-8831-2115

               

            
	
              With
                a copy to:

            	
              Loeb
                & Loeb LLP

              345
                Park Avenue

              New
                York, NY 10154-0037

              Attention:
                Mitchell S. Nussbaum

              Telephone:
                (212) 407-4159

              Fax:
                (212) 407-4990

               

            
	
              If
                to Executive:

            	
              Peter
                Mak

              Flat
                A, 17/F, Block 1

              East
                Ocean Garden

              Shenzhen,
                PRC

              Telephone:
                86-1382 3680 228

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.  Counterparts.
      This
      Agreement may be executed in two counterparts, and by different parties hereto
      in separate counterparts, each of which when executed shall be deemed to be
      an
      original but all of which taken together shall constitute one and the same
      agreement.

     

    6.  Version.
      The
      English version of this Agreement is the translation of Chinese version. Should
      there be any discrepancy between both versions, the Chinese version shall
      prevail.

     

    IN
      WITNESS WHEREOF, each of the Parties hereto has duly executed this Agreement
      as
      of the date and year first above written.

     

    NEW
      DRAGON ASIA CORPORATION

     

     

    By:
      /s/ Heng Jing
      LU                                                 


    Name:
      Heng Jing LU

    Title:
      Chairman

     

    


     

    /s/ Peter
      Mak                                                               


    Peter
      Mak, an individual

    


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



     

    EXHIBIT
      A

     

    NON-QUALIFIED
      STOCK OPTION TERMS

     

    Pursuant
      to the Supplementary Agreement, New Dragon Asia Corporation (the “Company”) has
      granted the Executive a stock option (“Option”) to purchase 2,000,000 shares of
      the Company’s “Common Stock.” The Option shall be subject by the following terms
      and conditions:

     

    1.  Grant
      Date.
      The
“Grant Date” shall be January 20, 2006. 

     

    2.  Exercise
      Price.
      The
“Exercise Price” shall be $1.60 in United States currency subject to adjustment
      under Sections 9 and 10 of this Exhibit A.

     

    3.  Vesting.
      Subject
      to the limitations contained herein, the Option shall be fully vested as of
      the
      date the Option is approved by the shareholders pursuant to Section 11 of this
      Exhibit A.

     

    4.  Method
      of Payment.
      The
      consideration to be paid for the shares to be issued upon exercise of the
      Option, may consist of (1) cash, (2) check, (3) with the consent of
      the Board or Directors of the Company (“Board”) and to the extent consistent
      with Applicable Laws, a full recourse promissory note bearing interest (at
      no
      less than such rate as shall then preclude the imputation of interest under
      the
      Internal Revenue Code) and payable upon such terms as may be prescribed by
      the
      Board, (4) other Company shares which (x) in the case of shares
      acquired from the Company, have been owned by the Executive for more than six
      (6) months on the date of surrender, and (y) have a fair market value on
      the date of surrender equal to the aggregate exercise price of the shares as
      to
      which such Option shall be exercised, (5) surrendered Shares then issuable
      upon exercise of the Option having a fair market value on the date of exercise
      equal to the aggregate exercise price of the Option or exercised portion
      thereof, (6) property of any kind which constitutes good and valuable
      consideration, (7) to the extent consistent with applicable laws, delivery
      of a notice that the Executive has placed a market sell order with a broker
      with
      respect to Shares then issuable upon exercise of the Options and that the broker
      has been directed to pay a sufficient portion of the net proceeds of the sale
      to
      the Company in satisfaction of the Option exercise price, provided,
      that
      payment of such proceeds is then made to the Company upon settlement of such
      sale, or (8) any combination of the foregoing methods of
      payment.

     

    5.  
      Securities Law Compliance.
      Notwithstanding anything to the contrary contained herein, the Option may not
      be
      exercised unless the shares of Common Stock issuable upon such exercise are
      then
      registered under applicable securities laws or, if such shares of Common Stock
      are not then so registered, the Company has determined that such exercise and
      issuance would be exempt from the registration requirements of applicable
      securities laws. The exercise of the Option must also comply with other
      applicable laws and regulations governing the Option, and may not be exercised
      if the Company determines that such exercise would not be in material compliance
      with such laws and regulations.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    6.  Term.
      Subject
      to the provisions of this Exhibit A, the Option may be exercised for whole
      shares of Common Stock at any time after vesting and prior to the earliest
      to
      occur of:

     

    6.1  three
      (3)
      months after the termination of the Executive’s employment for any reason other
      than death or Disability; 

     

    6.2  twelve
      (12) months after the Executive’s termination of employment due to Disability or
      death; 

     

    6.3  six
      (6)
      years from the Grant Date.

     

    Notwithstanding
      the foregoing, if the exercise of the Option is prevented within the applicable
      time periods set forth in Sections 6(a) or (b) is prevented for any reason,
      your
      Option shall not expire before the date that is thirty (30) days after the
      date
      that you are notified by the Company that the Option is again exercisable,
      but
      in any event no later than the “Expiration Date” indicated in Section
      6(c).

     

    7.  Exercise
      Procedures.
      The
      Option may be exercised after vesting and during its term by delivering of
      a
“Notice of Exercise” (in a form designated by the Company) together with the
      Exercise Price to the Secretary of the Company, or to such other person as
      the
      Company may designate, during regular business hours, together with such
      additional documents as the Company may then reasonably require. By exercising
      the Option, the Executive agrees that, as a condition of exercise, the Company
      may require the Executive to enter into an arrangement providing for the payment
      to the Company of any tax withholding obligation of the Company arising by
      reason of exercise of your Option or other applicable events.

     

    8.  Limitations
      on Transfer of Options.
      The
      Option is not transferable, except by will or by the laws of descent and
      distribution, and is exercisable during the Executive’s life only by the
      Executive. By delivering written notice to the Company, in a form satisfactory
      to the Company, the Executive may designate a third party who, in the event
      of
      the Executive’s death, shall thereafter be entitled to exercise the
      Option.

     

    9.  Subdivision
      or Consolidation.
      Subject
      to any required action by shareholders of the Company, the number of shares
      of
      Common Stock covered by the Option SAR, and the Exercise Price thereof, shall
      be
      proportionately adjusted for any increase or decrease in the number of issued
      shares of Common Stock of the Company resulting from a subdivision or
      consolidation of shares, including, but not limited to, a stock split, reverse
      stock split, recapitalization, continuation or reclassification, or the payment
      of a stock dividend or any other increase or decrease in the number of such
      shares effected without receipt of consideration by the Company. Any fraction
      of
      a share subject to the Option that would otherwise result from an adjustment
      pursuant to this Section shall be rounded upward to the next full number of
      shares without other compensation or consideration to the Executive

     

    10.  Capital
      Transactions.
      Upon a
      sale or exchange of all or substantially all of the assets of the Company,
      a
      merger or consolidation in which the Company is not the surviving corporation,
      a
      merger, reorganization or consolidation in which the Company is the surviving
      corporation and shareholders of the Company exchange their stock for securities
      or property, a liquidation of the Company or similar transaction, the Board,
      in
      its sole discretion, is hereby authorized to take any one or more of the
      following actions it determines is appropriate in order to prevent dilution
      or
      enlargement of the benefits or potential benefits intended by the Company with
      respect to the Option or to facilitate such transaction or event:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)  To
      provide for either the purchase of any the Option for an amount of cash equal
      to
      the amount that could have been obtained upon the exercise of such Option or
      the
      replacement of such Option with other rights or property selected by the Board
      in its sole discretion and in compliance with applicable laws;

     

    (b)  To
      provide that such Option shall be exercisable as to all shares covered thereby,
      notwithstanding anything to the contrary herein;

     

    (c)  To
      provide that such Option be assumed by the successor or survivor corporation,
      or
      a parent or subsidiary thereof, or shall be substituted for by similar options,
      rights or awards covering the stock of the successor or survivor corporation,
      or
      a parent or subsidiary thereof, with appropriate adjustments as to the number
      and kind of shares and prices;

     

    (d)  To
      make
      adjustments in the number and type of shares of Common Stock (or other
      securities or property) subject to the Option and/or in the terms and conditions
      of (including the Exercise Price) of the Option; or

     

    (e)  To
      provide that immediately upon the consummation of such event, such Option shall
      not be exercisable and shall terminate; provided,
      that
      for a specified period of time prior to such event, such Option shall be
      exercisable as to all shares covered thereby, notwithstanding anything to the
      contrary herein.

     

    11.  Shareholder
      Approval.
      The
      Supplementary Agreement including the Option and this Exhibit shall be submitted
      for the approval of the Company’s shareholders within twelve (12) months after
      the Grant Date to comply with Section 711 of the Amex Company Guide. The Option
      shall not vest or be exercisable prior to the time when the Plan is approved
      by
      the shareholders, and if such approval has not been obtained at the end of
      said
      twelve-month period, the Option shall thereupon be canceled and become null
      and
      void.