Unassociated Document


    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of December 24, 2007, by and among Discovery
      Technologies, Inc. a Nevada corporation,
      and all
      predecessors thereof
      (the
“Company”),
      Green
      Agriculture Holding Corporation, a New Jersey corporation (“Green”), Shaanxi
      TechTeam Jinong Humic Acid Product Co., Ltd., a company organized under the
      laws
      of the People’s Republic of China, and all predecessors thereof (“WOFE”),
      and
      the investors identified on the signature pages hereto (each, an “Investor”
      and
      collectively, the “Investors”).
      

     

    RECITALS:

     

    WHEREAS,
      as of the Closing Date the Company is entering into a Share Exchange
      Agreement,
      dated
      as of the date hereof
      (the
“Exchange
      Agreement”)
      with
      Green and the owners of 100% of the outstanding capital stock of Green
      (“Green
      Shareholders”),
      pursuant to which the Company will, subject to the terms and conditions thereof,
      acquire all of the outstanding capital stock of Green, in exchange for Common
      Stock (as defined below) under the Exchange Agreement and immediately prior
      to
      the Closing under this Agreement (the “Exchange”).

     

    WHEREAS,
      the closing of the Exchange is conditioned, among other things, on the
      consummation of the financing contemplated by this Agreement immediately
      thereafter.

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      exemptions from registration under the Securities Act (as defined below), the
      Company desires to issue and sell to each Investor, and each Investor, severally
      and not jointly, desires to purchase from the Company, shares of the Company’s
      Common Stock, as more fully described in this Agreement.

     

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

     

    ARTICLE
      1.

    DEFINITIONS

     

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

     

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

     

    “2009
      Make Good Shares” means
      the
      following, as
      equitably adjusted for any stock splits, stock combinations, stock dividends
      or
      similar transactions:
      the
      Shares times 50%.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “2009
      Annual
      Report”
      means
      the
      Annual Report on Form 10-KSB or appropriate form pursuant to the then effective
      rules under the Exchange Act of the Company for the fiscal year ending June
      30,
      2009, as filed with the Commission.

     

    “2009
      Guaranteed
      EPS” means
      ninety three percent of the 2009 Guaranteed ATNI divided by the Closing
      Outstanding Shares (as
      may
      be equitably adjusted for any stock splits, stock combinations, stock dividends
      or similar transactions):

     

    2009
      Guaranteed ATNI × 93%

    Closing
      Outstanding Shares

    


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

     

    “Affiliate”
      means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person, as such
      terms are used in and construed under Rule 405 under the Securities
      Act.

     

    “After
      Tax Net Income”
      shall
      have the meaning set forth in Section 4.11.

     

    “Available
      Undersubscription Amount”
      has the
      meaning set forth in Section 4.15(c).

     

    “Basic
      Amount”
has
      the
      meaning set forth in Section 4.15(b).

     

    “Board
      Holdback Escrow
      Amount”
      has the
      meaning set forth in section 4.12. 

     

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

     

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

     

    “CFO
      Holdback Escrow
      Amount” has
      the
      meaning set forth in section 4.16.

     

    “Circular
      75” means Notice
      on
      Relevant Issues of PRC State Administration of Foreign Exchange (“SAFE”)
      concerning Foreign Exchange Administration for Domestic Residents to Engage
      in
      Financing and Round-trip Investment via Overseas Special Purpose Companies
      promulgated by SAFE on October 21, 2005 and effective from November 1,
      2005.

     

    “Circular
      106”
      means
      the implementation guidance to Circular 75 promulgated by SAFE on May 29, 2007
      and effective from June 11, 2007. 

     

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

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

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

     

    "Closing
      Escrow Agreement"
      means
      the Escrow Agreement, dated as of the date hereof, by
      and
among
      the
      Company, the Investors and Escrow Agent in the form of Exhibit
      A
      hereto. 

     

    “Closing
      Outstanding Shares”
      means
      the number of shares of Common Stock outstanding immediately following the
      Closing. 

     

    “Commission”
      means
      the Securities and Exchange Commission.

     

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

     

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

     

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

     

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

     

     “Company
      U.S. Counsel”
      means
      Guzov Ofsink, LLC.

     

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

     

    “Compliance
      Notice Date”
      has the
      meaning set forth in Section 4.21.

     

    “Compliance
      Period”
      has the
      meaning set forth in Section 4.21.

     

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

     

    “Earnings
      Per Share” shall
      have the meaning set forth in Section 4.11.

     

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

     

    “Escrow
      Agent” shall
      mean Tri-State
      Title & Escrow, LLC and any successor thereto or replacement
      thereof.

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

    “FCPA”
      shall
      have the meaning set forth in Section 3.1(cc). 

     

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

     

    “Green”
      has the
      meaning set forth in the preamble to this Agreement.

     

    “Holdback
      Escrow Agreement” means
      Holdback Escrow Agreement, dated as of the date hereof, by
      and
among
      the
      Company, the Investors and Escrow Agent in the form of Exhibit
      B
      hereto.

     

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

     

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

     

    “Investment
      Amount”
      means,
      with respect to each Investor, the Investment Amount indicated on such
      Investor’s signature page to this Agreement.

     

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

     

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

     

    “IR
      Holdback Escrow
      Amount”
      has the
      meaning set forth in Section 4.13.

     

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

     

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


     

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

     

    “Make
      Good Escrow Agreement” means
      the
      Make Good Escrow Agreement, dated as of the date hereof, among the Company,
      the
      Make Good Escrow Agent, the Make Good Pledgor
      and the
      Investors, in the form of Exhibit
      D
      hereto.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    “Make
      Good Escrow Agent” shall
      mean Tri-State
      Title & Escrow, LLC and any successor thereto or replacement thereof.


     

    “Make
      Good Pledgor” means
      Mr.
      Yinshing David To. 

     

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

     

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

     

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

     

    “Notice
      of Acceptance”
      has the
      meaning set forth in Section 4.15(c).

     

    “Notice”
      has the
      meaning set forth in Section 4.21.

     

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

     

    “Offer”
has
      the
      meaning set forth in Section 4.15(b).

     

    “Offer
      Notice”
has
      the
      meaning set forth in Section 4.15(b).

     

    “Offer
      Period”
      has the
      meaning set forth in Section 4.15(c).

     

    “Offered
      Securities”
has
      the
      meaning set forth in Section 4.15(b).

     

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

     

    “Per
      Share Purchase Price”
      means
      $3.25. 

     

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

     

    “Pinnacle”
      means
      Pinnacle China Fund, L.P.

     

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

     

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

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    “Refused
      Securities”
      has the
      meaning set forth in Section 4.15(d).

     

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

     

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

     

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

     

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

     

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

     

    “September
      8 Merger and Acquisition Rules”
means
      Rules on Acquisition of Domestic Enterprises by Foreign Investors jointly
      promulgated by six ministries in PRC including PRC Ministry of Commerce and
      SAFE
      on August 8, 2006 and effective from September 8, 2006. 

     

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

     

    “Shares”
      means
      the shares of Common Stock being offered and sold to the Investors by the
      Company hereunder.

     

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

     

    “Subsequent
      Placement”
has
      the
      meaning set forth in Section 4.15(a).

     

    “Subsequent
      Placement Agreement”
has
      the
      meaning set forth in Section 4.15(d).

     

    “Subsidiary”
      of any
      Person means any “significant subsidiary” as defined in Rule 1-02(w) of the
      Regulation S-X promulgated by the Commission under the Exchange Act of such
      Person. The term “Subsidiaries” shall be deemed to include Green and WOFE and
      their respective subsidiaries as if the Exchange shall have been consummated
      as
      of the time of the execution of this Agreement, with the effect that all
      references to Subsidiaries of the Company in this Agreement shall also refer
      to
      Green, WOFE and their respective subsidiaries.

     

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

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

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

     

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

     

    “Undersubscription
      Amount”
has
      the
      meaning set forth in Section 4.15(b).

     

    “WOFE”
      has the
      meaning specified in the preamble of this Agreement.

     

    “WOFE
      Financial Statements”
has
      the
      meaning set forth in Section 5.1(e).

     

     

    ARTICLE
      2.

    PURCHASE
      AND SALE

     

    2.1.  Closing.
      Subject
      to the terms and conditions set forth in this Agreement, at the Closing the
      Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, the Shares representing
      such Investor’s Investment Amount. The Closing shall take place at the offices
      of Guzov Ofsink, LLC, 600 Madison, 14th
      Floor,
      New York, NY 10022 on the Closing Date or at such other location or time as
      the
      parties may agree.

     

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

     

    (i)  a
      single
      certificate representing that number of aggregate Shares to be issued and sold
      at Closing to such Investor, determined under Section 2.1(a), registered in
      the
      name of such Investor; 

     

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

     

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

     

    
      
         

      

      
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    (iv)  the
      Make
      Good Escrow Agreement, duly executed by the Company and the Escrow
      Agent;

     

    (v)  the
      legal
      opinion of Company U.S. Counsel, in agreed form, addressed to the Investors;
      

     

    (vi)  the
      legal
      opinion of special PRC counsel to WOFE, in agreed form, addressed to the
      Investors; 

     

    (vii)  the
      Registration Rights Agreement, duly executed by the Company;

     

    (viii)  the
      Lockup Agreement, duly executed by each party thereto.

     

    (b)  At
      the
      Closing, each Investor shall deliver or cause to be delivered the following
      (collectively, the “Investors
      Deliverables”):

     

    (i)  to
      the
      Company, the Closing Escrow Agreement, duly executed by such
      Investor;

     

    (ii)  to
      the
      Company, the Holdback Escrow Agreement, duly executed by such
      Investor;

     

    (iii)  to
      the
      Company, the Registration Rights Agreement, duly executed by such Investor;
      and

     

    (iv)  to
      the
      Company, the Make Good Escrow Agreement, duly executed by such
      Investor.

     

    (c)  Within
      one Business Day following the date of this Agreement, each Investor shall
      cause
      to be delivered to the Escrow Agent, its Investment Amount, in United States
      dollars and in immediately available funds, by wire transfer to an account
      designated for such purpose in accordance with the terms of the Closing Escrow
      Agreement.

     

     

    ARTICLE
      3.

    REPRESENTATIONS
      AND WARRANTIES

     

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

     

    (a)  Subsidiaries.
      Except as disclosed on Schedule 3.1 (a) none of the Existing Company Entities
      have any direct or indirect Subsidiaries. Except as disclosed in Schedule
      3.1(a), (i) the Company owns, directly or indirectly, all of the capital stock
      of each other Existing Company Entity, and each other Existing Company Entity
      owns, directly or indirectly, all of the capital stock of its respective
      Subsidiaries, in each case free and clear of any and all Liens, and (ii) all
      the
      issued and outstanding shares of capital stock of each Subsidiary are validly
      issued and are fully paid, non-assessable and free of any and all Liens. As
      of
      the Closing, the Company shall own 100% of the capital stock of Green and Green
      shall own 100% of the capital stock of WOFE, in each case free and clear of
      all
      Liens. Prior to the Closing Green Shareholders own 100% of the capital stock
      of
      Green free and clear of all Liens. Prior to the Closing Green is the owner
      of
      100% of the capital stock of WOFE, subject to the full payment of the purchase
      price of the WOFE. 

     

    
      
         

      

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

     

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

     

    
      
         

      

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

     

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

     

    (f)  Issuance
      of the Shares. The Shares have been duly authorized and, when issued and paid
      for in accordance with the Transaction Documents, will be duly and validly
      issued, fully paid and nonassessable, free and clear of any and all Liens.
      The
      Company has reserved from its duly authorized capital stock the shares of Common
      Stock issuable pursuant to this Agreement in order to issue the Shares.


     

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

     

    
      
         

      

      
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    (h)  SEC
      Reports; Financial Statements. The Company has filed all reports required to
      be
      filed by it under the Securities Act and the Exchange Act, including pursuant
      to
      Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof
      (or such shorter period as the Company was required by law to file such
      reports), including, for this purpose, the current report on Form 8-K that
      is
      being filed by the Company on or about the date hereof to disclose the
      transactions contemplated hereby and by the Exchange Agreement (the foregoing
      materials being collectively referred to herein as the “SEC
      Reports”
      and,
      together with the Schedules to this Agreement (if any), the “Disclosure
      Materials”)
      on a
      timely basis or has timely filed a valid extension of such time of filing and
      has filed any such SEC Reports prior to the expiration of any such extension.
      As
      of their respective dates, the SEC Reports complied in all material respects
      with the requirements of the Securities Act and the Exchange Act and the rules
      and regulations of the Commission promulgated thereunder, and none of the SEC
      Reports, when filed, contained any untrue statement of a material fact or
      omitted to state a material fact required to be stated therein or necessary
      in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company and
      each
      Subsidiary included in the SEC Reports comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with GAAP applied on
      a
      consistent basis during the periods involved, except as may be otherwise
      specified in such financial statements or the notes thereto, and fairly present
      in all material respects the financial position of the Company and its
      consolidated Subsidiaries as of and for the dates thereof and the results of
      operations and cash flows for the periods then ended, subject, in the case
      of
      unaudited statements, to normal, immaterial, year-end audit adjustments. The
      WOFE Financial Statements comply in all material respects with applicable
      accounting requirements and the rules and regulations of the Commission with
      respect thereto as in effect at the time of filing. The WOFE Financial
      Statements have been prepared in accordance with GAAP applied on a consistent
      basis during the periods involved, except as may be otherwise specified in
      such
      financial statements or the notes thereto, and fairly present in all material
      respects the financial position of WOFE and its consolidated Subsidiaries as
      of
      and for the dates thereof and the results of operations and cash flows for
      the
      periods then ended, subject, in the case of unaudited statements, to normal,
      immaterial, year-end audit adjustments.

     

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

     

    
      
         

      

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

     

    (k)  Litigation.
      There is no Action which (i) adversely affects or challenges the legality,
      validity or enforceability of any of the Transaction Documents, the Exchange
      Agreement or the Shares or (ii) except as specifically disclosed in the SEC
      Reports, could, if there were an unfavorable decision, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse
      Effect. No Existing Company Entity, nor any director or officer thereof (in
      his
      or her capacity as such), is or has been the subject of any Action involving
      a
      claim of violation of or liability under federal or state securities laws or
      a
      claim of breach of fiduciary duty, except as specifically disclosed in the
      SEC
      Reports. There has not been, and to the knowledge of the Existing Company
      Entities, there is not any pending investigation by or before the Commission
      or
      any other court, arbitrator, governmental or administrative agency, regulatory
      or self regulatory authority (federal, state, county, local or foreign), stock
      market, stock exchange or trading facility involving any Existing Company Entity
      or any of their respective current or former directors or officers (in his
      or
      her capacity as such). The Commission has not issued any stop order or other
      order suspending the effectiveness of any registration statement filed by the
      Company or any Subsidiary under the Exchange Act or the Securities
      Act.

     

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

     

    (m)  Indebtedness;
      Compliance. Except as disclosed on Schedule 3.1(m), no Existing Company Entity
      is a party to any indenture, debt, loan or credit agreement by which it or
      any
      of its properties is bound. WOFE has no and as of the Closing will not have
      any
      liabilities of any nature, contingent or otherwise. No Existing Company Entity
      (i) is in default under or in violation of (and no event has occurred that
      has
      not been waived that, with notice or lapse of time or both, would result in
      a
      default by such Existing Company Entity under), nor has any Existing Company
      Entity received notice of a claim that it is in default under or that it is
      in
      violation of, any indenture, loan or credit agreement or any other agreement
      or
      instrument to which it is a party or by which it or
      any of
      its properties is bound (whether
      or not such default or violation has been waived), (ii) is in violation of
      any
      court, arbitrator, governmental or administrative agency, regulatory or self
      regulatory authority (federal, state, county, local or foreign), stock market,
      stock exchange or trading facility, or (iii) is or has been in violation of
      any
      statute, rule or regulation of any governmental authority, including, without
      limitation, all foreign, federal, state and local laws relating to taxes,
      environmental protection, occupational health and safety, product quality and
      safety and employment and labor matters, except in each case as could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect. The Exchange Agreement complies with all applicable
      laws, rules and regulations of the United States. The Company is in compliance
      with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended,
      and the rules and regulations thereunder, that are applicable to it, except
      where such noncompliance could not have or reasonably be expected to result
      in a
      Material Adverse Effect. 

     

    
      
         

      

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

     

    (o)  Title
      to
      Assets. Except as set forth in Schedule 3.1(o), the Existing Company Entities
      have valid land use rights for all real property that is material to their
      respective businesses and good and marketable title in all personal property
      owned by them that is material to their respective businesses, in each case,
      free and clear of all Liens, except for Liens as do not materially affect the
      value of such property and do not materially interfere with the use made and
      proposed to be made of such property by such Existing Company Entity. Any real
      property and facilities held under lease by any Existing Company Entity are
      held
      by them under valid, subsisting and enforceable leases of which such Existing
      Company Entity is in compliance, except as could not, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse
      Effect. 

     

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

     

    
      
         

      

      
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    (q)  Insurance.
      Schedule 3.1(q) sets forth a list of all the insurance policies held by each
      Existing Company Entity. The Company has no reason to believe that it or any
      Existing Company Entity will not be able to renew its existing respective
      insurance coverage as and when such coverage expires or to obtain similar
      coverage from similar insurers as may be necessary to continue its business
      on
      terms consistent with market for the Company’s and such other Existing Company
      Entity’s respective lines of business.

     

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

     

    (s)  Internal
      Accounting Controls. Except as set forth on Schedule 3.1(s), the Company
      Entities maintain a system of internal accounting controls sufficient to provide
      reasonable assurance that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      GAAP and to maintain asset accountability, (iii) access to assets is permitted
      only in accordance with management’s general or specific authorization, and (iv)
      the recorded accountability for assets is compared with the existing assets
      at
      reasonable intervals and appropriate action is taken with respect to any
      differences. The Company has established disclosure controls and procedures
      (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company Entities
      and designed such disclosure controls and procedures to ensure that material
      information relating to the Company Entities is made known to the certifying
      officers by others within those entities, particularly during the period in
      which the Company’s Form 10-KSB or 10-QSB, as the case may be, is being
      prepared. The Company’s certifying officers have evaluated the effectiveness of
      the Company’s controls and procedures in accordance with Item 307 of Regulation
      S-B under the Exchange Act for the Company’s most recently ended fiscal quarter
      or fiscal year-end (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed Form 10-KSB or Form 10-QSB the
      conclusions of the certifying officers about the effectiveness of the disclosure
      controls and procedures based on their evaluations as of the Evaluation Date.
      Since the Evaluation Date, there have been no significant changes in the
      Existing Company Entities’ internal controls (as such term is defined in Item
      308(c) of Regulation S-B under the Exchange Act) or, to the Company’s knowledge,
      in other factors that could significantly affect any Company Entity’s internal
      controls.

     

    
      
         

      

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

     

    (u)  Certain
      Fees. Except as described in Schedule 3.1(u), no brokerage or finder’s fees or
      commissions are or will be payable by any Existing Company Entity to any broker,
      financial advisor or consultant, finder, placement agent, investment banker,
      bank or other Person with respect to the transactions contemplated by this
      Agreement. The Investors shall have no obligation with respect to any fees
      or
      with respect to any claims (other than such fees or commissions owed by an
      Investor pursuant to written agreements executed by such Investor which fees
      or
      commissions shall be the sole responsibility of such Investor) made by or on
      behalf of other Persons for fees of a type contemplated in this Section that
      may
      be due in connection with the transactions contemplated by this
      Agreement.

     

    (v)  Certain
      Registration Matters. Assuming the accuracy of the Investors’ representations
      and warranties set forth in Sections 3.2(b)-(e), no registration under the
      Securities Act is required for the offer and sale of the Shares by the Company
      to the Investors hereunder. The Company is eligible to register its Common
      Stock
      for resale by the Investors under Form SB-2 (or under any successor form
      thereof) promulgated under the Securities Act. Except as specified in Schedule
      3.1(v), no Existing Company Entity has granted or agreed to grant to any Person
      any rights (including “piggy-back” registration rights) to have any securities
      of the Company registered with the Commission or any other governmental
      authority that have not been satisfied.

     

    
      
         

      

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

     

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

     

    (y)  Application
      of Takeover Protections. The Company has taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s Articles of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Investors as a result
      of
      the Investors and the Company fulfilling their obligations or exercising their
      rights under the Transaction Documents, including, without limitation, the
      Company’s issuance of the Shares and the Investors’ ownership of the Shares.


     

    (z)  No
      Additional Agreements. No Existing Company Entity has any agreement or
      understanding with any Investor with respect to the transactions contemplated
      by
      the Transaction Documents other than as specified in the Transaction
      Documents.

     

    (aa)  Consultation
      with Auditors. The Company has consulted its independent auditors concerning
      the
      accounting treatment of the transactions contemplated by the Transaction
      Documents, and in connection therewith has furnished such auditors complete
      copies of the Transaction Documents.

     

    (bb)  Make
      Good
      Shares. The Make Good Pledgor
      is
      the sole
      record and beneficial owners of the 2009 Make Good Shares and hold such shares
      free and clear of all Liens. 

     

    (cc)  Foreign
      Corrupt Practices Act. No Existing Company Entity, nor to the knowledge of
      the
      Existing Company Entities, any agent or other person acting on behalf of any
      Existing Company Entity, has, directly or indirectly, (i) used any funds, or
      will use any proceeds from the sale of the Shares, for unlawful contributions,
      gifts, entertainment or other unlawful expenses related to foreign or domestic
      political activity, (ii) made any unlawful payment to foreign or domestic
      government officials or employees or to any foreign or domestic political
      parties or campaigns from corporate funds, (iii) failed to disclose fully any
      contribution made by the Company or any Subsidiary (or made by any Person acting
      on their behalf of which the Company is aware) which is in violation of law,
      or
      (iv) except as set forth in Schedule 3.1(cc), has violated in any material
      respect any provision of the Foreign Corrupt Practices Act of 1977, as amended,
      and the rules and regulations thereunder (the “FCPA”).

     

    
      
         

      

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

     

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

     

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

     

    (gg)  Other
      Representations and Warranties Relating to WOFE. 

     

    (i)  All
      material consents, approvals, registrations, authorizations or licenses
      requisite under PRC law for the due and proper establishment and operation
      of
      WOFE have been duly obtained from the relevant PRC governmental authorities
      and
      are in full force and effect.

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

    (hh)  Disclosure.
      Neither any Existing Company Entity nor any Person acting on its behalf has
      provided any Investor or its respective agents or counsel with any information
      that any Existing Company Entity believes constitutes material, non-public
      information concerning the Company, the Subsidiaries or their respective
      businesses, except insofar as the existence and terms of the proposed
      transactions contemplated hereunder may constitute such information. Each of
      the
      Existing Company Entities understands and confirms that the Investors will
      rely
      on the foregoing representations and covenants in effecting transactions in
      securities of the Existing Company Entities. All disclosure provided to the
      Investors regarding the Existing Company Entities and their respective
      businesses and the transactions contemplated hereby, furnished by or on behalf
      of the Existing Company Entities (including their respective representations
      and
      warranties set forth in this Agreement) are true and correct and do not contain
      any untrue statement of a material fact or omit to state any material fact
      necessary in order to make the statements made therein, in light of the
      circumstances under which they were made, not misleading. Each Investor
      acknowledges and agrees that the Existing Company Entities make no
      representations or warranties with respect to their respective businesses or
      the
      transactions contemplated hereby other than those specifically set forth in
      this
      Section 3.1 and each of the Investors have relied solely on those
      representations and review of the SEC Reports in making its investment decision.
      

     

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

     

    
      
         

      

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

     

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

     

    (c)  Investor
      Status. At the time such Investor was offered the Shares, it was, and at the
      date hereof and the time of sale it is, an “accredited investor” as defined in
      Rule 501(a) under the Securities Act. Such Investor is not a registered
      broker-dealer under Section 15 of the Exchange Act. Each Investor has such
      sophistication, knowledge and skill to be able to fully evaluate the risks
      of
      investing in the Company.

     

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

     

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

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    (f)  Certain
      Trading Activities. Such Investor has not directly or indirectly, nor has any
      Person acting on behalf of or pursuant to any understanding with such Investor,
      engaged in any transactions in the securities of the Company (including, without
      limitation, any Short Sales involving the Company’s securities) since the
      earlier to occur of (1) the time that such Investor was first contacted by
      the
      Company or the placement agent regarding an investment in the Company and (2)
      the 30th
      day
      prior to the date of this Agreement. Such Investor covenants that neither it
      nor
      any Person acting on its behalf or pursuant to any understanding with it will
      engage in any transactions in the securities of the Company (including Short
      Sales) prior to the time that the transactions contemplated by this Agreement
      are publicly disclosed.

     

    (g)  Independent
      Investment Decision. Such Investor has independently evaluated the merits of
      its
      decision to purchase the Shares pursuant to the Transaction Documents, and
      such
      Investor confirms that it has not relied on the advice of any other Investor’s
      business and/or legal counsel in making such decision. Such Investor has not
      relied on the business or legal advice of the Company or any of its agents,
      counsel or Affiliates in making its investment decision hereunder, and confirms
      that none of such Persons has made any representations or warranties to such
      Investor in connection with the transactions contemplated by the Transaction
      Documents.

     

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

     

     

    ARTICLE
      4.

    OTHER
      AGREEMENTS OF THE PARTIES

     

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

     

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

     

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

     

    
      
         

      

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

     

    (c)  Certificates
      evidencing Shares and
      2009
      Make Good Shares, if 2009 Make Good Shares are due to be delivered to Investors
      or their transferees pursuant to the Transaction Documents (collectively, the
      “Securities”),
      shall
      not
      contain any legend (including the legend set forth in Section 4.1(b)): (i)
      while
      a registration statement (including the Registration Statement) covering such
      Securities
      is then
      effective (provided, however,
      that the Company reserves the right to issue stop transfer instructions to
      the
      transfer agent (with a copy to the Investors) with respect to the Securities
      in the
      event that the Registration Statement with respect to the Securities
      is no
      longer current) or (ii) following a sale or transfer of such Securities
      pursuant
      to Rule 144 (assuming the transferee is not an Affiliate of the Company), or
      (iii) while such Securities
      are eligible for sale by the selling Investor without volume restrictions under
      Rule 144. The Company agrees that following the Effective Date or such other
      time as legends are no longer required to be set forth on certificates
      representing Securities under this Section 4.1(c), it will, no longer than
      three
      Trading Days following the delivery by an Investor to the Company or the
      Transfer Agent of a certificate representing such Securities containing a
      restrictive legend, deliver or cause to be delivered to such investor Securities
      which are free of all restrictive and other legends. If the Company is then
      eligible, certificates for Securities subject to legend removal hereunder shall
      be transmitted by the Transfer to an Investor by crediting the prime brokerage
      account of such Investor with the Depository Trust Company System as directed
      by
      such Investor.
      If an
      Investor shall make a sale or transfer of Securities
      either
      (x) pursuant to Rule 144 or (y) pursuant to a registration statement and in
      each
      case shall have delivered to the Company or the Company’s transfer agent the
      certificate representing Securities
      containing a restrictive legend which are the subject of such sale or transfer
      and a representation letter in customary form (the
      date
      of such sale or transfer and Securities
      delivery
      being the “Share
      Delivery Date”)
      and (1)
      the Company shall fail to deliver or cause to be delivered to such Investor
      a
      certificate representing such Securities
      that is
      free from all restrictive or other legends by the third
      Trading
      Day following the Share Delivery Date and (2) following such third
      Trading
      Day after the Share Delivery Date and prior to the time such Securities
      are
      received free from restrictive legends, the Investor, or any third party on
      behalf of such Investor, purchases (in an open market transaction or otherwise)
      shares of Common Stock to deliver in satisfaction of a sale by the Investor
      of
      such Shares (a "Buy-In"),
      then
      the Company shall pay in cash to the Investor (for costs incurred either
      directly by such Investor or on behalf of a third party) the amount by which
      the
      total purchase price paid for Common Stock as a result of the Buy-In (including
      brokerage commissions, if any) exceed the proceeds received by such Investor
      as
      a result of the sale to which such Buy-In relates. The Investor shall provide
      the Company written notice indicating the amounts payable to the Investor in
      respect of the Buy-In. The Company may not make any notation on its records
      or
      give instructions to any transfer agent of the Company that enlarge the
      restrictions on transfer set forth in this Section.

     

    
      
         

      

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

     

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

     

    4.4.  Subsequent
      Registrations.
      Except
      as set forth on Schedule 4.4, the Company may not file any registration
      statement (other than on Form S-8 and Form S-4) with the Commission with respect
      to any securities of the Company prior to the time that all Shares are
      registered pursuant to one or more effective Registration Statement(s), and
      the
      prospectuses forming a portion of such Registration Statement(s) is available
      for the resale of all Shares.

     

    
      
         

      

      
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    4.5.  Securities
      Laws Disclosure; Publicity.
      By 9:00
      a.m. (New York time) on the Trading Day following the Closing Date, the Company
      shall issue a press release disclosing the transactions contemplated hereby
      and
      the Closing (including, without limitation, details with respect to the make
      good provision and thresholds contained in Section 4.11 herein). Within
four
      Trading
Days
      following the Closing Date the Company will file a Current Report on Form 8-K
      disclosing the material terms of the Transaction Documents, including details
      with respect to the make good provision and thresholds contained in Section
      4.11
      herein (and attach as exhibits thereto the Transaction Documents) and the
      Closing. The Company shall make the foregoing disclosure such that following
      such disclosure, the Investors shall no longer be in possession of any material,
      non-public information with respect to the Company. In addition, the Company
      will make such other filings and notices in the manner and time required by
      the
      Commission and the Trading Market on which the Common Stock is listed.
      Notwithstanding the foregoing, the Company shall not publicly disclose the
      name
      of any Investor, or include the name of any Investor in any filing with the
      Commission (other than the Registration Statement and any exhibits to filings
      made in respect of this transaction in accordance with periodic filing
      requirements under the Exchange Act) or any regulatory agency or Trading Market,
      without the prior written consent of such Investor, except to the extent such
      disclosure is required by law or Trading Market regulations.

     

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

     

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

     

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

     

    
      
         

      

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

     

    4.10.  Use
      of
      Proceeds.
      The
      Company will use the net proceeds from the sale of the Shares hereunder for
      working capital purposes and not for the satisfaction of any portion of the
      Company’s debt (other than payment of trade payables and accrued expenses in the
      ordinary course of the Company’s business and consistent with prior practices
      and the WOFE Purchase Price as referred to in Article 4.20 below), or to redeem
      any Common Stock or Common Stock Equivalents (other than a redemption of 246,148
      shares of Common Stock for $550,000 in connection with the closing under the
      Exchange Agreement). 

     

    4.11.  Make
      Good
      Shares. 

     

    (a)  The
      Make
      Good Pledgor
      agrees
      that
      in
      the
      event that either (i) the Earnings Per Share (as defined below) reported in
      the
      2009 Annual Report is less than 2009 Guaranteed EPS or (ii) the After Tax Net
      Income (as defined below) reported in the 2009 Annual Report is less than
      $12,000,000 (the “2009
      Guaranteed ATNI”),
      the
      Make Good Pledgor will
      transfer (in accordance with the Make Good Escrow Agreement) to the Investors
      on
      a pro-rata basis (determined by dividing each Investor’s Investment Amount by
      the aggregate of all Investment Amounts delivered to the Company by the
      Investors hereunder) for no consideration other than payment of their respective
      Investment Amount paid at Closing, the 2009 Make Good Shares. “After
      Tax Net Income”
shall
      mean the Company’s income after taxes for the fiscal year ending June 30, 2009
      determined in accordance with GAAP as reported in the 2009 Annual Report.
“Earnings
      Per Share”
shall
      mean the Company’s After Tax Net Income divided by the number of shares of
      common stock of the Company outstanding on
      a
      fully diluted basis. In
      the
      event that the After Tax Net Income reported in the 2009 Annual Report is equal
      to or greater than the 2009 Guaranteed ATNI and the Earnings Per Share is
      greater than the 2009 Guaranteed EPS,
      no
      transfer of the 2009 Make Good Shares shall be required by the Make Good Pledgor
      to the Investors and such 2009 Make Good Shares shall be returned in accordance
      with the Make Good Escrow Agreement. Any
      such
      transfer of the 2009 Make Good Shares shall be made within ten (10)
      Business Days after
      the date
which
      the
      2009
      Annual Report is filed. Notwithstanding
      anything to the contrary contained herein, in determining
      whether the Company has achieved the 2009 Guaranteed ATNI or
      2009
      Guaranteed EPS, the
      Company may disregard any compensation charge or expense required to be
      recognized by the Company under GAAP resulting from
      the
      release of the 2009 Make Good Shares to Make
      Good
      Pledgor if and to the extent such charge or expense is specified in the
      Company’s independent auditor’s report for the relevant year, as filed with the
      Commission. No other exclusions shall be made for any non-recurring expenses
      of
      the Company, including liquidated damages under the Transaction Documents,
      in
      determining whether 2009 Guaranteed ATNI or 2009 Guaranteed EPS have been
      achieved. If prior to the second anniversary of the filing of the 2009 Annual
      Report, the Company or their auditors report or recognize that the financial
      statements contained in such report are subject to amendment or restatement
      such
      that the Company would recognize or report adjusted after tax net income of
      less
      than the 2009 Guaranteed ATNI or Earnings Per Share of less than the 2009
      Guaranteed EPS, as applicable, then notwithstanding any prior return
of
      2009
      Make Good Shares
      to the
      Make Good Pledgor, the Make Good Pledgor will, within 10 Business Days following
      the earlier of the filing of such amendment or restatement or recognition,
      deliver the 2009 Make Good Shares to the Investors.

     

    
      
         

      

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

     

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

     

    (d)  If
      any
      term or provision of this Section 4.11 is in contradiction of or conflicts
      with
      any term or provision of the Make Good Escrow Agreement, the terms of the Make
      Good Escrow Agreement shall control. 

     

    4.12.  Independent
      Board of Directors. The Company covenants and agrees that no later than 120
      days
      following the Closing Date, the Board of Directors of the Company shall be
      comprised of a minimum of five members, a majority of which shall be
“independent directors” as such term is defined in NASDAQ Marketplace Rule
      4200(a)(15). The Company agrees that $2,000,000 (the
      “Board
      Holdback Escrow
      Amount”)
      shall
      be held in escrow pursuant to the Holdback Escrow Agreement until such time
      as
      the Company complies with its obligations under this Section 4.12. If for any
      reason or for no reason whatsoever, the Escrow Agent does not receive the
      written notice contemplated
      by the
      Holdback Escrow Agreement from the Company and the Investors
      then holding a majority of the Shares
      relating
      to either the release of (i) the Board Holdback Escrow Amount prior to 125
      calendar days following the Closing Date or (ii) CFO Holdback Escrow Amount
      prior to 95 calendar days following the Closing Date (each such failure or
      breach being referred to as an “Event,”
      and for
      purposes of this section the date such Event occurs being referred to as
“Event
      Date”),
      then
      in addition to any other rights the Investors may have hereunder or under
      applicable law, on each such Event Date and on each monthly anniversary of
      such
      Event Date (if
      the
      applicable Event shall not have been cured by such date) until the applicable
      Event is cured,
      the
      Company shall pay to each Investor by wire transfer an amount in immediately
      available funds, as partial liquidated damages and not as a penalty, equal
      to 1%
      of the aggregate Investment Amount paid by such Investor for Shares pursuant
      to
      this Agreement. The partial liquidated damages payable under this Section 4.12
      shall
      be
      independent of any other damages payable under this Agreement or any other
      Transaction Document and shall
      apply on a daily pro-rata basis for any portion of a month prior to the cure
      of
      an Event. In no event will the Company be liable for partial liquidated damages
      in excess of 1% of the aggregate Investment Amount of the Investors in any
      30-day period in respect of any single Event (it being understood that if the
      Company suffers an Event relating to its failure to comply with this Section
      4.12 and an Event relating to its failure to comply with Section 4.15 in a
      30-day period it will be responsible for 2% of liquidated damages in a 30-day
      period). It is further understood that the partial liquidated damages
      contemplated hereby are limited to the Board Holdback Escrow Amount as to that
      Event and the CFO Holdback Escrow Amount as to that Event; provided that the
      Investors are entitled to all other remedies available under applicable law.
      On
      any Event Date, the Company will deliver to each Investor a written notice
      which
      shall set forth the relevant Event. If
      any
      term or provision of this Section 4.12 as to the Board Holdback Escrow Amount
      and/or partial liquidated damages is in contradiction of or conflicts with
      any
      term or provision of the Holdback Escrow Agreement relating thereto, the terms
      of the Holdback Escrow Agreement shall control. 

     

    
      
         

      

      
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    4.13.  Third
      Party Hiring. By the thirtieth day following the Closing Date, the Company
      shall
      hire either of CCG Elite, Hayden Communications, or Integrated Corporate
      Relations as the Company’s investor relations firm. The
      Company agrees that $250,000 (the
      “IR
      Holdback Escrow
      Amount”)
      shall
      be held in escrow pursuant to the Holdback Escrow Agreement until such time
      as
      the Company complies with its obligations under this Section 4.13. If
      any
      term or provision of this Section 4.13 as to the IR Holdback Escrow Amount
      is in
      contradiction of or conflicts with any term or provision of the Holdback Escrow
      Agreement relating thereto, the terms of the Holdback Escrow Agreement shall
      control.

     

    4.14.  Right
      of
      First Refusal. 

     

    (a)  From
      the
      date hereof until the first anniversary of the effective date of the
      Registration Statement
      (plus
      one additional day for each Trading Day following the Effective Date of any
      Registration Statement during which either (1) the Registration Statement is
      not
      effective or (2) the prospectus forming a portion of the Registration Statement
      is not available for the resale of all Registrable Securities (as defined in
      the
      Registration Rights Agreement)),
      the
      Company will not, directly or indirectly, offer, sell, grant any option to
      purchase, or otherwise dispose of (or announce any offer, sale, grant or any
      option to purchase or other disposition of) any of its or its Subsidiaries'
      equity or equity equivalent securities, including, without limitation, any
      debt,
      preferred stock or other instrument or security that is, at any time during
      its
      life and under any circumstances, convertible into or exchangeable or
      exercisable for shares of Common Stock or Common Stock Equivalents (any such
      offer, sale, grant, disposition or announcement being referred to as a
      "Subsequent
      Placement")
      unless
      the Company shall have first complied with this Section 4.14. If the Company
      desires to sell any securities it shall deliver to each of the Investors a
      written notice to such effect specifying the general terms of the offering
      the
      Company desires to make and for a period of at least twenty Business Days after
      the giving of such notice the Company agrees to negotiate in good faith with
      any
      Investors responding to such notice the terms of a sale of the Company’s
      securities to such responding Investors. 

     

    (b)  In
      the
      event that the Company shall receive an
      unsolicited offer regarding the purchase of the Company’s securities, the
      Company shall deliver to each Investor hereunder a written notice (the
      "Offer
      Notice")
      of any
      proposed or intended issuance or sale or exchange (the "Offer")
      of the
      securities being offered (the "Offered
      Securities")
      in a
      Subsequent Placement, which Offer Notice shall (v) identify and describe the
      Offered Securities, (w) specify the price and other terms upon which the Offered
      Securities are to be issued, sold or exchanged, and the number or amount of
      the
      Offered Securities to be issued, sold or exchanged, (x) identify the persons
      or
      entities (to the extent known) to which or with which the Offered Securities
      are
      to be offered, issued, sold or exchanged and (y) offer to issue and sell to
      or
      exchange with such Investors all of the Offered Securities, allocated among
      such
      Investors (i) based on such Investor's pro rata portion of the total Investment
      Amount hereunder (the "Basic
      Amount"),
      and
      (ii) with respect to each Investor that elects to purchase its Basic Amount,
      any
      additional portion of the Offered Securities attributable to the Basic Amounts
      of other Investors as such Investor shall indicate it will purchase or acquire
      should the other Investors subscribe for less than their Basic Amounts (the
      "Undersubscription
      Amount"),
      which
      process shall be repeated until the Investors shall have an opportunity to
      subscribe for any remaining Undersubscription Amount.

     

    
      
         

      

      
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    (c)  To
      accept
      an Offer, in whole or in part, such Investor must deliver a written notice
      to
      the Company prior to the end of the fifth Business Day after such Investor's
      receipt of the Offer Notice (the "Offer
      Period"),
      setting forth the portion of such Investor's Basic Amount that such Investor
      elects to purchase and, if such Investor shall elect to purchase all of its
      Basic Amount, the Undersubscription Amount, if any, that such Investor elects
      to
      purchase (in either case, the "Notice
      of Acceptance").
      If
      the Basic Amounts subscribed for by all Investors are less than the total of
      all
      of the Basic Amounts, then each Investor who has set forth an Undersubscription
      Amount in its Notice of Acceptance shall be entitled to purchase, in addition
      to
      the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
      for; provided, however, that if the Undersubscription Amounts subscribed for
      exceed the difference between the total of all the Basic Amounts and the Basic
      Amounts subscribed for (the "Available
      Undersubscription Amount"),
      each
      Investor who has subscribed for any Undersubscription Amount shall be entitled
      to purchase only that portion of the Available Undersubscription Amount as
      the
      Basic Amount of such Investor bears to the total Basic Amounts of all Investors
      that have subscribed for Undersubscription Amounts, subject to rounding by
      the
      Company to the extent its deems reasonably necessary.

     

    (d)  The
      Company shall have twenty Business Days from the expiration of the Offer Period
      above to (i) offer, issue, sell or exchange the Offered Securities as to which
      a
      Notice of Acceptance has not been given by the Investors (the “Refused
      Securities”)
      but
      only to the offerees described in the Offer Notice (if so described therein)
      and
      only upon terms and conditions (including, without limitation, unit prices
      and
      interest rates) that are not more favorable to the acquiring person or persons
      or less favorable to the Company than those set forth in the Offer Notice and
      (ii) to publicly announce (a) the execution of such Subsequent Placement
      Agreement (as defined below), and (b) either (x) the consummation of the
      transactions contemplated by such Subsequent Placement Agreement or (y) the
      termination of such Subsequent Placement Agreement, which shall be filed with
      the Commission on a Current Report on Form 8-K with such Subsequent Placement
      Agreement and any documents contemplated therein filed as exhibits thereto.
      If
      no disclosure has been made by the Company by the end of the twenty Business
      Day
      period referred to in this subsection (d), the Subsequent Placement shall be
      deemed to have been abandoned and the Investors shall no longer be deemed to
      be
      in possession of any non-public information with respect to the Company. The
      purchase by the Investors of any Offeree Securities is subject in all cases
      to
      the preparation, execution and delivery by the Company and the Investors of
      a
      purchase agreement relating to such Offered Securities reasonably satisfactory
      in form and substance to the Investors and their respective counsel (such
      agreement, the “Subsequent
      Placement Agreement.”)
      

     

    
      
         

      

      
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    (e)  In
      the
      event the Company shall propose to sell less than all the Refused Securities
      (any such sale to be in the manner and on the terms specified in this Section
      4.15), then each Investor may, at its sole option and in its sole discretion,
      reduce the number or amount of the Offered Securities specified in its Notice
      of
      Acceptance to an amount that shall be not less than the number or amount of
      the
      Offered Securities that such Investor elected to purchase pursuant to Section
      4.15(c) above multiplied by a fraction, (i) the numerator of which shall be
      the
      number or amount of Offered Securities the Company actually proposes to issue,
      sell or exchange (including Offered Securities to be issued or sold to Investors
      pursuant to Section 4.15(c) above prior to such reduction) and (ii) the
      denominator of which shall be the original amount of the Offered Securities.
      In
      the event that any Investor so elects to reduce the number or amount of Offered
      Securities specified in its Notice of Acceptance, the Company may not issue,
      sell or exchange more than the reduced number or amount of the Offered
      Securities unless and until such securities have again been offered to the
      Investors in accordance with Section 4.15(b) above.

     

    (f)  Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Investors shall acquire from the Company, and the Company shall
      issue to the Investors, the number or amount of Offered Securities specified
      in
      the Notices of Acceptance, as reduced pursuant to Section 4.15(e) above if
      the
      Investors have so elected, upon the terms and conditions specified in the Offer.
      

     

    (g)  Any
      Offered Securities not acquired by the Investors or other persons in accordance
      with Section 4.15(d) above may not be issued, sold or exchanged until they
      are
      again offered to the Investors under the procedures specified in this
      Agreement.

     

    (h)  In
      exchange for the Company’s willingness to agree to these procedures, each
      Investor hereby irrevocably agrees that it will hold in strict confidence any
      and all Offer Notices, the information contained therein, and the fact that
      the
      Company is contemplating a Subsequent Placement, until such time as the Company
      is obligated to make the disclosures required by Section 4.15(d), or unless
      it
      notifies the Company in writing that it no longer desires to receive Offer
      Notices. 

     

    4.15.  Chief
      Financial Officer. No later than three
      months
      following the Closing Date, the Company will hire a chief financial officer
      (“CFO”) who is a
      certified public accountant or possesses experience such that he or she can
      reasonably serve as a chief financial officer, fluent in English, and
who
      has a
      working familiarity with
      (i) US
      GAAP and (ii) auditing procedures and compliance for United States public
      companies.
      In the
      event that the proposed CFO is not a certified public accountant, who is fluent
      in English and an expert in GAAP and auditing procedures and compliance for
      United States public companies, then such proposed CFO shall be subject to
      Pinnacle’s reasonable approval. The Company shall enter into an employment
      agreement with the CFO for a term of no less than two years. Should the CFO
      be
      dismissed at any time prior to two years from the Closing Date, the Company
      shall replace the CFO with a Chief Financial Officer who fits the criteria
      set
      forth herein as soon as practicable.
      By
      9:00
      a.m. (New York time) on the fourth Trading Day following the hiring of such
      chief financial officer, the Company will file a Current Report on Form 8-K
      disclosing the information required by Item 5.02 of Form 8-K. The Company shall
      deposit $2,000,000 to be held in escrow (the “CFO
      Holdback Escrow
      Amount”)
      in
      accordance with the terms of the Holdback Escrow Agreement pending compliance
      with this provision. If any term or provision of this Section 4.15 as to the
      CFO
      Holdback Escrow Amount is in contradiction of or conflicts with any term or
      provision of the Holdback Escrow Agreement relating thereto, the terms of the
      Holdback Escrow Agreement shall control.

     

    
      
         

      

      
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    4.16.  Liquidated
      Damages for Governmental Rescission of the Transaction. If any governmental
      agency in the PRC challenges or otherwise takes any action that adversely
      affects the transactions contemplated by the Exchange Agreement, and the Company
      cannot undo such governmental action or otherwise address the material adverse
      effect to the reasonable satisfaction of the Investors within sixty (60) days
      of
      the occurrence of such governmental action, then, upon written demand from
      an
      Investor, the Company shall promptly, and in any event within thirty (30) days
      from the date of such written demand, pay to that Investor, as liquidated
      damages, an amount equal to that Investor’s entire Investment Amount with
      interest thereon from the Closing date until the date paid at the rate of 10%
      per annum. As a condition to the receipt of such payment, the Investor shall
      return to the Company for cancellation the certificates evidencing the Shares
      acquired by the Investor under the Agreement.

     

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

     

    4.19 Insurance.
      Within sixty (60) days following the Closing Date, each Existing Company Entity
      shall become insured by insurers of recognized financial responsibility against
      such losses and risks and in such amounts as are prudent and customary in the
      businesses in which it is engaged and as may be necessary to continue its
      business on terms consistent with market for the Company’s and such other
      Existing Company Entity’s respective lines of business.

     

    4.20 Completion
      of WOFE Purchase and Increase of WOFE’s Registered Capital.

     

    (a)  Completion
      of WOFE Purchase. By the 20th
      day
      following the Closing Date, the Company shall complete the WOFE Purchase.
In
      order
      to complete the WOFE Purchase, the Company and Green agree to transmit
      approximately $4,000,000 (“WOFE Purchase Price”) to the accounts of the former
      WOFE shareholders and complete additional filings and registrations, including
      obtaining a new business license and certificate from the PRC State
      Administration of Foreign Exchange reflecting the completion of the payment
      of
      the Purchase Price. The Company Entities represent and warrant that the former
      WOFE shareholders have agreed that they will not retain the WOFE Purchase Price
      and have issued an instruction that the PRC State Administration of Foreign
      Exchange, Xi’An branch, transmit the WOFE Purchase Price, when received, to the
      WOFE. In furtherance of the Company’s obligations under this Section, by the
      20th
      day
      following the Closing Date, the Company shall provide the Investors with
      evidence reasonably acceptable to them that the aggregate registered capital
      deficit (the WOFE Purchase Price) has been paid by providing a copy of the
      new
      business license evidencing that the aggregate capital deficit (the WOFE
      Purchase Price) has been paid as described above. 

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    (b)  Completion
      of the Increase of WOFE’s Registered Capital. By the 65th
      day
      following the Closing Date, the Company shall complete the increase of WOFE’s
      registered capital from approximately $4,000,000 to such amount as necessary
      to
      accommodate the net proceeds of the sale of Shares under this Agreement. The
      WOFE is to receive all necessary documentation evidencing the completion of
      the
      registered capital increase including the approval from provincial commercial
      bureau, a new business license from the local State Administration of Industrial
      and Commerce and an updated certificate from PRC State Administration of Foreign
      Exchange, Xi’An branch. 

     

    4.21 The
      Trademarks of the WOFE. For any Intellectual Property Rights that
      are
      owned in
      the name of any predecessor of the WOFE,
      the WOFE
      shall complete the
      change of the registered owner from that of the WOFE’s predecessor to the WOFE’s
      current name, address and other related updates which is required by PRC
      Trademark Offices within 18 months of the Closing Date (the“Compliance
      Period”)
      as
      evidenced by a written notice certifying the completion of the change of
      registered owner information (the “Notice”)
      from
      the PRC Trademark Offices (the date which is 18 months following the Closing
      Date, the “Compliance
      Notice Date”).
      A copy
      of the Notice shall be promptly provided to the Investors. If for any reason
      or
      for no reason whatsoever, the WOFE does not receive the Notice from the PRC
      Trademark Offices and provide such evidence to the Investors within the
      Compliance Period, then on the Compliance Notice Date and on each monthly
      anniversary thereof (until the WOFE provides a copy of the Notice to the
      Investors) the Company shall pay to each Investor by wire transfer an amount
      in
      immediately available funds, as partial liquidated damages and not as a
      penaltyequal to 0.5% of the aggregate Investment Amount paid by such Investor
      for Shares pursuant to this Agreement. The
      partial liquidated damages pursuant to the terms of this Section 4.21 shall
      be
      independent of any other damages payable under this Agreement or any other
      Transaction Document and shall apply on a daily pro-rata basis for any portion
      of a month prior to the time the Investors are provided a copy of the
      Notice.  

     

     

    ARTICLE
      5. 

    CONDITIONS
      PRECEDENT TO CLOSING

     

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

     

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

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    (e)  WOFE
      Financial Statements. WOFE shall have completed and delivered audited
      consolidated financial statements for the fiscal years ended June 30, 2006
      and
      2007 to the Company and the Investors and shall have received an audit report
      from an independent audit firm that is registered with the Public Company
      Accounting Oversight Board relating to the fiscal years ended June 30, 2006
      and
      2007, a copy of which shall be promptly provided to the Investors (collectively,
      the “WOFE
      Financial Statements”);

     

    (f)  WOFE
      Intellectual Property Rights. The WOFE shall provide to the Investors evidence
      acceptable to the Investors that all Intellectual Property Rights are either
      (i)
      validly owned by the WOFE, or (ii) (a) if owned by any Person other than
      the WOFE or its predecessor, subject to valid and binding Intellectual Property
      Right Licensing Agreements which may not be terminated for any reason until
      any
      such Intellectual Property Right covered thereby is validly owned by the WOFE,
      or (b) if owned by the predecessor of the WOFE, the application for the change
      of the registered owner information from that of the WOFE’s predecessor to the
      WOFE’s current name, address and other related updates which is or may be
      required by relevant PRC authorities in charge of such Intellectual Property
      is
      submitted by the WOFE to the relevant PRC authority on or before the Closing.
      

     

    (g)  PRC
      Opinion. The Company shall have delivered to the Investors, and the Investors
      shall be able to rely upon, the legal opinions that the Company shall have
      received from its legal counsel in the PRC (which, among other things, shall
      confirm the legality under applicable PRC law of the WOFE and the applicability
      of SAFE Circular 75, Circular 106 and the September 8 Merger and Acquisition
      Rules) with such legal opinions being in a form acceptable to the Investors
      in
      their sole discretion.

     

    (h)  Exchange
      Agreement and Form 8-K. Concurrently with or immediately prior to the Closing,
      (i) the Company shall have completed the acquisition of all of the outstanding
      capital stock of Green pursuant to the Exchange Agreement, and (ii) the Company
      shall have provided the Investors with the Current Report on Form 8-K to be
      filed in accordance with the Exchange Agreement, containing the audited
      financial statements of Green and other required disclosure with respect to
      Green and WOFE, provided that, prior to the filing of such Current Report,
      the
      Company shall give the Investors a meaningful opportunity to review and comment
      on the draft thereof and incorporate in good faith any comments from the
      Investors reasonably acceptable to the Company; 

     

    
      
         

      

      
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    (i)  Derivative
      Securities. Any issued and outstanding options, convertible notes or other
      securities of the Company that are exercisable or exchangeable for or
      convertible into Common Stock shall have been exercised, converted or exchanged
      for Common Stock in a manner satisfactory to the Investors; 

     

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

     

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

     

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

     

    (m)  Minimum/Maximum.
      The Company shall have delivered to each Investor signature pages to
      this Agreement indicating that the aggregate Investment Amount payable
      to the Company hereunder on the Closing Date is not less than $20,000,000 and
      no
      more than $26,000,000.

     

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

     

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

     

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

     

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

     

    (d)  Exchange
      Agreement. Concurrently with or immediately prior to the Closing, the Company
      shall have acquired all of the outstanding capital stock of Green pursuant
      to
      the Exchange Agreement. 

     

    (e)  Investors
      Deliverables. Each Investor shall have delivered its Investors Deliverables
      in
      accordance with Section 2.2(b); and

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

     

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

     

     

    ARTICLE
      6.

    MISCELLANEOUS

     

    6.1.  Fees
      and
      Expenses.
      At the
      Closing, the Company shall reimburse Pinnacle upon presentation to the Company
      of a
      summary
      invoice
      therefor
      which is addressed to Pinnacle by its counsel, up
      to
$60,000
      for
      Pinnacle’s legal fees in connection with the transactions contemplated by the
      Transaction Documents
      (Pinnacle may deduct such amount from the Investment Amount deliverable to
      the
      Company at Closing), it being understood that Bryan Cave LLP has only rendered
      legal advice to Pinnacle, and not to the Company or any other Investor in
      connection with the transactions contemplated hereby, and that each of the
      Company and the other Investors has relied for such matters on the advice of
      its
      own respective counsel.
      In
      addition, the Company shall at the Closing pay to Pinnacle, upon presentation
      to
      the Company of reasonable documentation therefor,
      not more
      than $7,500 to reimburse Pinnacle for its out-of-pocket due diligence expenses
      in connection with the transactions contemplated by the Transaction Documents.
      Except
      as
      specified in the immediately preceding two sentences and as described in Section
      6.4, each party shall pay the fees and expenses of its advisers, counsel,
      accountants and other experts, if any, and all other expenses incurred by such
      party incident to the negotiation, preparation, execution, delivery and
      performance of the Transaction Documents. The Company shall pay all stamp and
      other taxes and duties levied in connection with the sale of the
      Shares.
      In the
      event that any waivers or amendments are required with respect to any
      Transaction Document or the transactions contemplated thereby, the Company
      covenants to reimburse Pinnacle for reasonable legal expenses incurred in
      connection therewith.

     

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

     

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

     

    
      
         

      

      
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            	If to the Company:	
            	Discovery Technologies, Inc
	 	 	 	45 Old Millstone Drive, Unit 6,
	 	 	 	East Windsor, NJ 08520
	 	 	 	Attn: Mr. Yinshing David To
	 	 	 	 
	 	With a copy to:	 	Guzov Ofsink, LLC
	 	 	 	600 Madison Avenue, 14th
              Floor
	 	 	 	New York, New York 10022
	 	 	 	Facsimile: (212) 688-7273
	 	 	 	Attn.: Darren L. Ofsink, Esq.
	 	 	 	 
	 	If to an Investor:	 	To the address set forth under such
              Investor’s name on the signature pages hereof;
	 	
            	 	
            
	 	With a copy to: 	 	Bryan Cave LLP
	 	(only for notices 	 	1290 Avenue of the Americas
	 	to investors)	 	New York, New York 10104
	 	 	 	Facsimile: (212) 541-4630
	 	 	 	Email: elcohen@bryancave.com
	 	 	 	Attn.: Eric L. Cohen,
              Esq.


    

     

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

     

    6.4.  Amendments;
      Waivers; No Additional Consideration.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed by the Company and the Investors holding a majority of the
      Shares. No waiver of any default with respect to any provision, condition or
      requirement of this Agreement shall be deemed to be a continuing waiver in
      the
      future or a waiver of any subsequent default or a waiver of any other provision,
      condition or requirement hereof, nor shall any delay or omission of either
      party
      to exercise any right hereunder in any manner impair the exercise of any such
      right. No consideration shall be offered or paid to any Investor to amend or
      consent to a waiver or modification of any provision of any Transaction Document
      unless the same consideration is also offered to all Investors who then hold
      Shares. The Company shall pay for any fees, including reasonable attorney’s fees
      for one counsel representing the Investors, incurred by the Investors in
      connection with any amendment to a Transaction Document.

     

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

     

    (a)  by
      written agreement of the Investors holding a majority of the Shares to be issued
      at Closing pursuant to the terms hereof and the Company; and

     

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

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    6.7.  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns. The Company may not assign this
      Agreement or any rights or obligations hereunder without the prior written
      consent of the Investors. Any Investor may assign any or all of its rights
      under
      this Agreement to any Person to whom such Investor assigns or transfers any
      Shares, provided such transferee agrees in writing to be bound, with respect
      to
      the transferred Shares, by the provisions hereof that apply to the “Investors.”
Notwithstanding anything to the contrary herein, for the avoidance of doubt,
      each Investor may freely transfer any Shares to any Person (including its
      Affiliates or any investment fund sponsored or advised by such Investor) without
      the consent of any of the Existing Company Entities or any other
      Investor.

     

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

     

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

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOLLOW]

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
      Agreement to be duly executed by their respective authorized signatories as
      of
      December 24, 2007.

     

    
      	 	 	 
	 	DISCOVERY TECHNOLOGIES,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/
              Tao
              Li
	 	
              
Name:
              Tao Li
	 	
              Title: Chairman of the Board, 

               
President
                and Chief Executive Officer
                

            


    

    
       

      
        	 	 	 
	 	
                GREEN
                  AGRICULTURE HOLDING
                  CORPORATION

              
	 
 	 
 	 
 
	 	By:  	/s/
                Yinshing David To
	 	
                
Name:
                Yinshing David To
	 	
                Title:
                  Director

              


      

    

    
      
         

        
          	 	 	 
	 	
                  
                    SHAANXI
                      TECHTEAM JINONG HUMIC ACID PRODUCT CO.,
                      LTD.

                  

                
	 
 	 
 	 
 
	 	By:  	/s/
                  Tao
                  Li
	 	
                  
Name:
                  Tao Li
	 	
                  Title: Chairman of the Board,

                  
                     
President
                      and Chief Executive Officer
                      

                  

                


        

      

    

    
      
        
           

          
            	 	 	 
	 	
                    
                      
                        Only
                          as to Sections 3.1(bb), 4.11,
                          4.16
                          and 4.17
                          and
                          Article 6 herein:

                      

                    

                  
	 
 	 
        
                    	 
 
	 	      	/s/
                    Yinshing David To
	  	
                    
Yinshing
                    David
                    To


          

        

      

      
        
          
             

            
              	 	 	 
	 	      	/s/
                      Tao
                      Li
	 
	
                      
Tao
                      Li


            

             

            
              
                 

              

              
                38

                
                  

                

              

              
                 

              

            

          

        

      

    


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

     

    NAME
      OF INVESTOR

     

    By:

    Name:

    Title:

     

    Investment
      Amount: $

     

    Tax
      ID
      No.:

     

    ADDRESS
      FOR NOTICE

     

    Attention:

     

    Tel:

     

    Fax:
      _____________________________________

     

    Email:
      ____________________________________

     

    DELIVERY
      INSTRUCTIONS

    (if
      different from above)

     

    c/o:

     

    Street:

     

    City/State/Zip:

     

    Attention:

     

    Tel:

     

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

     

    Schedules
      to

    Securities
      Purchase Agreement

    


    dated
      as of December 24, 2007, by and among Discovery Technologies, Inc. a Nevada
      corporation, and all predecessors thereof (the “Company”), Green Agriculture
      Holding Corporation, a New Jersey corporation (“Green”), Shaanxi TechTeam Jinong
      Humic Acid Product Co., Ltd., a company organized under the laws of the People’s
      Republic of China (“WOFE”), and the investors identified on the signature pages
      hereto (each, an “Investor” and collectively, the
“Investors”).

    


    Schedule
      3.1 (a) Subsidiary

    


    Xi’an
      Jintai Agriculture Technology Development Company,
      a company incorporated in January 19, 2007 in the PRC is the wholly owned
      subsidiary of the WOFE, it serves as the WOFE’s research and development and
      experimental base. Its registered capital is RMB 1 million (approximately
      US$135,000)

    


    Schedule
      3.1 (g) Capitalization

    


    Please
      refer to the Cap table in excel format.

    


    Schedule
      3.1(k) Litigation

    


    Xi’an
      Techteam Science and Technology Industry (Group) Co., Ltd. (the “Group
      Company”), the former parent company of WOFE was a former 20% shareholder of
      Shanghai Li Ao Hi-Tech Investment Co., Ltd. (“Shanghai Li Ao”) as a nominee. The
      Group Company is substantially owned and controlled by Tao Li, the Chairman
      and
      CEO of WOFE.

    


    Shanghai
      Li Ao invested monies in Xinjiang Delong Group. Some of the top management
      of
      Xinjiang Delong Group was convicted in the PRC in 2006 of illegally taking
      deposit accounts from investors and stock manipulation. At no time has the
      Group
      Company, Shanghai Li Ao, Tao Li, WOFE or any employee, officer or director
      thereof been charged with any wrongdoing in connection with this
      matter.

    


    Schedule
      3.1 (m) Indebtedness

    


    
      	
              Loan
                No.

            	 	
              Borrower

            	 	
              Amount

              (million
                in RMB)

            	 	
              Dated

            	 	
              Term

            	 	
              Gurantee

            	 	
              Secured
                Property 

            
	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Xi
                Shang Yin Xincheng Jie 

              Zi
                [2007] No. 010

            	 	
              Xi’an
                City Commercial Bank, Xincheng Branch

            	 	
              15

            	 	
              4/29/2007

            	 	
              4/29/2007~4/01/2008

            	 	
              Xishangyin
                Xincheng Bao Zi [2007] No. 010

            	 	
              Property
                Certificate No. Yang Guo Yong (2006) No.06

              Building
                Certificate No. Yang Fang Quan Zheng Zi No. 20060030

            
	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Yang
                Nong Yin Jie Zi [2007] No. 001

            	 	
              Agricultural
                Bank of China, Yangling Branch

            	 	
              13.5

            	 	
              3/28/2007

            	 	
              3/28/2007~3/27/2008

            	 	
              Yang
                Nong Yin Bao Zi [2007] No. 001

            	 	
              None

            
	 	 	 	 	 	 	 	 	 	 	 	 	 
	
              Shannong
                Xin Jie Zi Beiwen No. [2007] No. 620

            	 	
              Xi’an
                Beilin District Country Credit Union North Wenyi Road
                Branch

            	 	
              3.8

            	 	
              9/18/2007

            	 	
              9/18/2007~9/16/2008

            	 	
              None

            	 	
              Mortgage
                of Building of another company Xi’an Xiansheng Info. Technology Co., Ltd.,
                which is majority owned by Mr. Tao
                Li

            


    

     

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

     

    Schedule
      3.1 (o) Title to Assets

    


    There
      is
      a mortgage over the following land use right and building owned by the WFOE
      for
      a loan of RMB15million with Xincheng Branch of Commercial Bank of Xi’an City as
      referred to under Schedule 3.1 (m).

     

    
      	 	 	
              License
                No.

            	 	
              Area

            	 	
              Term

            
	 	 	 	 	 	 	 
	
              Property
                at Yangling

            	 	
              Yangguan
                Guo Yong [2006] No. 06

            	 	
              30,946.65
                m2

            	 	
              Land
                use right valid through 01/2001-01/2051

            
	 	 	 	 	 	 	 
	
              Building
                at Yangling

            	 	
              No.
                20060030

            	 	
              6494.91
                m2

            	 	
              ---

            


    

     

    Schedule
      3.1 (p) Patents and Trademarks

    


    The
      following patents are in the process of application by the
      WFOE:

    


    
      	
              SN

            	 	
              Application
                Number

            	 	
              Date
                of Application

            	 	
              Applicant

            	 	
              Contents

            
	 	 	 	 	 	 	 	 	 
	
              1

            	 	
              200720031884.2

            	 	
              5/29/2007

            	 	
              Shaanxi
                Techteam Jinong Humici Acid Product Co.,Ltd

            	 	
              Production
                facility of Humic Acid Products

            
	 	 	 	 	 	 	 	 	 
	
              2

            	 	
              200710017334.x

            	 	
              2/1/2007

            	 	
              Shaanxi
                Techteam Jinong Humici Acid Product Co.,Ltd

            	 	
              Method
                and recipe of the water solube humic acid fertilizers
                

            


    

     

    A.
      Xi’an
      Techteam Science and Technology Industry (Group) Co., Ltd. (the “Group
      Company”), a company Mr. Tao Li has controlling shares is the registered owner
      of the following trademark:

     

    
      	Jinong (“Farmers’
              Helper”) 	Registration number: No. 1357523
              


    

     

    The
      Group
      Company is in the process of transferring the trademark to the WOFE. The
      application of the transfer with the PRC State Trademark Offices is dated
      October 15, 2007. There is a licensing agreement between the Group Company
      and
      the WOFE dated December 19, 2007 pursuant to which the Group Company granted
      an
      irrevocable, royalty free, exclusive license to the WOFE on the trademark of
      Jinong for the period from the date of the licensing agreement to the date
      on
      which the WOFE is transferred the trademark. 

     

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

     

    B.
      Yanglin Techteam Jinong Humic Acid Product Co., Ltd. (“Yanglin”), the
      predecessor of the WOFE, is the registered owner of the following
      trademark:

    
       

      
        	Libangnong
                (“Farmer’s Mighty Helper”) 	Registration number:
                No.1503


      

       

    

    Yanglin
      is in the process of updating the owner information records with the PRC State
      Trademark Offices. The application is dated August 23, 2007.

    


    C.
      Yanglin is the registered owner of the following trademarks:

     

    
      
        
          	Zhimeizi (“Make
                  Plants Grow with Luster”)  	Registration number: No. 1504
	 	 
	Lepushi (“Make
                  Farming Pleasant”)	Registration number: No.
                  1428


        

         

        Yanglin
          is in preparing the application for the owner information records updating
          and
          expect to file the application by the Closing.

      

    

     

    Schedule
      3.1 (q) Insurance

    


    
      	
              SN

            	
              Insurance
                Category

            	
              Policy
                Number

            	
              Premium
                (RMB)

            	
              Insured
                Property Value (RMB)

            	
              Insurance
                Carrier

            	
              Term
                of the Policy

            
	
              1

            	
              Social
                Insurance

            	
              Endowment
                Insurance

            	
              N/A

            	
              54.5.4/m/19
                Persons

            	
              N/A

            	
              It
                is different with each employee when they contracted with the Insurance
                company at the beginning.

            	
              N/A

            
	
              Medical
                Insurance

            	
              N/A

            	
              1640.52/m/19
                Persons

            	
              N/A

            
	
              Unemployment
                Insurance

            	
              N/A

            	
              696.83/m/19
                Persons

            	
              N/A

            
	
              Maternity
                Insurance

            	
              N/A

            	
              106.25/m/19
                Persons

            	
              N/A

            
	
              Industrial
                Injury Insurance

            	
              N/A

            	
              193.05/m/19
                Persons

            	
              N/A

            
	
              2

            	
              Assets
                Comprehensive Insurance

            	
              Fixed
                Assets

            	
              6005745

            	
              6,800.00

            	
              1,360,000.00

            	
              PICC
                Property and Causalty Company Limited,Shaanxi Branch

            	
              Expires
                on 12/29/2008

            
	
              Finished
                Products

            	
              2,000.00

            	
              400,000.00

            
	
              Packing
                Materials

            	
              1,000.00

            	
              200,000.00

            


    

     

    
      
         

      

      
        42

        
          

        

      

      
         

      

    

     

    Schedule
      3.1 (r)

    


    As
      of the
      date of this Agreement, the WOFE owes $135,947 to its officers and shareholders.
      Such advance from the officers and shareholders to the WOFE was unsecured,
      non-interest bearing and due on demand. The WOFE plans to pay the amount off
      by
      December 31, 2007.

     

    Schedule
      3.1 (s) 

    


    The
      Company intends to hire a chief financial officer who has experience with public
      accounting, the requirements of GAAP and the United States securities laws.
      The
      Company has not yet evaluated its internal controls over financial reporting
      in
      order to allow management to report on, and the independent auditors to attest
      to, its internal controls over financial reporting, as will be required by
      Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations
      of
      the SEC. The Company has never performed the system and process evaluation
      and
      testing required in an effort to comply with the management assessment and
      auditor certification requirements of Section 404, which will initially apply
      to
      us as of December 31, 2007.

    


    Schedule
      3.1 (u) Certain Fees

    


    In
      connection with the financing contemplated under the Securities Purchase
      Agreement, Hickey Freihofner Capital, a Division of Brill Securities, Inc.,
      member of FINRA, MSRB, SIPC, as placement agent, is to receive a cash fee of
      6%
      of the monies raised comprised of a 5% placement agent fee and 1% for
      non-accountable expenses and foreign finders received 2%.

    


    Schedule
      3.1 (v) Certain Registration Matters

    


    Michael
      Friess and Sanford Schwartz (the “Shell Sellers”), the directors and controlling
      owners of the Company before the Closing, has piggy-back registration rights
      on
      111,386 shares of common stock for the period that they hold those shares,
      pursuant to Redemption Agreement by and among the Shell Sellers and the Company
      dated the Closing Date. The piggy-back registration rights are conditioned
      on
      Rule 415 cutback. 

    


    Schedule
      3.1 (cc) Foreign
      Corrupt Practices Act  

     

    Under
      the
      FCPA, companies that have a class of securities registered under Section 12
      of
      the Exchange Act, or that are required to file reports under Section 15(d)
      of
      the Exchange Act, are required to devise and maintain a system of internal
      accounting controls sufficient to provide reasonable assurances that:


     

    	·  	
            transactions
              are executed in accordance with management's general or specific
              authorization; 

          


     

    	·  	
            transactions
              are recorded as necessary (1) to permit preparation of financial
              statements in conformity with generally accepted accounting principles
              or
              any other criteria applicable to such statements, and (2) to maintain
              accountability for assets; 

          


     

    
      
         

      

      
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    	·  	
            access
              to assets is permitted only in accordance with management's general
              or
              specific authorization; and 

          


     

    	·  	
            the
              recorded accountability for assets is compared with the existing assets
              at
              reasonable intervals and appropriate action is taken with respect to
              any
              differences.

          


     

    Reference
      is made to Schedule 3.1(s). 

     

    Schedule
      4.4

     

    Reference
      is made to Schedule 3.1 (v).

     

    
      
         

      

      
        44