Unassociated Document


    SECURITIES
      PURCHASE AGREEMENT

     

    This
      Securities Purchase Agreement (this “Agreement”)
      is
      dated as of July 13, 2007, among China 3C Group, a Nevada corporation
      (collectively with its predecessors, the “Company”),
      and
      the investors listed on the Schedule of Buyers attached hereto as Annex
      A
      and
      identified on the signature pages hereto (each, an “Investor”
      and
      collectively, the “Investors”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated
      thereunder, the Company desires to issue and sell to each Investor, and each
      Investor, severally and not jointly, desires to purchase from the Company
      certain securities of the Company, as more fully described in this
      Agreement.

     

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

     

    ARTICLE
      1.

    DEFINITIONS

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Commission”
      means
      the Securities and Exchange Commission.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Outside
      Date”
      means
      August 8, 2007.

     

    “Per
      Share Purchase Price”
      equals
      $5.60.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Shares”
      means
      the shares of Common Stock issued or issuable to the Investors pursuant to
      this
      Agreement.

     

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

     

    “Subsidiary”
      means
      any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation S-X
      promulgated by the Commission under the Exchange Act.

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

    “Transaction
      Documents”
      means
      this Agreement, the Registration Rights Agreement and any other documents or
      agreements executed in connection with the transactions contemplated
      hereunder.

     

    ARTICLE
      2.

    PURCHASE
      AND SALE

     

    2.1.   Closing.
      Subject
      to the terms and conditions set forth in this Agreement, at the Closing the
      Company shall issue and sell to each Investor, and each Investor shall,
      severally and not jointly, purchase from the Company, the Shares representing
      such Investor’s Investment Amount. The Closing shall take place at the offices
      of Bryan Cave LLP, 1290 Avenue of the Americas, New York, NY 10104 on the
      Closing Date or at such other location or time as the parties may
      agree.

     

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

     

    (i)   a
      certificate evidencing a number of Shares equal to such Investor’s Investment
      Amount divided by the Per Share Purchase Price, registered in the name of such
      Investor;

     

    (ii)   the
      legal
      opinion of Loeb & Loeb LLP, the Company’s United States securities law firm,
      Beckley Singleton, the Company’s Nevada law firm and Zhejiang Hong Taiyang 
Law Firm, the Company’s law firm in the PRC (which
      PRC
      legal opinion shall address, among other things, the legality under PRC law
      of
      any reorganizations or legal structures owned by the Company in the
      PRC),
      each
      such legal opinion in agreed form and addressed to the Investors;
      and

     

    (iii)   the
      Registration Rights Agreement, duly executed by the Company.

     

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

     

    (i)    its
      Investment Amount, in United States dollars and in immediately available funds,
      by wire transfer to an account designated in writing by the Company for such
      purpose; and

     

    (ii)   the
      Registration Rights Agreement, duly executed by such Investor.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      3.

    REPRESENTATIONS
      AND WARRANTIES

     

    3.1.   Representations
      and Warranties of the Company.
      The
      Company hereby makes the following representations and warranties to each
      Investor:

     

    (a)   Subsidiaries.
      The
      Company has no direct or indirect Subsidiaries other than as specified in the
      SEC Reports. The Company owns, directly or indirectly, all of the capital stock
      of each Subsidiary free and clear of any and all Liens, and all the issued
      and
      outstanding shares of capital stock of each Subsidiary are validly issued and
      are fully paid, non-assessable and free of preemptive and similar
      rights.

     

    (b)   Organization
      and Qualification.
      The
      Company and each Subsidiary are duly incorporated or otherwise organized,
      validly existing and in good standing under the laws of the jurisdiction of
      its
      incorporation or organization (as applicable), with the requisite power and
      authority to own and use its properties and assets and to carry on its business
      as currently conducted. Neither the Company nor any Subsidiary is in violation
      of any of the provisions of its respective certificate or articles of
      incorporation, bylaws or other organizational or charter documents. The Company
      and each Subsidiary are duly qualified to conduct its respective businesses
      and
      are in good standing as a foreign corporation or other entity in each
      jurisdiction in which the nature of the business conducted or property owned
      by
      it makes such qualification necessary, except where the failure to be so
      qualified or in good standing, as the case may be, could not, individually
      or in
      the aggregate, have or reasonably be expected to result in a Material Adverse
      Effect.

     

    (c)   Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and to
      consummate the transactions contemplated by each of the Transaction Documents
      and otherwise to carry out its obligations thereunder. The execution and
      delivery of each of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized by all necessary action on the part of the Company and no further
      action is required by the Company in connection therewith. Each Transaction
      Document has been (or upon delivery will have been) duly executed by the Company
      and, when delivered in accordance with the terms hereof, will constitute the
      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
      or
      similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
      application.

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (e)   Filings,
      Consents and Approvals.
      The
      Company is not required to obtain any consent, waiver, authorization or order
      of, give any notice to, or make any filing or registration with, any United
      States or PRC court or other federal, state, local or other governmental
      authority or other Person in connection with the execution, delivery and
      performance by the Company of the Transaction Documents, other than (i) the
      filing with the Commission of one or more Registration Statements in accordance
      with the requirements of the Registration Rights Agreement, (ii) filings
      required by state securities laws, (iii) the filing of a Notice of Sale of
      Securities on Form D with the Commission under Regulation D of the Securities
      Act, (iv) the filings required in accordance with Section 4.5 and (v) those
      that
      have been made or obtained prior to the date of this Agreement.

     

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

     

    (g)    Capitalization.
      The
      number of shares and type of all authorized, issued and outstanding capital
      stock of the Company, and all shares of Common Stock reserved for issuance
      under
      the Company’s various option and incentive plans, is specified in the SEC
      Reports. Except as specified in the SEC Reports, no securities of the Company
      are entitled to preemptive or similar rights, and no Person has any right of
      first refusal, preemptive right, right of participation, or any similar right
      to
      participate in the transactions contemplated by the Transaction Documents.
      Except as specified in the SEC Reports, there are no outstanding options,
      warrants, scrip rights to subscribe to, calls or commitments of any character
      whatsoever relating to, or securities, rights or obligations convertible into
      or
      exchangeable for, or giving any Person any right to subscribe for or acquire,
      any shares of Common Stock, or contracts, commitments, understandings or
      arrangements by which the Company or any Subsidiary is or may become bound
      to
      issue additional shares of Common Stock, or securities or rights convertible
      or
      exchangeable into shares of Common Stock. The issue and sale of the Shares
      will
      not, immediately or with the passage of time, obligate the Company to issue
      shares of Common Stock or other securities to any Person (other than the
      Investors) and will not result in a right of any holder of Company securities
      to
      adjust the exercise, conversion, exchange or reset price under such
      securities.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    (k)   Litigation.
      There
      is no Action which (i) adversely affects or challenges the legality, validity
      or
      enforceability of any of the Transaction Documents or the Shares or (ii) except
      as specifically disclosed in the SEC Reports, could, if there were an
      unfavorable decision, individually or in the aggregate, have or reasonably
      be
      expected to result in a Material Adverse Effect. Neither the Company nor any
      Subsidiary, nor any director or officer thereof (in his or her capacity as
      such), is or has been the subject of any Action involving a claim of violation
      of or liability under federal or state securities laws or a claim of breach
      of
      fiduciary duty, except as specifically disclosed in the SEC Reports. There
      has
      not been, and to the knowledge of the Company, there is not pending any
      investigation by the Commission involving the Company or any current or former
      director or officer of the Company (in his or her capacity as such). The
      Commission has not issued any stop order or other order suspending the
      effectiveness of any registration statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (l)   Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company.

     

    (m)   Compliance.
      Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has been in violation of any
      statute, rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws relating to taxes,
      environmental protection, occupational health and safety, product quality and
      safety and employment and labor matters, except in each case as could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect. The Company is in compliance with all effective
      requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
      regulations thereunder, that are applicable to it, except where such
      noncompliance could not have or reasonably be expected to result in a Material
      Adverse Effect.

     

    (n)   Regulatory
      Permits.
      The
      Company and the Subsidiaries possess all certificates, authorizations and
      permits issued by the appropriate federal, state, local or foreign regulatory
      authorities necessary to conduct their respective businesses as described in
      the
      SEC Reports, except where the failure to possess such permits could not,
      individually or in the aggregate, have or reasonably be expected to result
      in a
      Material Adverse Effect, and neither the Company nor any Subsidiary has received
      any notice of proceedings relating to the revocation or modification of any
      such
      permits.

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (p)   Patents
      and Trademarks.
      The
      Company and the Subsidiaries have, or have rights to use, all patents, patent
      applications, trademarks, trademark applications, service marks, trade names,
      copyrights, licenses and other similar rights that are necessary or material
      for
      use in connection with their respective businesses as described in the SEC
      Reports and which the failure to so have could, individually or in the
      aggregate, have or reasonably be expected to result in a Material Adverse Effect
      (collectively, the “Intellectual
      Property Rights”).
      Neither the Company nor any Subsidiary has received a written notice that the
      Intellectual Property Rights used by the Company or any Subsidiary violates
      or
      infringes upon the rights of any Person. Except as set forth in the SEC Reports,
      to the knowledge of the Company, all such Intellectual Property Rights are
      enforceable and there is no existing infringement by another Person of any
      of
      the Intellectual Property Rights.

     

    (q)   Insurance.
      The
      Company and the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as are prudent
      and customary in the businesses in which the Company and the Subsidiaries are
      engaged. The Company has no reason to believe that it will not be able to renew
      its and the Subsidiaries’ existing insurance coverage as and when such coverage
      expires or to obtain similar coverage from similar insurers as may be necessary
      to continue its business on terms consistent with market for the Company’s and
      such Subsidiaries’ respective lines of business.

     

    (r)   Transactions
      With Affiliates and Employees.
      Except
      as set forth in the SEC Reports, none of the officers or directors of the
      Company and, to the knowledge of the Company, none of the employees of the
      Company is presently a party to any transaction with the Company or any
      Subsidiary (other than for services as employees, officers and directors),
      including any contract, agreement or other arrangement providing for the
      furnishing of services to or by, providing for rental of real or personal
      property to or from, or otherwise requiring payments to or from any officer,
      director or such employee or, to the knowledge of the Company, any entity in
      which any officer, director, or any such employee has a substantial interest
      or
      is an officer, director, trustee or partner.

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    (v)   Certain
      Registration Matters.
      Assuming the accuracy of the Investors’ representations and warranties set forth
      in Section 3.2(b)-(e), no registration under the Securities Act is required
      for
      the offer and sale of the Shares by the Company to the Investors under the
      Transaction Documents. The Company is eligible to register its Common Stock
      for
      resale by the Investors under Form SB-2 or Form S-1 promulgated under the
      Securities Act. The Company has not granted or agreed to grant to any Person
      any
      rights (including “piggy-back” registration rights) to have any securities of
      the Company registered with the Commission or any other governmental authority
      that have not been satisfied.

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    (z)   No
      Additional Agreements.
      The
      Company does not have any agreement or understanding with any Investor with
      respect to the transactions contemplated by the Transaction Documents other
      than
      as specified in the Transaction Documents.

     

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

     

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

     

    (cc)   PFIC.
      Neither
      the Company nor any Subsidiary 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.

     

    (dd)   OFAC.
      Neither
      the Company nor any Subsidiary nor, to the knowledge of the Company, any
      director, officer, agent, employee, Affiliate or Person acting on behalf of
      the
      Company or any Subsidiary is currently subject to any U.S. sanctions
      administered by the Office of Foreign Assets Control of the U.S. Treasury
      Department (“OFAC”);
      and
      the Company will not directly or indirectly use the proceeds of the sale of
      the
      Shares, or lend, contribute or otherwise make available such proceeds to any
      Subsidiary, joint venture partner or other Person or entity, towards any sales
      or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country
      sanctioned by OFAC or for the purpose of financing the activities of any Person
      currently subject to any U.S. sanctions administered by OFAC.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

    (ff)   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
      and the 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 and the Subsidiaries and their operations including,
      without limitation, the registration with the Ministry of Commerce, the State
      Administration of Industry and Commerce, the State Administration for Foreign
      Exchange, tax bureau and customs authorities have been duly completed in
      accordance with the relevant PRC rules and regulations, except where, the
      failure to complete such filings and registrations does not, and would not,
      individually or in the aggregate, have a Material Adverse Effect.

     

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

     

    (iv)   Neither
      the Company nor any Subsidiary is in receipt of any letter or notice from any
      relevant PRC 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 for non-compliance
      with
      the terms thereof or with applicable PRC laws, or the need for compliance or
      remedial actions in respect of the activities carried out by the Company or
      such
      Subsidiary, except such revocation as does not, and would not, individually
      or
      in the aggregate, have a Material Adverse Effect.

     

    (v)   The
      Company and the Subsidiaries 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 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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

    (gg)   Disclosure.
      The
      Company confirms that neither it nor any Person acting on its behalf has
      provided any Investor or its respective agents or counsel with any information
      that the Company believes constitutes material, non-public information except
      insofar as the existence and terms of the proposed transactions hereunder may
      constitute such information. The Company understands and confirms that the
      Investors will rely on the foregoing representations and covenants in effecting
      transactions in securities of the Company. All disclosure provided to the
      Investors regarding the Company, its business and the transactions contemplated
      hereby, furnished by or on behalf of the Company (including the Company’s
      representations and warranties set forth in this Agreement) are true and correct
      and do not contain any untrue statement of a material fact or omit to state
      any
      material fact necessary in order to make the statements made therein, in light
      of the circumstances under which they were made, not misleading.

     

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

     

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

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    (g)   Independent
      Investment Decision.
      Such
      Investor has independently evaluated the merits of its decision to purchase
      Shares pursuant to the Transaction Documents, and such Investor confirms that
      it
      has not relied on the advice of any other Investor’s business and/or legal
      counsel in making such decision. Such Investor has not relied on the business
      or
      legal advice of the Company or any of its agents, counsel or Affiliates in
      making its investment decision hereunder, and confirms that none of such Persons
      (other than the Company) has made any representations or warranties to such
      Investor in connection with the transactions contemplated by the Transaction
      Documents; provided that this representation and warranty does not impair in
      any
      way the right of such Investor to rely on (i) the representations and warranties
      of the Company contained in the Transaction Documents or (ii) the legal opinions
      to be delivered to the Investors pursuant to Section 2.2(a)(ii).

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (h)   Confidentiality.
      Such
      Investor hereby acknowledges that all information pertaining to the existence
      and terms of the proposed transactions hereunder that was provided to such
      Investor is confidential (other than information which is in the public domain
      or becomes public knowledge without any action or breach on the part of such
      Investor and other than information that is otherwise available to such Investor
      on a nonconfidential basis) and such Investor shall not disclose any such
      confidential information (other than as may be required by law) to any third
      party prior to the earlier of (i) the public announcement of the transactions
      contemplated by this Agreement in accordance with Section 4.5 hereof or (ii)
      the
      termination of this Agreement in accordance with the terms hereof.

     

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

     

    ARTICLE
      4.

    OTHER
      AGREEMENTS OF THE PARTIES

     

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

     

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

     

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

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

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

     

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

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

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

     

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

     

    4.4.   Intentionally
      Omitted.

     

    4.5.   Securities
      Laws Disclosure; Publicity.
      By 9:00
      a.m. (New York time) on the Trading Day following the execution of this
      Agreement, and by 9:00 a.m. (New York time) on the Trading Day following the
      Closing Date, the Company shall issue press releases disclosing the transactions
      contemplated hereby and the Closing. On the second Trading Day following the
      execution of this Agreement the Company will file a Current Report on Form
      8-K
      disclosing the material terms of the Transaction Documents (and attach as
      exhibits thereto the Transaction Documents), and on the Trading Day following
      the Closing Date the Company will file an additional Current Report on Form
      8-K
      to disclose the Closing. In addition, the Company will make such other filings
      and notices in the manner and time required by the Commission and the Trading
      Market on which the Common Stock is listed. Notwithstanding the foregoing,
      the
      Company shall not publicly disclose the name of any Investor, or include the
      name of any Investor in any filing with the Commission (other than the
      Registration Statement and any exhibits to filings made in respect of this
      transaction in accordance with periodic filing requirements under the Exchange
      Act) or any regulatory agency or Trading Market, without the prior written
      consent of such Investor, except to the extent such disclosure is required
      by
      law or Trading Market regulations.

     

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

     

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

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    4.11.   Acknowledgment
      Regarding Investors’
      Trading Activity. The
      Company acknowledges and agrees that it has not asked any Investor, nor has
      any
Investor
      agreed
      to, either (a) restrict or become restricted or limit in any way its or any
      of
      its Affiliates trading in the securities of the Company, including any hedging,
      derivative or Short Sales transactions, from and after the
      time
      that the transactions contemplated by this Agreement are publicly disclosed
      in
      accordance with Section 4.5 except
      as
      and to the extent required by federal securities laws, or (b) hold the Shares
      for any specified term.

     

    ARTICLE
      5.

    CONDITIONS
      PRECEDENT TO CLOSING

     

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

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

    (e)   No
      Suspensions of Trading in Common Stock; Listing.
      Trading
      in the Common Stock shall not have been suspended by the Commission or any
      Trading Market (except for any suspensions of trading of not more than one
      Trading Day solely to permit dissemination of material information regarding
      the
      Company) at any time since the date of execution of this Agreement, and the
      Common Stock shall have been at all times since such date listed for trading
      on
      a Trading Market; 

     

    (f)   Officer’s
      Certificate.
      A
      certificate executed by a duly authorized officer of the Company certifying
      that
      (i) all representations and warranties made by the Company and information
      furnished by the Company in any schedules to this Agreement, are true and
      correct in all material respects as of the Closing Date, (ii) all covenants,
      agreements and obligations required by this Agreement to be performed or
      complied with by the Company, prior to or at the Closing, have been performed
      or
      complied with and (iii) the items referenced in Sections 5.1(c)-5.1(e) are
      true
      and correct as of the Closing Date;

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    ARTICLE
      6.

    MISCELLANEOUS

     

    6.1.   Fees
      and Expenses.
      Each
      party shall pay the fees and expenses of its advisers, counsel, accountants
      and
      other experts, if any, and all other expenses incurred by such party incident
      to
      the negotiation, preparation, execution, delivery and performance of the
      Transaction Documents. The Company shall pay all stamp and other taxes and
      duties levied in connection with the issuance of the Shares.

     

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

     

    6.3.   Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 5:30 p.m. (New York City time) on a Trading Day, (b)
      the
      next Trading Day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      on
      a day that is not a Trading Day or later than 5:30 p.m. (New York City time)
      on
      any Trading Day, (c) the Trading Day following the date of mailing, if sent
      by
      U.S. nationally recognized overnight courier service, or (d) upon actual receipt
      by the party to whom such notice is required to be given. The address for such
      notices and communications shall be as follows:

     

    If
      to the
      Company:   China
      3C
      Group

    
      	 	
              368
                HuShu Nan Road

            


      	 	HangZhou City, Zhejiang Province, China
              


      	 	Facsimile:


      	 	Attention:


    

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    


    With
      a
      copy to:       
Loeb
      & Loeb LLP

    
      	 	
              345 Park
                Avenue

            


      	 	New York, NY 10154


      	 	Facsimile: (212)
              504-3013


      	 	Attn.: Mitchell S. Nussbaum,
              Esq.


    

    


    If
      to an
      Investor:      To
      the
      address set forth under such Investor’s name on the signature pages
      hereof;

     

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

     

    6.4.   Amendments;
      Waivers; No Additional Consideration.
      No
      provision of this Agreement may be waived or amended except in a written
      instrument signed by the Company and the Investors holding a majority of the
      Shares. No waiver of any default with respect to any provision, condition or
      requirement of this Agreement shall be deemed to be a continuing waiver in
      the
      future or a waiver of any subsequent default or a waiver of any other provision,
      condition or requirement hereof, nor shall any delay or omission of either
      party
      to exercise any right hereunder in any manner impair the exercise of any such
      right. No consideration shall be offered or paid to any Investor to amend or
      consent to a waiver or modification of any provision of any Transaction Document
      unless the same consideration is also offered to all Investors who then hold
      Shares. Without the written consent or the affirmative vote of each Investor
      affected thereby, an amendment or waiver under this Section 6.4 may not waive
      or
      amend any Transaction Document the effect of which would be to permit the
      Company to (1) name any Investor as an underwriter in a Registration Statement
      without such Investor’s specific written consent thereto, or (2) not include any
      Registrable Securities (as defined in the Registration Rights Agreement) of
      an
      Investor in a Registration Statement due to their refusal to be named as an
      underwriter therein.

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

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

     

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

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOLLOW]

     

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    


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

     

    
      	 	 	 
	 	CHINA
              3C
              GROUP
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
	 	Title:


    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOR INVESTORS FOLLOW]

     

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    


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

     

    
      	NAME OF
              INVESTOR	 
	 	 
	     
	 
	
            	 
	By:  	
            	 
	 	Name:	 
	 	Title:	 
	 	 	 
	Investment Amount:
              $_______________	 
	 	 	 
	Tax ID No.:
              _______________________	 


    

    


    
      	ADDRESS FOR
              NOTICE	 
	 	 	 
	c/o:	   
              	 
	 	 	 
	Street:	   
              	 
	 	 	 
	City/State/Zip:	   
              	 
	 	 	 
	Attention:	   
              	 
	 	 	 
	Tel:	   
              	 
	 	 	 
	Fax:	   
              	 
	 	 	 
	DELIVERY
              INSTRUCTIONS	 
	
              (if
                different from above)

            	 
	 	 	 
	c/o:	   
              	 
	 	 	 
	Street:	   
              	 
	 	 	 
	City/State/Zip:	   
              	 
	 	 	 
	Attention:	   
              	 
	 	 	 
	Tel:	     	 


    

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    Annex
      A

     

    SCHEDULE
      OF BUYERS

    


    
      	
              (1)

            	
              (2)

            
	 	 
	 	 
	
              Buyer

            	
              Address
                and

              Facsimile
                Number

            
	 	 
	 	
               

               

            
	 	 
	 	 
	   
	    



    

    


    
      
         

      

      
        27