f8k42810ex10i_ecobuild.htm


     

    Exhibit 10.1

     

     

     

     

    


    SECURITIES
PURCHASE AGREEMENT

    


    Dated
as of April 27, 2010

    


    among

    


    ECO
BUILDING INTERNATIONAL

    


    and

    


    THE
PURCHASERS LISTED ON EXHIBIT A

     

     

     

     

     

     

     

     

     

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    Table of
Contents

     

    
      	 
      	 
      	
              Page

            
	 
      	 
      	 
      
	
              ARTICLE
      I

            	
              Purchase
      and Sale of Preferred Stock and Warrants

            	
              1

            
	 
      	 
      	 
      
	
              Section
      1.1

            	
              Purchase
      and Sale of Stock

            	
              1

            
	 
      	 
      	 
      
	
              Section
      1.2

            	
              Warrants

            	
              1

            
	 
      	 
      	 
      
	
              Section
      1.3

            	
              Conversion
      and Warrant Shares

            	
              1

            
	 
      	 
      	 
      
	
              Section
      1.4

            	
              Purchase
      Price and Closing

            	
              2

            
	 
      	 
      	 
      
	
              Section
      1.5

            	
              Share
      Exchange Transaction

            	
              2

            
	 
      	 
      	 
      
	
              ARTICLE
      II

            	
              Representations
      and Warranties

            	
              2

            
	 
      	 
      	 
      
	
              Section
      2.1

            	
              Representations
      and Warranties of the Company

            	
              2

            
	 
      	 
      	 
      
	
              Section
      2.2

            	
              Representations
      and Warranties of the Purchasers

            	
              18

            
	 
      	 
      	 
      
	
              ARTICLE
      III

            	
              Covenants

            	
              21

            
	 
      	 
      	 
      
	
              Section
      3.1

            	
              Securities
      Compliance

            	
              21

            
	 
      	 
      	 
      
	
              Section
      3.2

            	
              Registration
      and Listing

            	
              21

            
	 
      	 
      	 
      
	
              Section
      3.3

            	
              Inspection
      Rights

            	
              21

            
	 
      	 
      	 
      
	
              Section
      3.4

            	
              Compliance
      with Laws

            	
              22

            
	 
      	 
      	 
      
	
              Section
      3.5

            	
              Keeping
      of Records and Books of Account

            	
              22

            
	 
      	 
      	 
      
	
              Section
      3.6

            	
              Reporting
      Requirements

            	
              22

            
	 
      	 
      	 
      
	
              Section
      3.7

            	
              Amendments

            	
              23

            
	 
      	 
      	 
      
	
              Section
      3.8

            	
              Other
      Agreements

            	
              23

            
	 
      	 
      	 
      
	
              Section
      3.9

            	
              Distributions

            	
              23

            
	 
      	 
      	 
      
	
              Section
      3.10

            	
              Use
      of Proceeds

            	
              23

            
	 
      	 
      	 
      
	
              Section
      3.11

            	
              Reservation
      of Shares

            	
              23

            


       

      
        
           


        

        
           


          
            

          

        

        
           


        

      

       

      	
              Section
      3.12

            	
              Transfer
      Agent

            	
              23

            
	 
      	 
      	 
      
	
              Section
      3.13

            	
              Disposition
      of Assets

            	
              23

            
	 
      	 
      	 
      
	
              Section
      3.14

            	
              Reporting
      Status

            	
              24

            
	 
      	 
      	 
      
	
              Section
      3.15

            	
              Disclosure
      of Transaction

            	
              24

            
	 
      	 
      	 
      
	
              Section
      3.16

            	
              Disclosure
      of Material Information

            	
              24

            
	 
      	 
      	 
      
	
              Section
      3.17

            	
              Pledge
      of Securities

            	
              24

            
	 
      	 
      	 
      
	
              Section
      3.18

            	
              Lock-Up
      Agreements

            	
              25

            
	 
      	 
      	 
      
	
              Section
      3.19

            	
              Investor
      and Public Relations Escrow

            	
              25

            
	 
      	 
      	 
      
	
              Section
      3.20

            	
              Chief
      Financial Officer

            	
              25

            
	 
      	 
      	 
      
	
              Section
      3.21

            	
              DTC

            	
              25

            
	 
      	 
      	 
      
	
              Section
      3.22

            	
              Sarbanes-Oxley
      Act

            	
              25

            
	 
      	 
      	 
      
	
              Section
      3.23

            	
              Form
      D

            	
              25

            
	 
      	 
      	 
      
	
              Section
      3.24

            	
              No
      Integrated Offerings

            	
              26

            
	 
      	 
      	 
      
	
              Section
      3.25

            	
              No
      Commissions in Connection with Conversion of Preferred
    Shares

            	
              26

            
	 
      	 
      	 
      
	
              Section
      3.26

            	
              Option
      Plan Restrictions

            	
              26

            
	 
      	 
      	 
      
	
              Section
      3.27

            	
              Direct
      Lending

            	
              26

            
	 
      	 
      	 
      
	
              Section
      3.28

            	
              No
      Manipulation of Price

            	
              26

            
	 
      	 
      	 
      
	
              Section
      3.29

            	
              Additional
      Negative Covenants

            	
              26

            
	 
      	 
      	 
      
	
              Section
      3.30

            	
              Corporate
      Governance Requirements

            	
              26

            
	 
      	 
      	 
      
	
              Section
      3.31

            	
              Insurance

            	
              26

            
	 
      	 
      	 
      
	
              ARTICLE
      IV

            	
              CONDITIONS

            	
              27

            
	 
      	 
      	 
      
	
              Section
      4.1

            	
              Conditions
      Precedent to the Obligation of the Company to Sell the
    Units

            	
              27

            
	 
      	 
      	 
      


       

      
        
           


        

        
           


          
            

          

        

        
           


        

      

       

      	
              Section
      4.2

            	
              Conditions
      Precedent to the Obligation of the Purchasers to Purchase the
      Units

            	
              28

            
	 
      	 
      	 
      
	
              ARTICLE
      V

            	
              Stock
      Certificate Legend

            	
              31

            
	 
      	 
      	 
      
	
              Section
      5.1

            	
              Legend

            	
              31

            
	 
      	 
      	 
      
	
              ARTICLE
      VI

            	
              Indemnification

            	
              32

            
	 
      	 
      	 
      
	
              Section
      6.1

            	
              General
      Indemnity

            	
              32

            
	 
      	 
      	 
      
	
              Section
      6.2

            	
              Indemnification
      Procedure

            	
              32

            
	 
      	 
      	 
      
	
              ARTICLE
      VII

            	
              Miscellaneous

            	
              33

            
	 
      	 
      	 
      
	
              Section
      7.1

            	
              Fees
      and Expenses

            	
              33

            
	 
      	 
      	 
      
	
              Section
      7.2

            	
              Specific
      Enforcement, Consent to Jurisdiction

            	
              34

            
	 
      	 
      	 
      
	
              Section
      7.3

            	
              Entire
      Agreement; Amendment

            	
              34

            
	 
      	 
      	 
      
	
              Section
      7.4

            	
              Notices

            	
              35

            
	 
      	 
      	 
      
	
              Section
      7.5

            	
              Waivers

            	
              36

            
	 
      	 
      	 
      
	
              Section
      7.6

            	
              Headings

            	
              36

            
	 
      	 
      	 
      
	
              Section
      7.7

            	
              Successors
      and Assigns

            	
              36

            
	 
      	 
      	 
      
	
              Section
      7.8

            	
              No
      Third Party Beneficiaries

            	
              37

            
	 
      	 
      	 
      
	
              Section
      7.9

            	
              Governing
      Law

            	
              37

            
	 
      	 
      	 
      
	
              Section
      7.10

            	
              Survival

            	
              37

            
	 
      	 
      	 
      
	
              Section
      7.11

            	
              Counterparts

            	
              37

            
	 
      	 
      	 
      
	
              Section
      7.12

            	
              Publicity

            	
              37

            
	 
      	 
      	 
      
	
              Section
      7.13

            	
              Severability

            	
              37

            
	 
      	 
      	 
      
	
              Section
      7.14

            	
              Further
      Assurances

            	
              37

            
	 
      	 
      	 
      
	
              Section
      7.15

            	
              Currency

            	
              38

            
	 
      	 
      	 
      
	
              Section
      7.16

            	
              Judgment
      Currency

            	
              38

            
	 
      	 
      	 
      


       

      
        
           


        

        
           


          
            

          

        

        
           


        

      

       

      	
              Section
      7.17

            	
              Termination

            	
              38

            
	 
      	 
      	 
      
	
              Exhibit
      A

            	
              List
      of Purchasers

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      B

            	
              Form
      of Series A Warrant

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      C

            	
              Form
      of Registration Rights Agreement

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      D

            	
              Form
      of Lock-up Agreement

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      E-1

            	
              Form
      of Escrow General Agreement

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      E-2

            	
              Form
      of Securities Escrow Agreement

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      E-3

            	
              Form
      of Investor and Public Relations Escrow Agreement

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      F

            	
              Series
      A Certificate of Designation

            	 
      
	 
      	 
      	 
      
	
              Exhibit
      G

            	
              Form
      of Opinion of Counsel

            	 
      
	 
      	 
      	 
      


    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    SECURITIES
PURCHASE AGREEMENT

    


    This
SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated
as of April 27, 2010 by and among Eco Building International, a Nevada
corporation, (the “Company” or “Deyu”) and each of
the Purchasers of Units whose names are set forth on Exhibit A hereto
(individually, a “Purchaser” and
collectively, the “Purchasers”).

    


    The
parties hereto agree as follows:

    


    ARTICLE
I

    


    Purchase
and Sale of Preferred Stock and Warrants

    


    Section
1.1       Purchase and Sale of
Stock. Upon the following terms and conditions, the Company shall issue
and sell to the Purchasers and each of the Purchasers shall purchase from the
Company, Units (the “Units”), each
consisting of one share of the Company’s Series A Convertible Preferred Stock,
par value $0.001 per share (the “Preferred Shares”),
convertible into one share of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”) and a Series A Warrant (as defined below) to purchase the number
of shares of Common Stock equal to forty percent (40%) of the Preferred Shares
purchased by each Purchaser pursuant to the terms of this Agreement, as set
forth opposite such Purchaser’s name on Exhibit A hereto, as
applicable. The designation, rights, preferences and other terms and provisions
of the Series A Convertible Preferred Stock are set forth in the Series A
Certificate of Designation of the Relative Rights and Preferences of the Series
A Convertible Preferred Stock attached hereto as Exhibit F (the “Series A Certificate of
Designation”).  The Company and the Purchasers are executing
and delivering this Agreement in accordance with and in reliance upon the
exemption from securities registration afforded by Rule 506 of Regulation D
(“Regulation
D”) as promulgated by the United States Securities and Exchange
Commission (the “Commission”) under
the Securities Act of 1933, as amended (the “Securities Act”) or
Section 4(2) of the Securities Act.

    


    Section
1.2       Warrants. Upon the
following terms and conditions and for no additional consideration, each of the
Purchasers shall be issued Series A Warrants, in substantially the form attached
hereto as Exhibit
B (the “Warrants”), to
purchase the number of shares of Common Stock equal to forty percent (40%) of
the number of Preferred Shares purchased by each Purchaser pursuant to the terms
of this Agreement, as set forth opposite such Purchaser’s name on Exhibit A hereto. The
Warrants shall expire five (5) years following the Closing Date, and have an
initial exercise price of $5.06, which is 115% of the Purchase
Price.

    


    Section
1.3       Conversion and Warrant
Shares. The Company has authorized and has reserved and covenants to
continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a number of shares of Common Stock equal to one hundred
twenty five percent (125%) of the number of shares of Common Stock as shall from
time to time be sufficient to effect conversion of all of the Preferred Shares
and exercise of the Warrants then outstanding. Any shares of Common Stock
issuable upon conversion of the Preferred Shares and exercise of the Warrants
(and such shares when issued) are herein referred to as the “Conversion Shares”
and the “Warrant
Shares”, respectively. The Preferred Shares, the Conversion Shares and
the Warrant Shares are sometimes collectively referred to as the “Shares”.

     

    
      
         


      

      
        1

        
          

        

      

      
         


      

    

     

    Section
1.4       Purchase Price and
Closing. Subject to the terms and conditions hereof, the Company agrees
to issue and sell to the Purchasers and, in consideration of and in express
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Purchasers, severally but not jointly, agree to purchase
the Units for an aggregate purchase price of $10,000,000 (the “Offering Amount”), or
$4.40 per Unit (the “Purchase Price”). The
closing of the purchase and sale of the Units to be acquired by the Purchasers
from the Company under this Agreement shall take place at the offices of Anslow
& Jaclin, LLP, 195 Route 9 South, Suite 204, Manalapan, NJ 07726 (the “Closing”). Subject to
the terms and conditions set forth in this Agreement, the date and time of the
Closing shall be the Closing Date (or such later date as is mutually agreed to
by the Company and Maxim Group, LLC (the “Placement Agent”),
provided, that
all of the conditions set forth in Article IV hereof and applicable to the
Closing shall have been fulfilled or waived in accordance herewith (the “Closing Date”).
Subject to the terms and conditions of this Agreement, at the Closing the
Company shall deliver or cause to be delivered to each Purchaser (x) a
certificate for the number of Preferred Shares set forth opposite the name of
such Purchaser on Exhibit A hereto, (y)
its Warrants to purchase such number of shares of Common Stock as is set forth
opposite the name of such Purchaser on Exhibit A attached
hereto and (z) any other documents required to be delivered pursuant to Article
IV hereof. At the Closing, each Purchaser shall deliver its Purchase Price by
wire transfer to the escrow account pursuant to the Escrow General Agreement (as
hereafter defined).  In addition, the parties acknowledge that Four
Hundred Thousand Dollars ($400,000) of the Purchase Price funded on the Closing
Date shall be deposited in an escrow account pursuant to the Investor and Public
Relations Escrow Agreement to be used by the Company in connection with investor
and public relations.

    


    Section
1.5       Share Exchange
Transactions. The parties acknowledge that immediately prior to the
consummation of the transactions contemplated by this Agreement, the Company
will issue shares of its Common Stock to City Zone Holdings Limited,
incorporated in the British Virgin Islands (“City Zone”), pursuant to that
certain Share Exchange Agreement dated as of April [__], 2010 by and among the
Company and the controlling stockholders of the Company, City Zone and
shareholders of City Zone (the “Share Exchange
Agreement”). Upon consummation of the transactions contemplated by the
Share Exchange Agreement, City Zone, together with its subsidiaries, will become
the wholly owned subsidiaries of the Company (the “Share Exchange
Transaction”).

    


    


    ARTICLE
II

    


    Representations
and Warranties

    


    Section
2.1       Representations and
Warranties of the Company. The Company hereby represents and warrants to
the Purchasers on behalf of itself and its subsidiaries, as of the date hereof
and the Closing Date (except as set forth on the Schedule of Exceptions attached
hereto with each numbered Schedule corresponding to the section number herein),
as follows:

     

    
      
         


      

      
        2

        
          

        

      

      
         


      

    

     

    (a) Organization, Good Standing
and Power. The Company and each of its subsidiaries is a corporation or
other entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization (as applicable) and has the requisite corporate power to own, lease
and operate its properties and assets and to conduct its business as it is now
being conducted.  Except as disclosed on Schedule 2.1(g),
prior to the Share Exchange Transaction, the Company does not have any
subsidiaries. Except as set forth on Schedule 2.1(g), the
Company and each such subsidiary is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary except for any
jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect (as defined in Section 2.1(c)
hereof) on the Company’s financial condition.

    


    (b) Authorization;
Enforcement. The Company has the requisite corporate power and authority
to enter into and perform this Agreement, the Registration Rights Agreement in
the form attached hereto as Exhibit C (the “Registration Rights
Agreement”), the Lock-Up Agreement (as defined in Section 3.18 hereof) in
the form attached hereto as Exhibit D, the Escrow
Agreement by and among the Company, the Purchasers and the escrow agent named
therein, dated as of the date hereof, substantially in the form of Exhibit E-1 attached
hereto (the “Escrow
General Agreement”), the Securities Escrow Agreement by and among the
Company, the Purchasers, the Principal Stockholder (as hereinafter defined) and
the escrow agent named therein, dated as of the date hereof, substantially in
the form of Exhibit
E-2 attached hereto (the “Securities Escrow
Agreement”) and the Investor and Public Relations Escrow Agreement by and
among the Company, the Purchasers and the escrow agent named therein, dated as
of the date hereof, substantially in the form of Exhibit E-3 attached
hereto (the “Investor
and Public Relations Escrow Agreement”, together with the Escrow General
Agreement and the Securities Escrow Agreement, the “Escrow Agreements”),
the Series A Certificate of Designation, and the Warrants (collectively, the
“Transaction
Documents”) and to issue and sell the Units, the Shares and the Warrants
in accordance with the terms hereof. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company.
The other Transaction Documents will have been duly executed and delivered by
the Company at the Closing. Each of the Transaction Documents constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s
rights and remedies or by other equitable principles of general
application.

    


    (c) Capitalization. The
authorized capital stock of the Company and the shares thereof currently issued
and outstanding as of the date hereof and as contemplated by the Transaction
Documents are set forth on Schedule 2.1(c)
hereto. All of the outstanding shares of the Common Stock and the Preferred
Shares have been duly and validly authorized. Except as contemplated by the
Transaction Documents or as set forth on Schedule 2.1(c)
hereto, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Except as contemplated by the Transaction Documents, there are no
contracts, commitments, understandings, or arrangements by which the Company is
or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except as contemplated by the Transaction Documents or as
set forth on Schedule
2.1(c) hereto, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person 

     

    
      
         


      

      
        3

        
          

        

      

      
         


      

       

      with
respect to any of its equity or debt securities.  Except as
contemplated by the Transaction Documents, the Company is not a party to, and it
has no knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company. The offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Closing complied with all applicable Federal and state
securities laws, and no stockholder has a right of rescission or claim for
damages with respect thereto which would have a Material Adverse Effect (as
defined below). The Company has furnished or made available to the Purchasers
true and correct copies of the Company’s Certificate of Incorporation as in
effect on the date hereof (the “Certificate”), and
the Company’s Bylaws as in effect on the date hereof (the “Bylaws”). For the
purposes of this Agreement, “Material Adverse
Effect” means any material adverse effect on the business, operations,
properties, or financial condition of the Company and its subsidiaries
individually, or in the aggregate and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company to perform any of its obligations under this Agreement in any
material respect.

    

    


    (d) Issuance of Shares.
The Units, the Preferred Shares and the Warrants to be issued at the Closing
have been duly authorized by all necessary corporate action and the Preferred
Shares, when paid for or issued in accordance with the terms hereof, shall be
validly issued and outstanding, fully paid and nonassessable and entitled to the
rights and preferences set forth in the Series A Certificate of Designation.
When the Conversion Shares and the Warrant Shares are issued in accordance with
the terms of the Series A Certificate of Designation and the Warrants,
respectively, such shares will be duly authorized by all necessary corporate
action and validly issued and outstanding, fully paid and nonassessable, and the
holders shall be entitled to all rights accorded to a holder of Common
Stock.

    


    (e) No Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated herein and
therein do not and will not (i) violate any provision of the Company’s
Certificate or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party or by which it or its properties or assets are bound, (iii) create or
impose a lien, mortgage, security interest, pledge, charge or encumbrance
(collectively, “Lien”) of any nature
on any property of the Company under any agreement or any commitment to which
the Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including Federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries are bound or affected, provided, however, that,
excluded from the foregoing in all cases are such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. Other
than as disclosed on Schedule 2.1(e), the
business of the Company and its subsidiaries is not being conducted in violation
of any laws, ordinances or regulations of any governmental entity, except for
possible violations which singularly or in the aggregate do not and will not
have a Material Adverse Effect. The Company is not required under Federal, state
or local law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under the
Transaction Documents, or issue and sell the Preferred Shares, the Warrants, the
Conversion Shares and the Warrant Shares in accordance with the terms hereof or
thereof (other than (x) any consent, authorization or order that has been
obtained as of the date hereof, (y) any filing or registration that has been
made as of the date hereof or (z) any filings which may be required to be made
by the Company with the Commission or state securities administrators subsequent
to the Closing).

     

    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    (f) Commission Documents,
Financial Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”),
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the “Commission
Documents”).  The Company has delivered or made available to
each of the Purchasers true and complete copies of the Commission Documents, at
the request of any such Purchaser. The Company has not provided to the
Purchasers any material non-public information or other information which,
according to applicable law, rule or regulation, was required to have been
disclosed publicly by the Company but which has not been so disclosed, other
than with respect to the transactions contemplated by this Agreement. A current
report on Form 8-K is required to be and shall be filed by the Company within
four business days after the Closing Date to disclose the Transaction Documents,
the Share Exchange Agreement, the Restructuring Agreements and transactions
related thereto (the “Form
8-K”).  At the time of the respective filings, the Form 10-Ks
and the Form 10-Qs complied and, in the case of the Form 8-K, will comply in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such
documents.  As of their respective filing dates, none of the Form
10-Ks, Form 10-Qs or Form 8-K contained, contain or will contain, as applicable,
any untrue statement of a material fact; and none 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 included in the Commission
Documents, and the financial statements of the Company and its subsidiaries that
will be included in the Form 8-K (a copy of which has been delivered to the
Purchaser), comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its subsidiaries as of 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 year-end audit
adjustments). The City Zone Statements (as defined in Section 4.2(u) hereof)
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 City Zone Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
and fairly present in all material respects, the financial conditions and
results of City Zone and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended.

     

    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    (g) Subsidiaries. Schedule 2.1(g)
hereto sets forth each subsidiary of the Company, showing the jurisdiction of
its incorporation or organization and showing the percentage of ownership of
each subsidiary. For the purposes of this Agreement, “subsidiary” shall
mean any corporation or other entity of which at least a majority of the
securities or other ownership interests having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. All of the outstanding shares of capital
stock of each subsidiary have been duly authorized and validly issued, and are
fully paid and nonassessable. Other than as contemplated by the Transaction
Documents, there are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Other
than as contemplated by the Transaction Documents, neither the Company nor any
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.  The Company and
its subsidiaries, as applicable, each have the unrestricted right to vote, and
(subject to limitations or restrictions imposed by applicable law) to receive
dividends and distributions on, all capital securities of its subsidiaries as
owned by the Company or any such subsidiary, as the case may be.

    


    (h) No Material Adverse
Effect. Other than as disclosed on Schedule 2.1(h),
since December 31, 2009, neither the Company nor any of its subsidiaries has
experienced or suffered any Material Adverse Effect.

    


    (i) No Undisclosed
Liabilities.  Other than as disclosed on Schedule 2.1(i) and
in the Form 8-K, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company’s or its subsidiaries’
respective businesses since December 31, 2009 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company or
its subsidiaries.

     

    
      
         


      

      
        6

        
          

        

      

      
         


      

    

     

    (j) No Undisclosed Events or
Circumstances. To the Company’s knowledge, no event or circumstance has
occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.

    


    (k) Indebtedness. Other
than as disclosed on Schedule 2.1(k), the
City Zone Financial Statements set forth all outstanding secured and unsecured
Indebtedness of the subsidiaries of the Company on a consolidated basis, or for
which the subsidiaries of the Company have commitments as of the date of such
City Zone Financial Statements or any subsequent period that would require
disclosure. For the purposes of this Agreement, “Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $25,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same should be reflected in the
Company’s balance sheet (or the notes thereto), except guaranties by endorsement
of negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business; and (c) the present value of any lease payments
in excess of $25,000 due under leases required to be capitalized in accordance
with GAAP. Except as set forth in Schedule 2.1(k),
neither the Company nor any subsidiary is in default with respect to any
Indebtedness.

    


    (l) Title to Assets.
Other than as disclosed on Schedule 2.1(l), each
of the Company and its subsidiaries has good and marketable title to (i) all
properties and assets purportedly owned or used by them as reflected in the City
Zone Financial Statements, (ii) all properties and assets necessary for the
conduct of their business as currently conducted, and (iii) all of its real and
personal property reflected in the City Zone Financial Statements free and clear
of any Lien. All leases of the Company and each of its subsidiaries are valid
and subsisting and in full force and effect.

    


    (m) Actions Pending.
There is no action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or any other proceeding pending or, to the knowledge of
the Company, threatened against the Company or any subsidiary which questions
the validity of this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or any other proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or
any subsidiary or any executive officers or directors of the Company or
subsidiary in their capacities as such.

     

    
      
         


      

      
        7

        
          

        

      

      
         


      

    

     

    (n) Compliance with Law.
Other than as disclosed on Schedule 2.1(n), the
business of the Company and the subsidiaries has been and is presently being
conducted in material compliance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances. The Company and each of
its subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business in all material respects as now being conducted by it
unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

    


    (o) Taxes. The Company
and each of the subsidiaries has accurately prepared and filed all federal,
state and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company and the subsidiaries for all current taxes
and other charges to which the Company or any subsidiary is subject and which
are not currently due and payable. None of the federal income tax returns of the
Company or any subsidiary have been audited by the Internal Revenue Service. The
Company has no knowledge of any additional assessments, adjustments or
contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company or any subsidiary for any
period, nor of any basis for any such assessment, adjustment or
contingency.

    


    (p) Certain Fees. Except
as set forth on Schedule 2.1(p)
hereto, no brokers fees, finders fees or financial advisory fees or commissions
will be payable by the Company or any subsidiary or any Purchaser with respect
to the transactions contemplated by this Agreement and the other Transaction
Documents.

    


    (q) Disclosure. Except as
set forth in Schedule
2.1(q), neither this Agreement nor the Schedules hereto nor any other
documents, certificates or instruments furnished to the Purchasers by or on
behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made
herein or therein, taken as a whole and in the light of the circumstances under
which they were made herein or therein, not false or misleading.

    


    (r) Operation of
Business. The Company and each of the subsidiaries owns or has the lawful
right to use all patents, trademarks, domain names (whether or not registered)
and any patentable improvements or copyrightable derivative works thereof,
websites and intellectual property rights relating thereto, service marks, trade
names, copyrights, licenses and authorizations, and all rights with respect to
the foregoing, which are necessary for the conduct of its business as now
conducted without any conflict with the rights of others, except where the
failure to so own or possess would not have a Material Adverse
Effect.

     

    
      
         


      

      
        8

        
          

        

      

      
         


      

    

     

    (s) Environmental
Compliance. Since their inception, neither the Company, nor any of its
subsidiaries have been, in violation of any applicable law relating to the
environment or occupational health and safety, where such violation would have a
material adverse effect on the business or financial condition of any of the
Company and its subsidiaries. The Company and its subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment
including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions,
discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Other than as
disclosed on Schedule
2.1(s), the Company and each of its subsidiaries are also in compliance
with all other limitations, restrictions, conditions, standards, requirements,
schedules and timetables required or imposed under all Environmental Laws. There
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its subsidiaries
that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance where, in
each of the foregoing clauses (i) and (ii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.

    


    (t) Books and Record Internal
Accounting Controls. Except as otherwise disclosed in the Form 10-Ks, the
Form 10-Qs, or the Form 8-K, the books and records of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any subsidiary. The
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company, 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 actions are taken with respect to any
differences.

    


    (u) Material Agreements.
Schedule 2.1(u)
sets forth any and all written or oral contracts, instruments, agreements,
commitments, obligations, plans or arrangements, the Company or any subsidiary
is a party to, that a copy of which would be required to be filed with the
Commission as an exhibit to a registration statement on Form S-1 (collectively,
the “Material
Agreements”) if the Company or any subsidiary were registering securities
under the Securities Act. The Company and each of its subsidiaries has in all
material respects performed all the obligations required to be performed by them
to date under the foregoing agreements, have received no notice of default and
are not in default under any Material Agreement now in effect the result of
which would cause a Material Adverse Effect. Except as restricted under
applicable laws and regulations, the incorporation documents, certificates of
designations or the Transaction Documents, no written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of the
Company or of any subsidiary limits or shall limit the payment of dividends on
the Company’s Preferred Shares, other preferred stock, if any, or its Common
Stock.

     

    
      
         


      

      
        9

        
          

        

      

      
         


      

    

     

    (v) Transactions with
Affiliates. Except as set forth in the Form 8-K and the Transaction
Documents there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions between
(a) the Company or any subsidiary on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any of its
subsidiaries, or any person owning any capital stock of the Company or any
subsidiary or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.

    


    (w) Securities Act of
1933. Assuming the accuracy of the representations of the Purchasers set
forth in Section 2.2 (d)-(h) hereof, the Company has complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Units hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Units, the Shares, the Warrants or similar
securities to, or solicit offers with respect thereto from, or enter into any
preliminary conversations or negotiations relating thereto with, any person, or
has taken or will take any action so as to bring the issuance and sale of any of
the Units, the Shares and the Warrants in violation of the registration
provisions of the Securities Act and applicable state securities laws, and
neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of any of the Units, the Shares and the
Warrants.

    


    (x) Governmental
Approvals. Except for the filing of any notice prior or subsequent to the
Closing Date that may be required under applicable state and/or Federal
securities laws (which if required, shall be filed on a timely basis), including
the filing of a Form D and a registration statement or statements pursuant to
the Registration Rights Agreement, and the filing of the Series A Certificate of
Designation with the Secretary of State for the State of Nevada, no
authorization, consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Units, the Preferred Shares
and the Warrants, or for the performance by the Company of its obligations under
the Transaction Documents.

     

    
      
         


      

      
        10

        
          

        

      

      
         


      

    

     

    (y) Employees. Except as
disclosed on Schedule
2.1(y), neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees. Except as
disclosed in the Form 8-K, neither the Company nor any subsidiary has any
employment contract, agreement regarding proprietary information,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer, employee or consultant to be employed or engaged by
the Company or such subsidiary required to be disclosed in the Commission
Documents or on the Form 8-K that is not so disclosed. Since December 31, 2009,
no officer, consultant or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, would have a Material
Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the
Company or any subsidiary.

    


    (z) Absence of Certain
Developments. Except as disclosed on Schedule 2.1(z),
since December 31, 2009, neither the Company nor any subsidiary
has:

    


    (i) other
than the Share Exchange Transaction, issued any stock, bonds or other corporate
securities or any rights, options or warrants with respect thereto;

    


    (ii) borrowed
any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
Company’s or such subsidiary’s business;

    


    (iii) discharged
or satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business;

    


    (iv) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements so
to purchase or redeem, any shares of its capital stock;

    


    (v) sold, assigned or transferred
any other tangible assets, or canceled any debts or claims, except in the
ordinary course of business;

    


                                    (vi) sold,
assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any person except to
customers in the ordinary course of business or to the Purchasers or their
representatives;

    


    (vii) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
prospective business;

     

    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    (viii) made
any changes in employee compensation except in the ordinary course of business
and consistent with past practices;

    


    (ix) made
capital expenditures or commitments therefor that aggregate in excess of
$25,000;

    


    (x) other
than the Share Exchange Transaction, entered into any other transaction other
than in the ordinary course of business, or entered into any other material
transaction, whether or not in the ordinary course of business;

    


    (xi) suffered
any material damage, destruction or casualty loss, whether or not covered by
insurance;

    


    (xii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment;

    


    (xiii) effected
any two or more events of the foregoing kind which in the aggregate would be
material to the Company or its subsidiaries; or

    


    (xiv) entered
into an agreement, written or otherwise, to take any of the foregoing
actions.

    


    (aa) Public Utility Holding
Company Act; Investment Company Act and U.S. Real Property Holding Corporation
Status. The Company is not a “holding company” or a “public utility
company” as such terms are defined in the Public Utility Holding Company Act of
1935, as amended. The Company is not, and as a result of and immediately upon
the Closing will not be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended.  The Company is not and has never been a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended.

    


    (bb) ERISA. No liability
to the Pension Benefit Guaranty Corporation has been incurred with respect to
any Plan (as defined below) by the Company or any of its subsidiaries which is
or would be materially adverse to the Company and its subsidiaries. The
execution and delivery of this Agreement and the other Transaction Documents and
the issuance and sale of the Units, the Preferred Shares and the Warrants will
not involve any transaction which is subject to the prohibitions of Section 406
of ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended, provided, that, if any of
the Purchasers, or any person or entity that owns a beneficial interest in any
of the Purchasers, is an “employee pension benefit plan” (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a “party in
interest” (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(bb), the term “Plan” shall mean an
“employee pension benefit plan” (as defined in Section 3 of ERISA) which is or
has been established or maintained, or to which contributions are or have been
made, by the Company or any subsidiary or by any trade or business, whether or
not incorporated, which, together with the Company or any subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.

     

    
      
         


      

      
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    (cc) Dilutive Effect. The
Company understands and acknowledges that it has an obligation to issue
Conversion Shares upon the conversion of the Preferred Shares in accordance with
this Agreement and the Series A Certificate of Designation and to issue the
Warrant Shares upon the exercise of the Warrants in accordance with this
Agreement and the Warrants regardless of the dilutive effect that such issuance
may have on the ownership interest of other stockholders of the
Company.

    


    (dd) No Integrated
Offering. Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Shares pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Shares
pursuant to Rule 506 under the Securities Act, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Shares to be integrated with other offerings. The Company does
not have any registration statement pending before the Commission or currently
under the Commission’s review and since June 27, 2008, except as contemplated
under the Transaction Documents, the Company has not offered or sold any of its
equity securities or debt securities convertible into shares of Common
Stock.

    


    (ee) Independent Nature of
Purchasers. The Company acknowledges that the obligations of each
Purchaser under the Transaction Documents are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance of the obligations of any other Purchaser under the
Transaction Documents. The Company acknowledges that the decision of each
Purchaser to purchase securities pursuant to this Agreement has been made by
such Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its subsidiaries
which may have been made or given by any other Purchaser or by any agent or
employee of any other Purchaser, and no Purchaser or any of its agents or
employees shall have any liability to any Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein, or in any
Transaction Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. The Company acknowledges that each Purchaser 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 Purchaser to
be joined as an additional party in any proceeding for such purpose. The Company
acknowledges that for reasons of administrative convenience only, the
Transaction Documents have been prepared by counsel for one of the Purchasers
and such counsel does not represent all of the Purchasers but only such
Purchaser and the other Purchasers have retained their own individual counsel
with respect to the transactions contemplated hereby. The Company acknowledges
that it has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.

     

    
      
         


      

      
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    (ff)
Sarbanes-Oxley
Act. The Company is in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),
and the rules and regulations promulgated thereunder, that are effective and for
which compliance by the Company is required as of the date hereof.

    


    (gg)
Transfer
Agent.  The Company has retained the transfer agent listed on
Schedule
2.1(gg).  Such transfer agent is eligible to transfer
securities via Depository Trust Company (“DTC”) and Deposit
Withdrawal Agent Commission (“DWAC”) and will
accept the Irrevocable Transfer Agent Instructions (as defined
below).

    


    (hh)
Share
Exchange.  Subject to the consummation of the Share Exchange
Agreement, the Company represents on behalf of City Zone, which will be a direct
wholly-owned subsidiary of the Company upon consummation of the Share Exchange
Transaction, as follows:

    


    (i) that
City Zone has the legal right, power and authority (corporate and other) to
enter into and perform its obligations under the Share Exchange Agreement to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of, and has authorized, executed and
delivered, the Share Exchange Agreement to which it is a party along with
related agreements contemplated by the Share Exchange Agreement; such agreements
constitute valid and legally binding obligations enforceable in accordance with
their terms, subject, as to enforceability, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles.

    


    (ii) that
City Zone does not own or lease properties or conduct any business outside of
the People’s Republic of China (“PRC”) and that City
Zone does not need to be duly qualified as a foreign corporation for the
transaction of business under the laws of any jurisdiction in which it is not
now so qualified.

    


    (iii) that
the execution and delivery by City Zone, of, and the performance by City Zone of
its obligations under, the Share Exchange Agreement to which it is a party and
the consummation by City Zone of the transactions contemplated therein will not:
(A) conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which City Zone is a
party or by which City Zone is bound or to which any of the properties or assets
of City Zone is subject; (B) result in any violation of the provisions of the
articles of association or business license of City Zone; and (C) will not
result in any violation of any laws, regulations, rules, orders, decrees,
guidelines or notices of the PRC, except that, with respect to (A), (B) and (C),
such conflict, breach or violation would not reasonably be expected to have a
Material Adverse Effect on City Zone.

     

    
      
         


      

      
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    (ii)
Additional PRC
Representations and Warranties.

     
 

    (i) All
material consents, approvals, authorizations or licenses requisite under PRC law
for the due and proper establishment and operation of the Company’s subsidiaries
doing business in the PRC (the “PRC Subsidiaries”)
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 the Company, City Zone and the PRC Subsidiaries and their capital
structure and operations including, without limitation, to the extent
applicable, tax bureau and customs authorities, have been duly completed in
accordance with the relevant PRC rules and regulations, except where the failure
to complete such filings and registrations does not, and would not, individually
or in the aggregate, have a Material Adverse Effect. The Company and the
Company’s subsidiaries have complied with all relevant PRC laws and regulations
regarding the contribution and payment of the registered capital of the PRC
Subsidiaries, the payment schedules of which have been approved by the relevant
PRC governmental authorities. There are no outstanding rights of, or commitments
made by the Company or any of its subsidiaries to sell any equity interests of
any PRC Subsidiary.

     

    (iii) Neither
the Company nor any subsidiary of the Company is in receipt of any letter or
notice from any relevant PRC governmental or quasi-governmental authority
notifying it of the revocation, or otherwise questioning the validity, of any
licenses or qualifications issued to it or any subsidy granted to it by any PRC
governmental authority, or the need for compliance or remedial actions in
respect of the activities carried out by the Company or such
subsidiary.

     

    (iv) The
Company and the subsidiaries of the Company have conducted their respective
business activities within their permitted scope of business or have otherwise
operated their respective businesses 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 the Company or any of its subsidiaries’
business which is subject to periodic renewal, neither the Company nor such
subsidiary has any knowledge of any grounds on which such requisite renewals
will not be granted by the relevant PRC governmental authorities.

     

    (v) Other
than as disclosed on Schedule 2.1(jj)(v),
with regard to employment and staff or labor, the Company and the subsidiaries
of the Company have complied with all applicable PRC laws and regulations in all
material respects, including without limitation, laws and regulations pertaining
to welfare fund contributions, social benefits, medical benefits, insurance,
retirement benefits, pensions or the like.

     

    
      
         


      

      
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    (vi) Each
of the Company, the subsidiaries of the Company and their respective directors
are aware of the content of the PRC Rules on Mergers and Acquisitions of
Domestic Enterprises by Foreign Investors jointly promulgated by the
Ministry of Commerce, the State Assets Supervision and Administration
Commission, the State Tax Administration, the State Administration of Industry
and Commerce, the China Securities Regulatory Commission (the “CSRC”) and the State
Administration of Foreign Exchange of the PRC on August 8, 2006 (the “M&A Rules”), and,
in particular, the relevant provisions thereof which purport to require offshore
special purpose vehicles, or SPVs, formed for listing purposes and controlled
directly or indirectly by PRC companies or individuals, to obtain the approval
of the CSRC prior to the listing and trading of their securities on an overseas
stock exchange. The Company has received legal advice specifically with respect
to the M&A Rules from its PRC counsel to the effect that such approval
requirements are not applicable to the Company or to the listing or quotation of
the Company’s securities on any National Stock Exchange (as hereinafter defined
in Section 3.22).

     

    (vii)
Other than as disclosed on Schedule
2.1(jj)(vii), the Company and the subsidiaries have taken all necessary
steps to comply with, and to ensure compliance by, each of their respective
stockholders, option holders, directors, officers, and employees that are, or
are directly or indirectly owned or controlled by, a PRC resident or citizen,
with any applicable rules and regulations of the relevant PRC government
agencies (including, without limitation, the Ministry of Commerce, National
Development and Reform Commission and the State Administration of Foreign
Exchange) relating to overseas investment by PRC residents and citizens or
overseas listing by offshore special purpose vehicles controlled directly or
indirectly by PRC companies and individuals (the “PRC Overseas Investment and
Listing Regulations”), including, without limitation, ensuring that each
such stockholder, option holder, director, officer and employee that is, or is
directly or indirectly owned or controlled by, a PRC resident or citizen,
complete any registration and other procedures required under applicable PRC
Overseas Investment and Listing Regulations.

    


    (viii)
Except as set forth in Schedule
2.1(jj)(viii), the PRC subsidiaries are not currently prohibited,
directly or indirectly, from paying any dividends to their respective equity
holders, nor are any of them prohibited, from making any other distribution on
their respective equity interests, or from repaying any loans or
advances.

     

    (ix)
Neither the Company, nor any subsidiary, nor any of their respective properties,
assets or revenues has any right of immunity under British Virgin Islands
(“BVI”) or PRC
law, from any legal action, suit or proceeding, from the giving of any relief in
any such legal action, suit or proceeding, from set-off or counterclaim, from
the jurisdiction of any BVI, PRC, New York or U.S. federal court, from service
of process, attachment upon or prior to judgment, or attachment in aid of
execution of judgment, or from execution of a judgment, or other legal process
or proceeding for the giving of any relief or for the enforcement of a judgment,
in any such court, with respect to its obligations, liabilities or any other
matter under or arising out of or in connection with the Transaction Documents;
and, to the extent that the Company, or any subsidiary or any of their
respective properties, assets or revenues may have or may hereafter become
entitled to any such right of immunity in any such court in which proceedings
may at any time be commenced, each of the Company and the subsidiaries waives or
will waive such right to the extent permitted by law and has consented to such
enforcement as provided in Section 7.3 of this Agreement.

     

    
      
         


      

      
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    (jj) Restructuring
Transaction.  The Company represents on behalf of City Zone,
which is a direct wholly-owned subsidiary of the Company due to the consummation
of the Share Exchange Transaction, as follows:

    


    (i) that
City Zone had the legal right, power and authority (corporate and other) to
enter into and perform its obligations under each of the agreements set forth on
Schedule
2.1(kk)(i) (collectively, the “Restructuring
Agreements”), to which it is a party and took all necessary corporate
action to authorize the execution, delivery and performance of, each of the
Restructuring Agreements to which it was a party; and each of the Restructuring
Agreements to which City Zone was a party constituted a valid and legally
binding obligation of City Zone, enforceable in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights and to general equity principles.

    


    (ii) City
Zone does not directly own or lease properties or conduct any business outside
of the People’s Republic of China (“PRC”)
and  City Zone does not need to be duly qualified as a foreign
corporation for the transaction of business under the laws of any jurisdiction
in which it is not now so qualified.

    


    (iii) that
the execution and delivery by City Zone, of, and the performance by City Zone of
its obligations under, each of the Restructuring Agreements to which it was a
party and the consummation by City Zone of the transactions contemplated therein
did not: (A) conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which City
Zone is a party or by which City Zone is bound or to which any of the properties
or assets of City Zone is subject; (B) result in any violation of the provisions
of the articles of association or business license of City Zone; and (C) will
not result in any violation of any laws, regulations, rules, orders, decrees,
guidelines or notices of the PRC or Hong Kong law, except that, with respect to
(A), (B) and (C), such conflict, breach or violation would not reasonably be
expected to have a Material Adverse Effect on City Zone or the PRC
Subsidiaries.

    


    (iv) that
each of the Restructuring Agreements is in proper and enforceable legal form
under the laws of the PRC and was properly filed with the appropriate authority
in the PRC; and any stamp or similar tax has been paid in respect of any of the
Restructuring Agreements to ensure the legality, validity, enforceability or
admissibility in evidence of each of the Restructuring Agreements in the PRC,
except as set forth on Schedule
2.1(kk)(iv).

    


    (kk)
No Additional
Agreements.  Neither the Company nor any of its subsidiaries
has any agreement or understanding with any Purchaser with respect to the
transactions contemplated by the Transaction Documents other than as specified
in the Transaction Documents.

     

    
      
         


      

      
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    (ll) Foreign Corrupt Practices
Act.  None of the Company nor any of its subsidiaries nor to
the knowledge of the Company, any agent or other person acting on behalf of the
Company or any of its subsidiaries, has, directly or indirectly, (i) used any
funds, or will use any proceeds from the sale of the Units, 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 of the
Company (or made by any Person acting on their behalf of which the Company is
aware) or any members of their respective management which is in violation of
any applicable law, or (iv) has violated in any material respect any provision
of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and
regulations thereunder which was applicable to the Company or any of its
subsidiaries.

    


    (mm) PFIC.  None
of the Company or any of its subsidiaries 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.

    


    (nn) OFAC. None of the
Company or any of its subsidiaries nor, to the knowledge of the Company, any
director, officer, agent, employee, Affiliate or Person acting on behalf of any
of the Company or any of its subsidiaries, 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
Units, or lend, contribute or otherwise make available such proceeds to any
subsidiary of the Company, 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.

    


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

    


    Section
2.2       Representations and
Warranties of the Purchasers. Each Purchaser hereby makes the following
representations and warranties to the Company as of the date hereof and the
Closing Date, with respect solely to itself and not with respect to any other
Purchaser:

    


    (a) Organization and Good
Standing of the Purchasers. If the Purchaser is an entity, such Purchaser
is a corporation, partnership or limited liability company duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.

     

    
      
         


      

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

    


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

    


    (d) Acquisition for
Investment. Each Purchaser is acquiring the Units, and the underlying
Preferred Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Each Purchaser does not have a present intention to sell the Units, Preferred
Shares or the Warrants, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of the Units, Preferred Shares
or the Warrants to or through any person or entity; provided, however, that by
making the representations herein and subject to Section 2.2(h) below, such
Purchaser does not agree to hold the Units, Preferred Shares or the Warrants for
any minimum or other specific term and reserves the right to dispose of the
Units, Preferred Shares or the Warrants at any time in accordance with Federal
and state securities laws applicable to such disposition. Each Purchaser
acknowledges that it is able to bear the financial risks associated with an
investment in the Units, Preferred Shares and the Warrants and that it has been
given full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries and received such information as it
has deemed necessary or appropriate to conduct its due diligence investigation
and has sufficient knowledge and experience in investing in companies similar to
the Company in terms of the Company’s stage of development so as to be able to
evaluate the risks and merits of its investment in the Company. Each Purchaser
further acknowledges that such Purchaser understands the risks of investing in
companies domiciled and/or which operate primarily in the PRC and that the
purchase of the Units, Preferred Shares and Warrants involves substantial
risks.

     

    
      
         


      

      
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    (e) Status of Purchasers.
Each Purchaser is an “accredited investor” as defined in Regulation D
promulgated under the Securities Act. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act and such
Purchaser is not a broker-dealer, nor an affiliate of a
broker-dealer.

    


    (f) Opportunities for Additional
Information. Each Purchaser acknowledges that such Purchaser has had the
opportunity to ask questions of and receive answers from, or obtain additional
information from, the executive officers of the Company concerning the financial
and other affairs of the Company. In making the decision to invest in the
Company and its business, each Purchaser hereby acknowledges that such Purchaser
has relied solely upon the City Zone Financial Statements and other written
information provided to such Purchaser by the Company and City
Zone.

    


    (g) No General
Solicitation. Each Purchaser acknowledges that the Units were not offered
to such Purchaser by means of any form of general or public solicitation or
general advertising, or publicly disseminated advertisements or sales
literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of
communications.

    


    (h) Rule 144. Such
Purchaser understands that the Shares must be held indefinitely unless such
Shares are registered under the Securities Act or an exemption from registration
is available. Such Purchaser acknowledges that such Purchaser is familiar with
Rule 144 of the rules and regulations of the Commission, as amended, promulgated
pursuant to the Securities Act (“Rule 144”), and that
such person has been advised that Rule 144 permits resales only under certain
circumstances. Such Purchaser understands that to the extent that Rule 144 is
not available, such Purchaser will be unable to sell any Shares without either
registration under the Securities Act or the existence of another exemption from
such registration requirement.

    


    (i) General. Such
Purchaser understands that the Units are being offered and sold in reliance on a
transactional exemption from the registration requirements of Federal and state
securities laws and the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Purchaser set forth herein in order to determine the applicability of such
exemptions and the suitability of such Purchaser to acquire the
Units.

    


    (j) Independent
Investment. Except as may be disclosed in any filings with the Commission
by the Purchasers under Section 13 and/or Section 16 of the Exchange Act, no
Purchaser has agreed to act with any other Purchaser for the purpose of
acquiring, holding, voting or disposing of the Shares purchased hereunder for
purposes of Section 13(d) under the Exchange Act, and each Purchaser is acting
independently with respect to its investment in the Shares.

     

    
      
         


      

      
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    (k) Trading Activities.
Each Purchaser agrees that it shall not, directly or indirectly, engage in any
short sales with respect to the Common Stock for a period of twenty four (24)
months following the Closing Date.

    


    (l) Brokers. Other than
the Placement Agent, each Purchaser has no knowledge of any brokerage or
finder’s fees or commissions that are or will be payable by the Company or any
subsidiary to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other person or entity with respect to the
transactions contemplated by this Agreement.

    


    


    ARTICLE
III

    


    Covenants

    


    The
Company covenants with each of the Purchasers as follows, which covenants are
for the benefit of the Purchasers and their permitted assignees (as defined
herein).

    


    Section
3.1      Securities
Compliance. The Company shall notify the Commission in accordance with
its rules and regulations, of the transactions contemplated by any of the
Transaction Documents, including filing a Form D with respect to the Units, the
Preferred Shares, Warrants, the Conversion Shares and Warrant Shares as required
under Regulation D and applicable “blue sky” laws, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Units, the
Preferred Shares, the Warrants, Conversion Shares and the Warrant Shares to the
Purchasers or subsequent holders.

    


    Section
3.2       Registration and
Listing. The Company shall (a) comply in all respects with its reporting
and filing obligations under the Exchange Act, (b) comply with all requirements
related to any registration statement filed pursuant to the Registration Rights
Agreement, and (c) not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act except as
permitted under the Transaction Documents. Subject to the terms of the
Transaction Documents, the Company further covenants that it will take such
further action as the Purchasers may reasonably request, all to the extent
required from time to time to enable the Purchasers to sell the Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, as amended. Upon the
request of the Purchasers, the Company shall deliver to the Purchasers a written
certification of a duly authorized officer as to whether it has complied with
such requirements.

     

    
      
         


      

      
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    Section
3.3       Inspection Rights.
The Company shall permit, during normal business hours and upon reasonable
request and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as such Purchaser shall own Shares which, in
the aggregate, represent more than 5% of the total combined voting power of all
voting securities then outstanding on a fully diluted basis (which shall include
all Conversion Shares but not Warrant Shares) (“Information Rights
Purchasers”), for purposes reasonably related to such Purchaser’s
interests as a stockholder to examine and make reasonable copies of and extracts
from the records and books of account of, and visit and inspect the properties,
assets, operations and business of the Company and any subsidiary, and to
discuss the affairs, finances and accounts of the Company and any subsidiary
with any of its officers, consultants, directors, and key employees. Such
Purchaser agrees that such Purchaser and its employees, agents and
representatives will keep confidential and will not disclose, divulge or use
(other than for purposes of monitoring its investment in the Company) any
confidential information which such Purchaser may obtain from the Company
pursuant to financial statements, reports and other materials submitted by the
Company to such Purchaser pursuant to this Agreement or pursuant to inspection
rights granted hereunder, unless such information is known to the public through
no fault of such Purchaser or his or its employees or representatives; provided,
however, that a Purchaser may disclose such information (i) to its attorneys,
accountants and other professionals in connection with their representation of
such Purchaser in connection with such Purchaser’s investment in the Company,
(ii) to any prospective permitted transferee of the Shares, so long as the
prospective transferee agrees to be bound by the provisions of this Section 3.3,
(iii) to any general partner or affiliate of such Purchaser. The Company may
require each Purchaser to execute a separate confidentiality agreement in form
and substance reasonably acceptable to the Company as a prerequisite to the
exercise of such Purchaser’s inspection rights pursuant to this Section
3.3.

    


    Section
3.4       Compliance with Laws.
The Company shall comply, and cause each subsidiary to comply in all material
respects, with all applicable laws, rules, regulations and orders.

    


    Section
3.5       Keeping of Records and Books
of Account. The Company shall keep and cause each subsidiary to keep
adequate records and books of account, in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be
made.

    


    Section
3.6      Reporting
Requirements. If the Commission ceases making periodic reports filed
under the Exchange Act available via the Internet, then at a Purchaser’s request
the Company shall furnish the following to such Purchaser so long as such
Purchaser shall beneficially own any Shares:

    


    (a) Quarterly
Reports filed with the Commission on Form 10-Q as soon as practicable after the
document is filed with the Commission, and in any event within five (5) business
days after the document is filed with the Commission;

     

    
      
         


      

      
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    (b) Annual
Reports filed with the Commission on Form 10-K as soon as practicable after the
document is filed with the Commission, and in any event within five (5) business
days after the document is filed with the Commission; and

    


    (c) Copies
of all notices and information, including without limitation notices and proxy
statements in connection with any meetings, that are provided to holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such holders of Common Stock.

    


    Section
3.7      Amendments. The
Company shall not amend or waive any provision of the Articles or Bylaws of the
Company in any way that would adversely affect the liquidation preferences,
dividends rights, conversion rights, voting rights or redemption rights of the
Preferred Shares.

    


    Section
3.8       Other Agreements. The
Company shall not enter into any agreement the terms of which would restrict or
impair the ability of the Company or any subsidiary to perform its or their
respective obligations under any Transaction Document.

    


    Section
3.9      Distributions. So
long as any Preferred Shares remain outstanding, the Company agrees that it
shall not (i) declare or pay any dividends or make any distributions to any
holder(s) of Common Stock unless such dividends or distributions are also
simultaneously paid or made to the holders of the Preferred Shares on an
as-converted basis or (ii) purchase or otherwise acquire for value, directly or
indirectly, any Common Stock or other equity security of the
Company.

    


    Section
3.10     Use of Proceeds. The
net proceeds from the sale of the Units hereunder shall be used by the Company
for working capital and general corporate purposes and not to redeem any Common
Stock or securities convertible, exercisable or exchangeable into Common Stock
or to settle any outstanding litigation.

    


    Section
3.11    Reservation of
Shares. So long as any of the Preferred Shares or Warrants remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than one hundred
twenty five percent (125%) of the aggregate number of shares of Common Stock
needed to provide for the issuance of the Conversion Shares and the Warrant
Shares.

    


    Section
3.12    Transfer
Agent.  The Company has engaged the transfer agent and
registrar listed on Schedule 2.1(gg) (the
“Transfer
Agent”) with respect to its Common Stock, who is DTC and DWAC
eligible.

    


    Section
3.13     Disposition of
Assets. So long as any Preferred Shares remain outstanding, neither the
Company nor any subsidiary shall sell, transfer or otherwise dispose of any of
its properties, assets and rights including, without limitation, its software
and intellectual property, to any person except for (i) sales to customers in
the ordinary course of business (ii) sales or transfers between the Company and
its subsidiaries or between subsidiaries of the Company, or (iii) otherwise with
the prior written consent of the holders of a majority of the Preferred Shares
then outstanding.

     

    
      
         


      

      
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    Section
3.14     Reporting Status. So
long as a Purchaser beneficially owns any of the Shares, the Company shall
timely file all reports required to be filed with the Commission pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.

    


    Section
3.15     Disclosure of
Transaction. The Company shall issue a press release describing the
material terms of the transactions contemplated hereby (the “Press Release”) as
soon as practicable after the Closing but in no event later than 9:00 A.M.
Eastern Time on the fourth Business Day following the Closing. The Company shall
also file with the Commission, the Form 8-K describing the material terms of the
transactions contemplated hereby (and attaching as exhibits thereto this
Agreement, the Registration Rights Agreement, the Series A Certificate of
Designation, the Securities Escrow Agreement, form of Warrant, the Press
Release, and the Share Exchange Agreement) as soon as practicable following the
Closing Date but in no event more than four (4) Business Days following the
Closing Date, which Press Release and Form 8-K shall be subject to prior review
and comment by counsel for the Purchasers. “Business Day” means
any day during which the American Stock Exchange (“AMEX”) (or other
principal exchange) shall be open for trading.

    


    Section
3.16     Disclosure of Material
Information. The Company and its subsidiaries covenant and agree that
neither it nor any other person acting on its or their behalf has provided or,
from and after the filing of the Press Release, will provide any Purchaser or
its agents or counsel with any information that the Company believes constitutes
material non-public information (other than with respect to the transactions
contemplated by this Agreement), unless prior thereto such Purchaser shall have
executed a specific written agreement regarding the confidentiality and use of
such information, provided, however, that the
non-disclosure and confidentiality agreement between the Purchasers and the
Placement Agent, as in effect on the date hereof, shall not be considered to be
a valid confidentiality and non-disclosure agreement for the purpose of
consenting to any disclosure of material non-public information that shall be
disclosed to the Purchaser subsequent to the Closing Date. The Company understands
and confirms that each Purchaser shall be relying on the foregoing covenants in
effecting transactions in securities of the Company. The Company shall not
disclose the identity of any Purchaser in any filing with the SEC except as
required by the rules and regulations of the SEC thereunder.  In the
event of a breach of the foregoing covenant by the Company, any of its
subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Purchaser may notify the Company, and the Company shall
make public disclosure of such material nonpublic information within two (2)
trading days of such notification.

     

    
      
         


      

      
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    Section
3.17     Pledge of Securities.
The Company acknowledges and agrees that the Shares may be pledged by a
Purchaser in connection with a bonafide margin agreement
or other loan or financing arrangement that is secured by the Common Stock. The
pledge of Common Stock shall not be deemed to be a transfer, sale or assignment
of the Common Stock hereunder, and no Purchaser effecting a pledge of Common
Stock shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document; provided, that a
Purchaser and its pledgee shall be required to comply with the provisions of
Article V hereof in order to effect a sale, transfer or assignment of Common
Stock to such pledgee. At a Purchaser’s expense, the Company hereby agrees to
execute and deliver such documentation as a pledgee of the Common Stock may
reasonably request in connection with a pledge of the Common Stock to such
pledgee by a Purchaser.

    


    Section
3.18     Lock-Up Agreements.
The persons listed on Schedule 3.18
attached hereto shall be subject to the terms and provisions of a lock-up
agreement in substantially the form attached as Exhibit D hereto (the
“Lock-Up
Agreement”), which shall provide the manner in which certain
stockholders, officers and directors of the Company may sell, transfer or
dispose of their shares of Common Stock.

    


    Section
3.19    Investor and Public
Relations Escrow. At the Closing, the Company shall cause to be
deposited, Four Hundred Thousand Dollars ($400,000) of the Purchase Price funded
on the Closing Date in an escrow account to be used by the Company in connection
with investor and public relations pursuant to the terms of the Investor and
Public Relations Escrow Agreement.

    


    Section
3.21     DTC. Not later than
the Effective Date of the Registration Statement (as defined in the Registration
Rights Agreement), the Company shall cause its Common Stock to be eligible for
transfer with its transfer agent pursuant to the Depository Trust Company
Automated Securities Transfer Program.

    


    Section
3.20     Chief Financial
Officer. As soon as possible following the Closing, but no later than
ninety (90) days after the Closing Date, the Company shall use its best efforts
to appoint an individual to serve as Chief Financial Officer of the Company who
is fluent in English, who shall be mutually acceptable to the Company and the
Placement Agent.  Notwithstanding the foregoing, the Placement Agent
shall not unreasonably withhold approval of the Chief Financial Officer
identified by the Company.

    


    Section
3.21     DTC. Not later than
the Effective Date of the Registration Statement (as defined in the Registration
Rights Agreement), the Company shall cause its Common Stock to be eligible for
transfer with its transfer agent pursuant to the Depository Trust Company
Automated Securities Transfer Program.

    


    Section
3.22     Sarbanes-Oxley Act.
The Company shall be in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated
thereunder, as required under such Act.

    


    Section
3.23     Form D. The Company
agrees to file a Form D with respect to the securities as required by
Rule 506 under Regulation D and to provide a copy thereof to the Purchasers
promptly after such filing.

     

    
      
         


      

      
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    Section
3.24     No Integrated
Offerings. The Company shall not make any offers or sales of any security
(other than the securities being offered or sold hereunder) under circumstances
that would require registration of the securities being offered or sold
hereunder under the Securities Act.

    


    Section
3.25     No Commissions in Connection
with Conversion of Preferred Shares. In connection with the conversion of
the Preferred Shares into Conversion Shares, neither the Company nor any Person
acting on its behalf will take any action that would result in the Conversion
Shares being exchanged by the Company other than with the then existing holders
of the Preferred Shares exclusively where no commission or other remuneration is
paid or given directly or indirectly for soliciting the exchange in compliance
with Section 3(a)(9) of the Securities Act.

    


    Section
3.26     Option Plan
Restrictions.  The Company may establish an officer, director,
employee or consultant stock option or stock incentive plan, provided, however,
that such stock option plan does not permit the issuance of more than ten
percent (10%) of the number of shares of Common Stock then issued and
outstanding and any such issuance of stock options under the stock incentive
plan shall not be issued at a price below the market price on the day the option
is granted.

    


    Section
3.27    Direct
Lending.  Neither the Company nor any of its subsidiaries shall
engage in any transaction whereby it borrows money from companies other than
from its wholly-owned subsidiaries or financial institutions and lends money
directly to other companies other than its wholly-owned subsidiaries unless such
practice is lawful under the laws of the governing jurisdiction and the Company
obtains the prior consent of the holders of a majority of the Preferred Shares
then outstanding.

    


    Section
3.28    No Manipulation of
Price.  The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.

    


    Section
3.29     Additional Negative
Covenants.  For a period of two (2) years following the Closing
Date, the Company agrees that it will not, without the consent of the Placement
Agent:

    


    (a)
engage in any business other than businesses engaged in or proposed to be
engaged in by the Company on the date hereof or businesses similar
thereto;

    


    (b) merge
or consolidate with any person or entity (other than mergers of wholly owned
subsidiaries into the Company), or sell, lease or otherwise dispose of its
assets other than in the ordinary course of business involving an aggregate
consideration of more than ten percent (10%) of the book value of its assets on
a consolidated basis in any 12-month period, or liquidate, dissolve,
recapitalize or reorganize;

     

    
      
         


      

      
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    (c) incur
any indebtedness for borrowed money or become a guarantor or otherwise
contingently liable for any such indebtedness except for obligations incurred in
the ordinary course of business;

     

    (d) enter
into any new agreement or make any amendment to any existing agreement, which by
its terms would restrict the Company's performance of its obligations to holders
of the Preferred Shares pursuant to this Agreement or any agreement contemplated
hereby;

     

    (e) enter
into any agreement with any holder or prospective holder of any securities of
the Company providing for the granting to such holder of registration rights,
preemptive rights, special voting rights or protection against
dilution;

    


    (f) issue
any securities other than the Exempt Issuance (as defined in the Series A
Certificate of Designation), either as compensation or otherwise;
or

    


    (g)
without the consent of a majority of such Purchasers owning the Units at the
time of such offering, conduct an offering of securities at a price per share
less than one hundred and twenty percent (120%) of the Purchase
Price.

    


    Section
3.30    Corporate Governance
Requirements. As soon as possible, but no later than six (6) months after
the Closing Date, the Company shall comply with all Nasdaq Corporate Governance
standards, including, but not limited to, appointment of three (3) independent
directors and establishment of an audit committee of at least three (3) members
(the “Audit
Committee”) that has adopted a formal written charter of the Audit
Committee.

    


    Section
3.31     Insurance. As
soon as possible, but no later than sixty (60) days after the Closing Date, the
Company shall obtain from a financially sound and reputable insurer Directors
and Officers liability insurance in the amount of $1,000,000. The Directors and
Officers liability insurance policy shall not be cancelable by the Company
without the prior written approval of the Placement Agent.

     

    ARTICLE
IV

    


    CONDITIONS

    


    Section
4.1       Conditions Precedent to the
Obligation of the Company to Sell the Units. The obligation hereunder of
the Company to issue and sell the Units, and the underlying Preferred Shares and
the Warrants to the Purchasers is subject to the satisfaction or waiver, at or
before the Closing, of each of the conditions set forth below. These conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion.

    


    (a) Accuracy of Each Purchaser’s
Representations and Warranties. The representations and warranties of
each Purchaser in this Agreement and each of the other Transaction Documents to
which such Purchaser is a party shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at
that time, except for representations and warranties that are expressly made as
of a particular date, which shall be true and correct in all material respects
as of such date.

     

    
      
         


      

      
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    (b) Performance by the
Purchasers. Each Purchaser shall have performed, satisfied and complied
in all respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Purchaser 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 which prohibits the consummation of any of
the transactions contemplated by this Agreement.

    


    (d) Delivery of Purchase
Price. The Purchase Price for the Units shall have been delivered to the
escrow agent pursuant to the Escrow General Agreement.

    


    (e) Delivery of Transaction
Documents. The Transaction Documents to which the Purchasers are parties
shall have been duly executed and delivered by the Purchasers to the
Company.

    


    (f) Share Exchange
Transaction. Prior to the Closing, the Share Exchange Transaction shall
have been consummated.

    


    Section
4.2       Conditions Precedent to the
Obligation of the Purchasers to Purchase the Units. The obligation
hereunder of each Purchaser to acquire and pay for the Units is subject to the
satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for each Purchaser’s sole benefit and may be
waived by such Purchaser at any time in its sole discretion.

    


    (a) Accuracy of the Company’s
Representations and Warranties. Each of the representations and
warranties of the Company in this Agreement and the other Transaction Documents
shall be true and correct in all respects as of the date when made and as of the
Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be true
and correct in all respects as of such date.

    


    (b) Performance by the
Company. The Company shall have performed, satisfied and complied in all
respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company 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 which prohibits the consummation of any of
the transactions contemplated by this Agreement.

     

    
      
         


      

      
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    (d) No Proceedings or
Litigation. No action, suit or proceeding before any arbitrator or any
governmental authority shall have been commenced, and no investigation by any
governmental authority shall have been threatened, against the Company or any
subsidiary, or any of the officers, directors or affiliates of the Company or
any subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.

    


    (e) Series A Certificate of
Designation of Rights and Preferences. Prior to the Closing, the Series A
Certificate of Designation shall have been filed with the Secretary of State of
Nevada.

    


    (f) Opinions of Counsel,
Etc. At the Closing, the Purchasers shall have received an opinion of
U.S. counsel to the Company and an opinion of BVI counsel to City Zone, dated
the date of the Closing, in substantially the form of Exhibit H hereto, and
such other certificates and documents as the Purchasers or its counsel shall
reasonably require incident to the Closing. Four (4) days prior to Closing, the
Purchasers shall have received an opinion of PRC counsel to the PRC
Subsidiaries, dated the date of the Closing with respect to the Share Exchange
Agreement and such other matters as the Purchasers may reasonably
request.

    


    (g) Registration Rights
Agreement. On the Closing Date, the Company shall have executed and
delivered the Registration Rights Agreement to each Purchaser.

     
 

    (h) Certificates. The
Company shall have executed and delivered to the Purchasers the certificates (in
such denominations as such Purchaser shall request) for the Preferred Shares and
the Warrants being acquired by such Purchaser at the Closing (in such
denominations as such Purchaser shall request) to such address set forth next to
each Purchasers name on Exhibit A with
respect to the Closing.

    


    (i) Resolutions. The
Board of Directors of the Company shall have adopted resolutions consistent with
Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the
“Resolutions”).

    


    (j) Reservation of
Shares. As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Preferred Shares and the exercise of the Warrants, a
number of shares of Common Stock equal to one hundred twenty five percent (125%)
of the aggregate number of Conversion Shares issuable upon conversion of the
Preferred Shares issued or to be issued pursuant to this Agreement and the
number of Warrant Shares issuable upon exercise of the number of Warrants issued
or to be issued pursuant to this Agreement.

    


    (k) Lock-Up Agreements.
As of the Closing Date, the persons listed on Schedule 3.18 hereto
shall have delivered to the Purchasers fully executed Lock-Up Agreements in the
form of Exhibit
D, respectively, attached hereto.

     

    
      
         


      

      
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    (l) Secretary’s
Certificate. The Company shall have delivered to such Purchaser a
secretary’s certificate, dated as of the Closing Date, as to (i) the resolutions
adopted by the Board of Directors of the Company consistent with Section 2.1(b),
(ii) the Articles, (iii) the Bylaws, (iv) the Series A Certificate of
Designation, each as in effect at the Closing, and (v) the authority and
incumbency of the officers of the Company executing the Transaction Documents
and any other documents required to be executed or delivered in connection
therewith.

    


    (m) Officer’s
Certificate. The Company shall have delivered to the Purchasers a
certificate of an executive officer of the Company, dated as of the Closing
Date, confirming the accuracy of the Company’s representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this Section 4.2 as of the Closing
Date.

    


    (n) Escrow General
Agreement. On the Closing Date, the Company and the escrow agent shall
have executed and delivered the Escrow General Agreement in the form of Exhibit E-1 attached
hereto to each Purchaser.

    


    (o) Securities Escrow
Agreement. On the Closing Date, the Securities Escrow Agreement shall
have been executed by the parties thereto and the Escrow Shares (as defined in
the Securities Escrow Agreement) shall have been deposited into the escrow
account pursuant to the terms of the Securities Escrow Agreement in the form of
Exhibit E-2
attached hereto.

    


    (p) Investor and Public
Relations Escrow.  On the Closing Date, the Investor and Public
Relations Escrow Agreement shall have been executed by the parties thereto and
the Escrowed Funds (as defined in the Investor and Public Relations Escrow
Agreement) shall have been deposited with the escrow agent pursuant to the terms
of the Investor and Public Relations Escrow Agreement in the form of Exhibit E-3 attached
hereto.

    


    (q) Material Adverse
Effect. No Material Adverse Effect shall have occurred at or before the
Closing Date.

    


    (r) Share Exchange
Transaction. Prior to the Closing Date, the Share Exchange Transaction
shall have been consummated.

    


    (s) Financial Statements.
No later than the third Business Day prior to the Closing Date, the Company
shall have delivered to the Purchasers the audited financial statements for the
fiscal years ended December 31, 2008 and 2009 audited by  KCCW
Accountancy Corp, Certified Public Accountants (the “City Zone Financial
Statements”), which City Zone Financial Statements shall be acceptable to
the Purchasers.

    


    (t) Capitalization Table.
No later than the third Business Day prior to the Closing Date, the Company
shall have delivered to each of the Purchasers a capitalization table setting
forth (i) its capitalization, on a fully diluted basis immediately prior to the
Closing and (ii) its pro forma capitalization, on a fully diluted basis, giving
effect to the consummation of the transactions contemplated by this Agreement.
In each case, the table shall list all outstanding options, warrants and other
securities convertible into equity of the Company.

     

    
      
         


      

      
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    (u) Form 8-K. No later
than three (3) Business Days prior to the Closing Date, the Company shall have
delivered to each of the Purchasers, a Form 8-K, in substantially final form,
that it proposes to file with the Commission, which Form 8-K, subject only to
Purchaser’s comments, if any, shall be in form and substance reasonably
acceptable to the Purchasers and the Placement Agent.

    


    (v) Draft Press Release.
No later than two (2) Business Days prior to the Closing Date, the Company shall
have delivered to each of the Purchasers, a draft of the press release, in form
and substance reasonably acceptable to the Placement Agent, announcing the
transaction contemplated hereby (the “Draft Press
Release”), in substantially final form, that it proposes to accredit to
the Placement Agent as part of the Form 8-K and distribute to the public, which
Draft Press Release shall be reasonably acceptable to the Purchasers and the
Placement Agent.

    


    


    ARTICLE
V

    


    Stock
Certificate Legend

    


    Section
5.1       Legend. Each
certificate representing the Preferred Shares, the Warrants and Warrant Shares
and if appropriate, securities issued upon conversion or exercise thereof, shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required by applicable state securities or “blue
sky” laws):

    


    THESE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

    


    The
Company agrees to reissue certificates representing any of the Conversion Shares
or the Warrant Shares, without the legend set forth above if at such time, prior
to making any transfer of any such securities, such holder thereof shall give
written notice to the Company describing the manner and terms of such transfer
and removal as the Company may reasonably request. Such proposed transfer and
removal will not be effected until: (a) either (i) the Company has received an
opinion of counsel reasonably satisfactory to the Company, to the effect that
the registration of the Conversion Shares or the Warrant Shares under the
Securities Act is not required in connection with such proposed transfer, (ii) a
registration statement under the Securities Act covering such proposed
disposition has been filed by the Company with the Commission and has become
effective under the Securities Act, (iii) the Company has received other
evidence reasonably satisfactory to the Company that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the holder provides the Company with reasonable assurances
that such security can be sold pursuant to Rule 144 under the Securities Act;
and (b) either (i) the Company has received an opinion of counsel reasonably
satisfactory to the Company, to the effect that registration or qualification
under the securities or “blue sky” laws of any state is not required in
connection with such proposed disposition, or (ii) compliance with applicable
state securities or “blue sky” laws has been effected or a valid exemption
exists with respect thereto. The Company will respond to any such notice from a
holder 

     

    
      
         


      

      
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      within
five (5) business days. In the case of any proposed transfer under this Section
5.1, the Company will use reasonable efforts to comply with any such applicable
state securities or “blue sky” laws, but shall in no event be required, (x) to
qualify to do business in any state where it is not then qualified, (y) to take
any action that would subject it to tax or to the general service of process in
any state where it is not then subject, or (z) to comply with state securities
or “blue sky” laws of any state for which registration by coordination is
unavailable to the Company. The restrictions on transfer contained in this
Section 5.1 shall be in addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this Agreement.
Whenever a certificate representing the Conversion Shares or the Warrant Shares
is required to be issued to a Purchaser without a legend, in lieu of delivering
physical certificates representing the Conversion Shares or the Warrant Shares
(provided that a registration statement under the Securities Act providing for
the resale of the Warrant Shares and Conversion Shares is then in effect), the
Company may cause its transfer agent to electronically transmit the Conversion
Shares or Warrant Shares to a Purchaser by crediting the account of such
Purchaser or such Purchaser’s prime broker with the DTC through its DWAC system
(to the extent not inconsistent with any provisions of this
Agreement).

    

    


    ARTICLE
VI

    


    Indemnification

    


    Section
6.1      General Indemnity.
The Company agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, managers, partners, members, shareholders,
affiliates, agents, successors, assigns) and the Placement Agent from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Purchasers as a result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Company
herein. Further, the Company agrees to indemnify and hold harmless the
Purchasers (and their respective directors, officers, managers, partners,
members, shareholders, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Purchasers as a result of the failure of the
Company or any of its subsidiaries to pay contributions for all employees or any
other liability that arises from the failure to comply with any PRC rule or
regulation. Each Purchaser severally but not jointly agrees to indemnify and
hold harmless the Company and its directors, officers, affiliates, agents,
successors and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by the Company
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by such Purchaser herein. The maximum aggregate liability of each
Purchaser pursuant to its indemnification obligations under this Article VI
shall not exceed the portion of the Purchase Price paid by such Purchaser
hereunder. In no event shall any “Indemnified Party” (as defined below) be
entitled to recover consequential or punitive damages resulting from a breach or
violation of this Agreement.

     

    
      
         


      

      
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    Section
6.2       Indemnification
Procedure. Any party entitled to indemnification under this Article VI
(an “Indemnified
Party”) will give written notice to the indemnifying party of any matters
giving rise to a claim for indemnification; provided, that the
failure of any party entitled to indemnification hereunder to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Article VI except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an Indemnified Party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the Indemnified Party a
conflict of interest between it and the indemnifying party may exist with
respect of such action, proceeding or claim, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. In the event that the
indemnifying party advises an Indemnified Party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the Indemnified Party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the Indemnified Party’s
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The Indemnified Party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party which relates to such
action or claim. The indemnifying party shall keep the Indemnified Party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent, provided, however, that the
indemnifying party shall be liable for any settlement if the indemnifying party
is advised of the settlement but fails to respond to the settlement within
thirty (30) days of receipt of such notification. Notwithstanding anything in
this Article VI to the contrary, the indemnifying party shall not, without the
Indemnified Party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the Indemnified Party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim. The
indemnification required by this Article VI shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, so long as
the Indemnified Party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the Indemnified
Party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.

     

    
      
         


      

      
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    ARTICLE
VII

    


    Miscellaneous

    


    Section
7.1       Fees and Expenses.
Except as otherwise set forth in this Agreement and the other Transaction
Documents, each party shall pay the fees and expenses of its advisors, 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 this Agreement, provided that the Company shall pay all actual
and reasonable attorneys’ fees and expenses (including disbursements and
out-of-pocket expenses) up to a maximum of $35,000 incurred by the Purchasers
and the Placement Agent in connection with the preparation, negotiation,
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions and the review of the Share Exchange
Agreement. The Company shall also pay all reasonable fees and expenses incurred
by the Purchasers in connection with the enforcement of this Agreement or any of
the other Transaction Documents, including, without limitation, all reasonable
attorneys’ fees and expenses but only if the Purchasers are successful in any
litigation or arbitration relating to such enforcement.

     

    Section
7.2       Specific Enforcement,
Consent to Jurisdiction.

    


    (a) The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Transaction Documents and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.

    


    (b) Each
of the Company and the Purchasers (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the Southern
District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Purchasers
consents to process being served in any such suit, action or 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 in this Section
7.2 shall affect or limit any right to serve process in any other manner
permitted by law.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof.  The
Company hereby appoints Anslow & Jaclin, LLP, with its office at 195
Route 9 South, Suite 204, Manalapan, New Jersey 07726, as its agent for service
of process in New York.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by
law.

     

    
      
         


      

      
        34

        
          

        

      

      
         


      

    

     

    Section
7.3       Entire Agreement;
Amendment. This Agreement and the other Transaction Documents contains
the entire understanding and agreement of the parties with respect to the
matters covered hereby and, except as specifically set forth herein or in the
Transaction Documents, neither the Company nor any of the Purchasers makes any
representations, warranty, covenant or undertaking with respect to such matters
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
nor any of the Transaction Documents may be waived or amended other than by a
written instrument signed by the Company and the Placement Agent, and no
provision hereof may be waived other than by a written instrument signed by the
party against whom enforcement of any such waiver is sought. No such amendment
shall be effective to the extent that it applies to less than all of the holders
of the Preferred Shares then outstanding. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents or holders of
Preferred Shares, as the case may be.

    


    Section
7.4       Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery by
telex (with correct answer back received), telecopy or facsimile at the address
or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall
be:

    


    If to the
Company:

     

    Eco
Building International

    c/o City
Zone Holdings Limited

    Unit 106,
Tern Centre, Tower II

    251
Queen’s Road

    Central
Hong Kong

    Attention:
Jianming Hao

    Telephone
No.: 86-13828824414


    Fax No.:
86-354-257-1345

     

    
      
         


      

      
        35

        
          

        

      

      
         


      

    

     

    with
copies (which shall not constitute notice) to:

    


    Anslow
& Jaclin LLP

    195 Route
9 South, Suite 204

    Manalapan,
New Jersey 07726

    Attention:   Richard
I. Anslow, Esq.

                                       
 Eric M. Stein, Esq.

    Tel. No.:
(732) 409-1212

    Fax No.:
(732) 577-1188

    


    If to any
Purchaser:  At the address of such Purchaser set forth on Exhibit A to this
Agreement, as the case may be, with copies to Purchaser’s counsel as set forth
on Exhibit A or
as specified in writing by such Purchaser.

    


    with
copies (which shall not constitute notice) to:

    


    Gersten
Savage LLP

    600
Lexington Avenue, 9th Floor

    New York,
New York 10022

    Attention:
Jay Kaplowitz, Esq.

    Tel. No.:
(212) 752-9700

    Fax No.:
(212) 980-5192

    


    Any party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party
hereto.

    


    Section
7.5       Waivers. No waiver by
any party 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 other provisions, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.

    


    Section
7.6       Headings. The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose and
shall not be deemed to limit or affect any of the provisions
hereof.

     

    
      
         


      

      
        36

        
          

        

      

      
         


      

    

     

    Section
7.7       Successors and
Assigns.  This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Placement Agent, as
applicable, provided, however, that,
subject to federal and state securities laws and as otherwise provided in the
Transaction Documents, a Purchaser may assign its rights and delegate its duties
hereunder in whole or in part to an affiliate or to a third party acquiring all
or substantially all of its Shares or Warrants in a private transaction without
the prior written consent of the Company or the other Purchasers, provided, that no
such assignment or obligation shall affect the obligations of such Purchaser
hereunder and that such assignee agrees in writing to be bound, with respect to
the transferred securities, by the provisions hereof that apply to the
Purchasers.  The provisions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the parties.  Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. If any Purchaser transfers Preferred Shares purchased
hereunder, any such penalty shares or liquidated damages, as the case may be,
pursuant to this Agreement shall similarly transfer to such transferee with no
further action required by the purchaser or the
Company.  Notwithstanding anything to the contrary set forth herein,
only those Purchasers who own shares of Preferred Shares or Conversion Shares of
the Company shall be entitled to receive any rights and benefits of this
Agreement based on their ownership interest at the time when such rights or
benefits accrue. If any Purchaser transfers Preferred Shares purchased
hereunder, any and all rights and benefits pursuant to this Agreement shall
similarly transfer to such transferee with no further action required by the
Purchaser, the transferee or the Company.  In the event that any
Purchaser (or permitted assign) no longer holds shares of Series A Preferred or
Conversion Shares such Purchaser will similarly not be entitled to any of the
rights or benefits conferred upon such Purchaser pursuant to this
Agreement.

    


    Section
7.8       No Third Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.

    


    Section
7.9       Governing Law. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York, without giving effect to any of the conflicts of
law principles which would result in the application of the substantive law of
another jurisdiction. This Agreement shall not be interpreted or construed with
any presumption against the party causing this Agreement to be
drafted.

    


    Section
7.10     Survival. The
representations and warranties of the Company and the Purchasers shall survive
the execution and delivery hereof and the Closing hereunder for a period of two
(2) years following the Closing Date.

    


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

    


    Section
7.12    Publicity. The
Company agrees that it will not disclose, and will not include in any public
announcement, except as provided in the Transaction Documents, the name of the
Purchasers without the consent of the Purchasers unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.

     

    
      
         


      

      
        37

        
          

        

      

      
         


      

    

     

    Section
7.13    Severability. The
provisions of this Agreement and the Transaction Documents are severable and, in
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions or part of the provisions contained in this Agreement
or the Transaction Documents shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement or the Transaction Documents and such provision shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or part
of such provision, had never been contained herein, so that such provisions
would be valid, legal and enforceable to the maximum extent
possible.

    


    Section
7.14     Further Assurances.
From and after the date of this Agreement, upon the request of any Purchaser or
the Company, each of the Company and the Purchasers shall execute and deliver
such instrument, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Preferred Shares, the Conversion Shares, the
Warrants, the Warrant Shares, the Series A Certificate of Designation, the
Registration Rights Agreement and the other Transaction Documents.

    


    Section
7.15     Currency.  Unless
otherwise indicated, all dollar amounts referred to in this Agreement are in
United States Dollars.  All amounts owing under this Agreement or any
Transaction Document shall be paid in US dollars.  All amounts
denominated in other currencies shall be converted in the US dollar equivalent
amount in accordance with the Exchange Rate on the date of
calculation.  “Exchange Rate” means, in relation to any amount of
currency to be converted into US dollars pursuant to this Agreement, the US
dollar exchange rate as published in The Wall Street Journal on the relevant
date of calculation.

    


    Section
7.16     Judgment
Currency.

    


    (a) If
for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 7.17 referred to
as the “Judgment
Currency”) an amount due in US Dollars under this Agreement, the
conversion shall be made at the Exchange Rate prevailing on the business day
immediately preceding:

    


    (i) the
date of actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or

    


    (ii) the
date on which the foreign court determines, in the case of any proceeding in the
courts of any other jurisdiction (the date as of which such conversion is made
pursuant to this Section being hereinafter referred to as the “Judgment Conversion
Date”).

    


    (b) If
in the case of any proceeding, there is a change in the Exchange Rate prevailing
between the Judgment Conversion Date and the date of actual payment of the
amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Exchange Rate prevailing on the date of payment, will produce
the amount of US Dollars which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.

     

    
      
         


      

      
        38

        
          

        

      

      
         


      

    

    
 

    (c) Any amount due from the
Company under this provision shall be due as a separate debt and shall not be
affected by judgment being obtained for any other amounts due under or in
respect of this Agreement.

    


    Section
7.17     Termination.  This
Agreement may be terminated prior to Closing:

    


    (a) by mutual written agreement of
the Purchasers and the Company, a copy of which shall be provided to the escrow
agent appointed under the Escrow General Agreement (the “Escrow Agent”);
and

    


    (b) by
the Company or a Purchaser (as to itself but no other Purchaser) upon written
notice to the other, with a copy to the Escrow Agent, if the Closing shall not
have taken place by 6:30 p.m. Eastern time on May 31, 2010; provided, that the
right to terminate this Agreement under this Section 7.17(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.

    


    (c) In
the event of a termination pursuant to Section 7.17(c) or 7.17(b), each
Purchaser shall have the right to a return of up to its entire Purchase Price
deposited with the Escrow Agent pursuant to this Agreement, without interest or
deduction.  The Company covenants and agrees to cooperate with such
Purchaser in obtaining the return of its Purchase Price, and shall not
communicate any instructions to the contrary to the Escrow Agent.

    


    (d) In
the event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Purchasers. Upon a termination in accordance with
this Section 7.17, the Company and the terminating Purchaser(s) shall not have
any further obligation or liability (including as arising from such termination)
to the other and no Purchaser will have any liability to any other Purchaser
under the Transaction Documents as a result therefrom.

    


    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         


      

      
        39

        
          

        

      

      
         


      

    

     

    [SIGNATURE
PAGE TO STOCK PURCHASE AGREEMENT]

    


    


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

     

    
      
        	 	ECO
      BUILDING INTERNATIONAL	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name:  Jianming
      Hao	 
	 	 	Title:  Chief
      Executive Officer	 
	 	 	 	 


      

    

     

    
      
         


      

      
        40

        
          

        

      

      
         


      

    

     

    By its
execution and delivery of this signature page, the undersigned Purchaser hereby
joins in and agrees to be bound by the terms and conditions of the Securities
Purchase Agreement dated as of April [●], 2010 by and among Eco Building
International and the Purchasers (as defined therein), as to the number of Units
set forth below, and authorizes this signature page to be attached to the
Purchase Agreement or counterparts thereof and for its name, address and number
of Units purchased to be added to Exhibit A of the
Purchase Agreement.

     

    
      
        	 	PURCHASER	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 
	 	Number
      of Units:	 
	 	Aggregate
      Purchase Price: $	 


      

    

     

    
      
         


      

      
        41

        
          

        

      

      
         


      

       

    

    EXHIBIT
A TO THE

    SECURITIES
PURCHASE AGREEMENT

    


    
       

        
          

        

      

    

    


    LIST
OF PURCHASERS

    


    
      	
              
Purchaser and
      Address

            	
              Investment

            	
              Units
      Purchased

            	
              Shares
      of

              Preferred
      Stock

            	
              Series
      A

              Warrants

            	
              Percent

            
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
              Total

            	 
      	 
      	 
      	 
      	 
      


    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    EXHIBIT
B TO THE

    SECURITIES
PURCHASE AGREEMENT

    


    
      
        

      

    

    


    


    FORM
OF SERIES A WARRANT

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
 

    EXHIBIT
C TO THE

    SECURITIES
PURCHASE AGREEMENT

    


    
      
        

      

    

    


    FORM
OF REGISTRATION RIGHTS AGREEMENT

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    EXHIBIT
D TO THE

    SECURITIES
PURCHASE AGREEMENT

    


    
      
        

      

    

    


    FORM
OF LOCK-UP AGREEMENT

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    EXHIBIT
E-1 TO THE

    SECURITIES
PURCHASE AGREEMENT

    


    
      
        

      

    

    


    FORM
OF ESCROW GENERAL AGREEMENT

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    EXHIBIT
E-2 TO THE

    SECURITIES
PURCHASE AGREEMENT

    


     

      
        

      

    

    


    FORM
OF SECURITIES ESCROW AGREEMENT

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    EXHIBIT
E-3 TO THE

    INVESTORS
AND PUBLIC RELATIONS ESCROW AGREEMENT

    


    
      
        

      

    

    


    FORM
OF INVESTOR AND PUBLIC RELATIONS ESCROW AGREEMENT

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    EXHIBIT
F TO THE

    SECURITIES
PURCHASE AGREEMENT

    


     

      
        

      

    

    


    SERIES
A CERTIFICATE OF DESIGNATION

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    EXHIBIT
G TO THE

    SECURITIES
PURCHASE AGREEMENT

    


    
      
        

      

    

    


    FORM
OF OPINION OF COUNSEL