Securities Purchase & Exchange Agreement



 Exhibit 10.12 
 CHINA MEDIA NETWORKS INTERNATIONAL, INC. 
 $2,000,000 6% SENIOR SECURED DEBENTURE DUE JUNE 28, 2008

 WARRANTS TO PURCHASE 16,000,000 SHARES OF COMMON STOCK 
  
 SECURITIES PURCHASE AND EXCHANGE AGREEMENT 
 By and Between 
 CHINA MEDIA
NETWORKS INTERNATIONAL, INC. 
 and 
 VICIS CAPITAL MASTER FUND 
  
 DATED JUNE 28, 2006 







 SECURITIES PURCHASE AND EXCHANGE AGREEMENT 
 This SECURITIES PURCHASE AND EXCHANGE AGREEMENT (the “Agreement”), dated this 28th day of June, 2006, is made by and between CHINA MEDIA
NETWORKS INTERNATIONAL, INC., a Nevada corporation (the “Company”), and VICIS CAPITAL MASTER FUND (the “Purchaser”). 
 R E C I T A L S 
 WHEREAS, the Company desires to undertake a convertible debt financing (the “Convertible Debt
Financing”), and pursuant to the terms and conditions of this Agreement, the Company wishes to issue and sell to the Purchaser, and the Purchaser wishes to acquire from the Company, the following securities (collectively, the
“Securities”): (a) 6% Convertible Senior Secured Debenture due June 28, 2008 in the principal amount of $2,000,000 and in the form attached hereto as Exhibit A (the “Debenture”); (b) warrants to purchase an
aggregate of 8,000,000 shares of common stock, par value $.0001 per share (the “Common Stock”), of the Company initially at an exercise price of $.345 per share in the form attached hereto as Exhibit B (the “$.345
Warrants”); and (c) warrants to purchase an aggregate of 8,000,000 shares of Common Stock initially at an exercise price of $.375 per share in the form attached hereto as Exhibit C (the “$.375 Warrants”, and together with
the $.345 Warrants, the “Warrants”). 
 WHEREAS, the Purchaser is the holder of a Convertible Promissory Note (the
“Note”) issued by the Company in the principal amount of $300,000 pursuant to that certain Securities Purchase Agreement, dated May 3, 2006, by and between the Company and the Purchaser, and pursuant to the terms of the Note and that
certain Securities Purchase Agreement, dated May 3, 2006 by and between the Company and the Purchaser, the Note will automatically convert into the Debenture upon the consummation of the Convertible Debt Financing. 
 WHEREAS, the Purchaser is also the holder of 1,994,419 shares of Common Stock (the “Exchanged Shares”), and the Purchaser desires to deliver
the Exchanged Shares as partial consideration for the issuance of the Securities. 
 WHEREAS, as an inducement for the Purchaser’s
acquisition of the Securities, the Company has agreed to amend and restate that certain Investor Rights Agreement, dated December 30, 2005 (the “Investor Rights Agreement”) as hereinafter set forth to include as Registrable Securities
under the Investor Rights Agreement: (a) the shares of Common Stock issuable upon conversion of the Debenture (the “Debenture Shares”); and (b) the shares of Common Stock issuable upon the exercise of the Warrants (the
“Warrant Shares”, and together with the Debenture Shares, collectively, the “Shares”). The amended and restated Investor Rights Agreement is hereinafter referred to as the “New Investor Rights Agreement”. 
 WHEREAS, in connection with and subject to the consummation of the Convertible Debt Financing, the Purchaser has acquired from other investors of the
Company (the “Existing Investors”) those shares of Common Stock and warrants issued by the Company as set forth on Exhibit I attached hereto (the “Resale Transaction”), and as an inducement for the Purchaser’s
acquisition of such shares and warrants, the Company has agreed to change the terms of such warrants as hereinafter set forth. 







 NOW, THEREFORE, the Company and the Purchaser hereby agree as follows: 
 ARTICLE I 
 PURCHASE AND SALE OF THE
SECURITIES 
 1.1 Purchase and Sale of the Securities. Subject to the terms and conditions hereof and in reliance on the
representations and warranties contained herein, or made pursuant hereto, the Company will issue and sell to the Purchaser, and the Purchaser will purchase from the Company at the closing of the transactions contemplated hereby (the
“Closing”), the Securities for the following consideration (collectively, the “Purchase Price”): $1,700,000 in cash (the “Cash Payment”), subject to the provisions of Section 12.9 hereof, and the surrender of the
Note and the Exchanged Shares (as defined above). In connection herewith, the Company and the Purchaser agree that the value of the Exchanged Shares is no greater than $0.30 per share. 
 1.2 Closing. The Closing shall be deemed to occur at the offices of Quarles & Brady, LLP, 411 East Wisconsin Avenue, Milwaukee, Wisconsin
at 5:00 p.m. CDT on June 28, 2006 or at such other place, date or time as mutually agreeable to the parties (the “Closing Date). 
 1.3 Closing Matters. On the Closing Date, subject to the terms and conditions hereof, the following actions shall be taken: 
 (a) The Company will deliver to the Purchaser: (a) the Debenture dated the Closing Date, in the principal amount of $2,000,000; (b) a warrant registered in the Purchaser’s name representing the $.345 Warrants; and (c) a
warrant registered in the Purchaser’s name representing the $.375 Warrants. 
 (b) The Purchaser shall deliver to the Company the Cash
Payment subject to the provisions of Section 12.9 hereof in immediately available funds and surrender the Note and the Exchanged Shares to the Company. 
 ARTICLE II 
 SECURITY DOCUMENTS 
 2.1 Company Security Documents. 
 (a)
Security Agreement. All of the obligations of the Company under the Debenture shall be secured by a lien on all the personal property and assets of the Company now existing or hereinafter acquired granted pursuant to a security agreement
dated of even date herewith between the Company and Purchaser (“Security Agreement”), which, except for Permitted Liens (as hereinafter defined), shall be a first lien. 
 (b) Stock Pledge Agreement. To secure the obligations of the Company under the Debenture, the Company shall pledge, hypothecate, assign, transfer,
and deliver to the Purchaser all the capital stock of its subsidiary, OrthoSupply Management, Inc., a Delaware corporation (“OrthoSupply” or “Subsidiary”), pursuant to a stock pledge agreement (“Stock Pledge
Agreement”). 
  

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 2.2 Guaranty. All of the obligations of the Company under the Debenture shall be guaranteed
pursuant to a guaranty agreement by OrthoSupply (“Guaranty Agreement”). 
 2.3 Guarantor Security Documents. All of the
obligations of OrthoSupply under the Guaranty Agreement shall be secured by a lien on all the personal property and assets of OrthoSupply now existing or hereinafter acquired granted pursuant to a guarantor security agreement dated of even date
herewith between the Company and OrthoSupply (“Guarantor Security Agreement”), which, except for Permitted Liens, shall be a first lien. 
 ARTICLE III 
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 
 The Company hereby represents and warrants to the Purchaser as of the date of this Agreement as follows: 
 3.1 Organization and Qualification. The Company is a corporation duly organized and validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse
Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, operations, results of operations, condition (financial or otherwise) or prospects of the Company and its
Subsidiary or on the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or on the authority or ability of the Company to perform its obligations under the Transaction Documents (as
hereinafter defined). 
 3.2 Subsidiaries. The Company has no subsidiaries other than OrthoSupply and its indirect wholly-owned
subsidiary, OrthoSupply Management, LLC, a Massachusetts limited liability company (the “LLC”). The LLC currently has no assets and is not currently conducting operations of any kind (business or otherwise), and since December 30,
2005, has not conducted any such operations. The Company owns, directly or indirectly, all of the capital stock of OrthoSupply, consisting of 100 shares of common stock, free and clear of any and all Liens, and all the issued and outstanding shares
of capital stock of OrthoSupply are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. OrthoSupply is a corporation duly organized and validly existing and in good standing under the laws of the jurisdiction
in which it is incorporated, and has all requisite corporate power and authority to carry on its business as now conducted. OrthoSupply is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. 
  

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 3.3 No Violation. Neither the Company nor any of its subsidiaries is in violation of: (a) any
of the provisions of its certificate or articles of incorporation, bylaws or other organizational or charter documents; or (b) any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or OrthoSupply,
except for possible violations which would not, individually or in the aggregate, have a Material Adverse Effect. 
 3.4
Capitalization. 
 (a) As of the date hereof and without giving effect to the sale of Securities at Closing as contemplated hereby but
after giving effect to the surrender of the Exchanged Shares, the Company’s authorized capital stock consists of 50,000,000 shares of Common Stock, par value $.0001 per share, of which 20,446,729 shares are outstanding and no shares are
reserved for issuance upon the exercise of all of the outstanding options, warrants and other securities issued by the Company that are convertible into Common Stock. All of such outstanding shares have been, or upon issuance will be, validly
issued, are fully paid and nonassessable. 
 (b) Except as disclosed in the Company’s reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission (the “SEC”) pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), prior to the date hereof
(the “SEC Documents”): 
 (i) except pursuant to the Investor Rights Agreement, no holder of shares of the Company’s capital
stock has any preemptive rights or any other similar rights or has been granted or holds any liens or encumbrances suffered or permitted by the Company; 
 (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
for, any shares of capital stock of the Company or OrthoSupply, or contracts, commitments, understandings or arrangements by which the Company or OrthoSupply is or may become bound to issue additional shares of capital stock of the Company or
OrthoSupply or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company
or OrthoSupply; 
 (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents
or instruments evidencing Indebtedness (as defined in Section 3.14 hereof) of the Company or OrthoSupply or by which the Company or OrthoSupply is or may become bound; 
 (iv) there are no financing statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the
Company; 
 (v) there are no agreements or arrangements under which the Company or OrthoSupply is obligated to register the sale of any of
their securities under the 

  

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Securities Act of 1933, as amended, (the “Securities Act”) (except the Investor Rights Agreement); 
 (vi) there are no outstanding securities or instruments of the Company or OrthoSupply that contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company or OrthoSupply is or may become bound to redeem a security of the Company or OrthoSupply; 
 (vii) there are no securities or instruments containing antidilution or similar provisions that will be triggered by the issuance of the Securities or the repricing of the warrants acquired by the Purchaser from the
Existing Investors in the Resale Transaction (except for such warrants with respect to which waivers of anti-dilution rights are being obtained in connection herewith); and 
 (viii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement.

 3.5 Issuance of Securities. 
 (a) The Securities to be issued hereunder are duly authorized and, upon payment and issuance in accordance with the terms hereof, shall be free from all taxes, Liens and charges with respect to the issuance thereof. As of the Closing, the
Company has not authorized or reserved any shares of Common Stock for the issuance of the Debenture Shares or the Warrant Shares. 
 (b)
Except for (i) the filing of the Company’s amended and restated articles of incorporation, and (ii) the reservation by the Board (as hereinafter defined) of 25,661,088 shares of Common Stock for issuance upon conversion of the
Debenture and exercise of the Warrants as contemplated by Section 7.15(a) hereof, all actions by the Board, the Company and its stockholders necessary for the valid issuance of the Debenture Shares and the Warrant Shares pursuant to the terms
of the Debenture and the Warrants, respectively, has been taken. 
 (c) Subject to the provisions of Section 7.15(a) hereof, the
Debenture Shares and Warrant Shares, when issued and paid for upon conversion of the Debenture or exercise of the Warrants, respectively, will be validly issued, fully paid and nonassessable and free from all taxes, Liens and charges with respect to
the issue thereof, with the holders being entitled to all rights accorded to a holder of the Common Stock. Assuming the accuracy of each of the representations and warranties set forth in Article IV hereof, the issuance by the Company to the
Purchaser of the Securities is exempt from registration under the Securities Act. 
 3.6 Authorization; Enforcement; Validity. The
Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the New Investor Rights Agreement, the Security Agreement, the Stock Pledge Agreement, the Debenture, and the Warrants, and each
of the other agreements or instruments entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction Documents by the 

  

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Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, and the issuance of the
Debenture and the Warrants, have been duly authorized by the board of directors of the Company (the “Board”), and no further consent or authorization is required by the Company, the Board or its stockholders. This Agreement and the other
Transaction Documents of even date herewith have been duly executed and delivered by the Company, and constitute the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms,
except (i) as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies, (ii) as any rights to indemnity or contribution hereunder may be limited by federal and state securities laws and public policy consideration, or (iii) as may be subject to the provisions of
Section 7.15(a) hereof. 
 3.7 Dilutive Effect. The Company understands and acknowledges that its obligation to issue the
Debenture Shares and Warrant Shares upon conversion of the Debenture or the exercise of the Warrants, as the case may be, in accordance therewith is absolute and unconditional regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company. 
 3.8 No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance of the Debenture Shares and the Warrant Shares) will not
(i) result in a violation of any articles or certificate of incorporation, any certificate of designations, preferences and rights of any outstanding series of preferred stock or bylaws of the Company or OrthoSupply or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or OrthoSupply is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or OrthoSupply or by
which any property or asset of the Company or OrthoSupply is bound or affected, except in the case of clauses (ii) and (iii), for such breaches or defaults as would not be reasonably expected to have a Material Adverse Effect. 
 3.9 Governmental Consents. Except for the filing of a Form D with the SEC, the registration of the Shares under the Securities Act for resale by
the Purchaser, and compliance with the provisions of Section 7.15(a) hereof, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory
or self-regulatory agency or any other Person (as hereinafter defined) in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case, in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior to the Closing pursuant to the preceding sentence have been obtained or effected. The Company is unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any of the foregoing. 
  

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 3.10 No General Solicitation. Neither the Company, nor any of its affiliates, nor any Person
acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities. 
 3.11 No Integrated Offering. None of the Company, its subsidiaries, any of their affiliates, and any Person acting on their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the Securities Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions. 
 3.12
Placement Agent’s Fees. Except as set forth on Schedule 3.12, no brokerage or finder’s fee or commission are or will be payable to any Person with respect to the transactions contemplated by this Agreement based upon
arrangements made by the Company or any of its affiliates. The Company agrees that it shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by
Purchaser) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Purchaser harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket
expenses) arising in connection with any claim for any such fees or commissions. 
 3.13 Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, the transactions
contemplated by the Transaction Documents, the Common Stock or any of its subsidiaries or any of their respective current or former officers or directors in their capacities as such. To the knowledge of the Company, there has not been within the
past two (2) years, and there is not pending, any investigation by the SEC involving the Company or any current or former director or officer of the Company (in his or her capacity as such). The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company under the Securities Act within the past two (2) years. 
 3.14 Indebtedness and Other Contracts. Except as disclosed in the SEC Documents, neither the Company nor OrthoSupply (a) has any outstanding Indebtedness (as defined below), (b) is a party to any contract, agreement or
instrument, the violation of which, or default under, by any other party to such contract, agreement or instrument would result in a Material Adverse Effect, (c) is in violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (d) is a party to any contract, agreement or instrument relating to any
Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. For purposes of this Agreement: (x) ”Indebtedness” of any Person means, without duplication
(i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by 

  

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notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or
businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness
(even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, change, security interest or other encumbrance upon or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (i) through (vii) above; (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability
will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. 
 3.15 Financial Information; SEC Documents. Since December 31, 2005, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act. As of their respective dates, the SEC Documents filed since December 31, 2005 complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and none of such SEC Documents, at the time they were filed with the SEC, 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 the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements
of the Company included in such SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Purchaser that is not included in the SEC Documents filed
since December 31, 2005 contains any untrue statement of a material 

  

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fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were
made, not misleading. 
 3.16 Absence of Certain Changes. Except as disclosed in the SEC Documents or on Schedule 3.16,
since December 31, 2005, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), results of operations or prospects of the Company or its
subsidiaries. Since December 31, 2005, the Company has not (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $50,000 outside of the ordinary course of business or (iii) had
capital expenditures, individually or in the aggregate, in excess of $100,000. The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so. After giving effect to the transactions contemplated hereby to occur at the Closing, the Company will not be
Insolvent (as hereinafter defined). For purposes of this Agreement, “Insolvent” means (i) the present fair saleable value of the Company’s assets is less than the amount required to pay the Company’s total indebtedness,
contingent or otherwise, (ii) the Company is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature or (iv) the Company has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be
conducted. 
 3.17 Foreign Corrupt Practices. 
 (a) Since December 31, 2005, neither the Company, nor any director, officer, agent, employee or other Person acting on behalf of the Company has, in the course of its actions (a) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds,
(c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee. 
 (b) None of the subsidiaries of the Company, nor any of their respective directors, officers, agents,
employees or other Persons acting on behalf of such subsidiaries has, in the course of their respective actions (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political
activity, (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (c) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended or (d) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 
 3.18 Transactions With Affiliates. Except as set forth in the SEC Documents, none of the officers, directors or employees of the Company is
presently a party to any transaction with 

  

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the Company or OrthoSupply (other than for ordinary course services as employees, officers or 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 such officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner. 
 3.19 Insurance. The Company and OrthoSupply are insured by insurers of recognized financial responsibility against such losses and risks and in
such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and OrthoSupply are engaged. Neither the Company nor OrthoSupply has been refused any insurance coverage sought or applied for and
neither the Company nor OrthoSupply has any reason to believe that it will not be able to renew its 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 at a cost that would not have a Material Adverse Effect. 
 3.20 Employee Relations. Neither the Company nor OrthoSupply is a
party to any collective bargaining agreement or employs any member of a union. No Executive Officer of the Company (as defined in Rule 501(f) of the Securities Act) has notified the Company that such officer intends to leave the Company or otherwise
terminate such officer’s employment with the Company. No Executive Officer of the Company, to the knowledge of the Company, is, or is now, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or OrthoSupply to any liability with respect
to any of the foregoing matters. The Company and OrthoSupply are in compliance with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. 
 3.21 Title. The Company and OrthoSupply have good and marketable title to all personal property owned by them which is material to their respective business, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and OrthoSupply.
Any real property and facilities held under lease by the Company and OrthoSupply are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and OrthoSupply. 
 3.22 Intellectual Property Rights. Schedule 3.22 sets forth a
list of all of the Company’s and OrthoSupply’s patents, trademarks, trade names, service marks copyrights, and registrations and applications therefor, trade secrets and any other intellectual property right (collectively,
“Intellectual Property Rights”), identifying whether owned by the Company, OrthoSupply or a third party. The Intellectual Property Rights are, to the best of the Company’s 

  

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knowledge, fully valid and are in full force and effect. The Company does not have any knowledge of any infringement by the Company or OrthoSupply of
Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought, or to the knowledge of the Company, being threatened, against the Company or OrthoSupply regarding its Intellectual Property Rights that could
have a Material Adverse Effect. The Company is unaware of any facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their Intellectual Property Rights. 
 3.23 Environmental Laws. The
Company and each of its subsidiaries (a) are in compliance with any and all Environmental Laws (as hereinafter defined), (b) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (c) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (a), (b) and (c), the failure to so comply could be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder. 

3.24 Tax Matters. The Company and each of its subsidiaries (a) have made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject, (b) have paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (c) have set aside on its books reasonably adequate provision for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply,
except where such failure would not have a Material Adverse Effect. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 3.25 Sarbanes-Oxley Act. The Company is in compliance with any and all requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof and applicable to it, and any and all rules and regulations promulgated by the SEC thereunder that are effective and applicable to it as of the date hereof, except where such noncompliance would not have a Material
Adverse Effect. 
 3.26 FDA Compliance. The Company and OrthoSupply, and the manufacture, marketing and sales of the Company’s
and OrthoSupply’s products, complies with any and all applicable requirements of the Federal Food, Drug and Cosmetic Act, any rules and regulations of the Food and Drug Administration promulgated thereunder, and any similar laws outside of


  

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the United States to which the company is subject, except where such noncompliance would not have a Material Adverse Effect. 
 3.27 Investment Company Status. The Company is not, and immediately after receipt of payment for the Securities will not be, an “investment
company,” an “affiliated person” of, “promoter” for or “principal underwriter” for, or an entity “controlled” by an “investment company,” within the meaning of the Investment Company Act.

 3.28 Material Contracts. Each contract of the Company that involves expenditures or receipts in excess of $100,000 (each an
“Applicable Contract”) is in full force and effect and is valid and enforceable in accordance with its terms. The Company is and has been in full compliance with all applicable terms and requirements of each Applicable Contract and no
event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a violation or breach of, or give the Company or any other entity the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any Applicable Contract. The Company has not given or received from any other entity any notice or other communication (whether oral or written)
regarding any actual, alleged, possible or potential violation or breach of, or default under, any Applicable Contract. 
 3.29
Inventory. All inventory of the Company consists of a quality and quantity usable and salable in the ordinary course of business, except for obsolete items and items of below-standard quality, all of which have been or will be written off or
written down to net realizable value on the unaudited consolidated balance sheet of the Company and its Subsidiaries as of March 31, 2006. The quantities of each type of inventory (whether raw materials, work-in-process, or finished goods) are
not excessive, but are reasonable and warranted in the present circumstances of the Company. 
 3.30 Disclosure. The Company confirms
that neither it nor any other Person acting on its behalf has provided the Purchaser or its agents or counsel with any information that constitutes or might constitute material, nonpublic information that has not been disclosed in the SEC Documents.
The Company understands and confirms that the Purchaser will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided to the Purchaser regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company 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. 
 ARTICLE IV

 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 
 The Purchaser hereby represents and warrants to the Company as of the date of this Agreement as follows: 
 4.1 Accredited Investor. The Purchaser acknowledges and agrees that (i) the offering and sale of the Securities are intended to be exempt from registration under the 

  

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Securities Act by virtue of Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder, (ii) the Securities have not been
registered under the Securities Act and (iii) the Company has represented to the Purchaser (assuming the veracity of the representations of the Purchaser made herein) that the Securities have been offered and sold by the Company in reliance
upon an exemption from registration provided in Section 4(2) of the Securities Act and Regulation D thereunder. In accordance therewith and in furtherance thereof, the Purchaser represents and warrants to and agrees with the Company that
it is an accredited investor (as defined in Rule 501 promulgated under the Securities Act). 
 4.2 No Distribution. The Purchaser
hereby represents and warrants that the Purchaser is acquiring the Securities hereunder for its own account for investment and not with a view to distribution, and with no present intention of distributing the Securities or selling the Securities
for distribution. The Purchaser understands that the Securities are being sold to the Purchaser in a transaction which is exempt from the registration requirements of the Securities Act. Accordingly, the Purchaser acknowledges that it has been
advised that the Securities have not been registered under the Securities Act and are being sold by the Company in reliance upon the veracity of the Purchaser’s representations contained herein and upon the exemption from the registration
requirements provided by the Securities Act and the securities laws of all applicable states. The Purchaser’s acquisition of the Securities shall constitute a confirmation of the foregoing representation and warranty and understanding thereof.

 4.3 Evaluation. The Purchaser has such knowledge and experience in financial and business matters as is required for evaluating the
merits and risks of making this investment, and the Purchaser has received such information requested by the Purchaser concerning the business, management and financial affairs of the Company in order to evaluate the merits and risks of making this
investment. Further, the Purchaser acknowledges that the Purchaser has had the opportunity to ask questions of, and receive answers from, the officers of the Company concerning the terms and conditions of this investment and to obtain information
relating to the organization, operation and business of the Company and of the Company’s contracts, agreements and obligations or needed to verify the accuracy of any information contained herein or any other information about the Company.
Except as set forth in this Agreement, no representation or warranty is made by the Company to induce the Purchaser to make this investment, and any representation or warranty not made herein or therein is specifically disclaimed and no information
furnished to the Purchaser or the Purchaser’s advisor(s) in connection with the sale were in any way inconsistent with the information stated herein. The Purchaser further understands and acknowledges that no Person has been authorized by the
Company to make any representations or warranties concerning the Company, including as to the accuracy or completeness of the information contained in this Agreement. 
 4.4 Investment Risks. The purchase of the Securities involves risks which the Purchaser has evaluated, and the Purchaser is able to bear the economic risk of the purchase of such Securities and the loss of its
entire investment. The Purchaser is able to bear the substantial economic risk of the investment for an indefinite period of time, has no need for liquidity in such investment and can afford a complete loss of such investment. The Purchaser’s
overall commitment to investments that are not readily marketable is not, and its acquisition of the Securities will not cause such overall commitment to become, disproportionate to its net 

  

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worth and the Purchaser has adequate means of providing for its current needs and contingencies. 
 4.5 Accuracy of Representations. The Purchaser is making the foregoing representations and warranties with the intent that they may be relied upon
by the Company in determining the suitability of the sale of the Securities to the Purchaser for purposes of federal and state securities laws. Accordingly, the Purchaser represents and warrants that the information stated herein is true, accurate
and complete. 
 4.6 Authorization; Enforceability. The individual signing below on behalf of the Purchaser hereby warrants and
represents that he/she is authorized to execute this Agreement on behalf of the Purchaser. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action,
if any, in respect thereof on the part of the Purchaser and no other proceedings on the part of the Purchaser are necessary to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the
Purchaser and constitutes a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms (subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and
subject, as to enforceability, to general principles of equity (whether applied in a proceeding in equity or at law)). 
 4.7 Resale;
Certificate Legend. In entering into this Agreement and in purchasing the Securities, the Purchaser further acknowledges that: 
 (a)
Neither the Securities nor any interest therein may be resold by the Purchaser in the absence of a registration under the Securities Act or an exemption from registration. In particular, the Purchaser is aware that all of the foregoing described
Securities will be “restricted securities”, as such term is defined in Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144, unless the conditions thereof are met. Other than
as set forth in this Agreement and the New Investor Rights Agreement, the Company has no obligation to register any Securities purchased or issuable hereunder. 
 (b) The following legends (or similar language) shall be placed on the certificate(s) or other instruments evidencing the Securities: 
 THE SECURITIES REPRESENTED BY THIS [DEBENTURE] [CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION
OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND 

  

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OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS. 
 (c) The Company may at any time place a
stop transfer order on its transfer books against the Securities. Such stop order will be removed, and further transfer of the Securities will be permitted, upon an effective registration of the respective Securities, or the receipt by the Company
of an opinion of counsel satisfactory to the Company that such further transfer may be effected pursuant to an applicable exemption from registration. 
 ARTICLE V 
 CONDITIONS TO CLOSING OF THE PURCHASERS 
 The obligation of the Purchaser to purchase the Securities at the Closing is subject to the fulfillment to the Purchaser’s satisfaction on or prior
to the Closing Date of each of the following conditions, any of which may be waived by the Purchaser: 
 5.1 Representations and
Warranties Correct. The representations and warranties in Article III hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of the Closing
Date. 
 5.2 Performance. All covenants, agreements and conditions contained in this Agreement to be performed or complied with by the
Company on or prior to the Closing Date shall have been performed or complied with by the Company in all material respects. 
 5.3 No
Impediments. Neither the Company nor any Purchaser shall be subject to any order, decree or injunction of a court or administrative agency of competent jurisdiction that prohibits the transactions contemplated hereby or would impose any material
limitation on the ability of such Purchaser to exercise full rights of ownership of the Securities. At the time of the Closing, the purchase of the Securities to be purchased by the Purchaser hereunder shall be legally permitted by all laws and
regulations to which the Purchaser and the Company are subject. 
 5.4 Other Agreements and Documents. Company or OrthoSupply, as
applicable, shall have executed and delivered the following agreements and documents: 
 (a) The Debenture in the form of Exhibit A
attached hereto; 
 (b) The $.345 Warrants in the form of Exhibit B attached hereto; 
 (c) The $.375 Warrants in the form of Exhibit C attached hereto; 
 (d) The New Investor Rights Agreement in the form of Exhibit D attached hereto; 
  

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 (e)    The Security Agreement in the form of Exhibit E hereto; 
 (f)    The Stock Pledge Agreement in the form of Exhibit F attached hereto; 
 (g)    The Guaranty Agreement in the form of Exhibit G attached hereto; 
 (h)    The Guarantor Security Agreement in the form of Exhibit H attached hereto; 
 (i)    Financing Statements on Form UCC-1 with respect to all personal property and assets of the Company and OrthoSupply;

 (j)    A Certificate of Good Standing from the state of incorporation of the Company and OrthoSupply; 
 (k)    A certificate of the Company’s CEO, dated the Closing Date, certifying (i) the fulfillment of the conditions
specified in Sections 5.1 and 5.2 of this Agreement, (ii) the Board resolutions approving this Agreement and the transactions contemplated hereby, and (iii) other matters as the Purchaser shall reasonably request; 
 (l)    A written waiver, in form and substance satisfactory to the Purchaser, from each person other than the Purchaser who has any
of the following rights: 
 (i)    any currently effective right of first refusal to acquire the Securities; or

 (ii)    any right to an anti-dilution adjustment of securities issued by the Company that are held by such person
that will be triggered as a result of (A) the issuance of the Securities or (B) the repricing of the warrants acquired by the Purchaser in connection with the Resale Transaction with the Existing Investors as contemplated by
Section 7.16(b) hereof; 
 (m)    All necessary consents or waivers, if any, from all parties to any other material
agreements to which the Company is a party or by which it is bound immediately prior to the Closing in order that the transactions contemplated hereby may be consummated and the business of the Company may be conducted by the Company after the
Closing without adversely affecting the Company; and 
 (n)    Reimbursement of expenses as set forth in
Section 12.9 hereof. 
 5.5    Due Diligence Investigation.    No fact shall have been
discovered, whether or not reflected in the Schedules hereto, which in the Purchaser’s determination would make the consummation of the transactions contemplated by this Agreement not in the Purchaser’s best interests. 
 5.6    Transaction with Existing Investors.    The Purchaser shall have completed the acquisition of
shares of Common Stock and warrants from the Existing Investors as set forth on Exhibit I attached hereto on terms and conditions satisfactory to the Purchaser it its sole discretion. 
  

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 ARTICLE VI 
 CONDITIONS TO CLOSING OF THE COMPANY 
 The Company’s obligation to sell the Securities at the
Closing is subject to the fulfillment to its satisfaction on or prior to the Closing Date of each of the following conditions: 
 6.1    Representations.    The representations made by the Purchaser pursuant to Article IV hereof shall be true and correct when made and shall be true and correct on the Closing Date.

 6.2    No Impediments.    Neither the Company nor any Purchaser shall be subject to any
order, decree or injunction of a court or administrative agency of competent jurisdiction that prohibits the transactions contemplated hereby or would impose any material limitation on the ability of such Purchaser to exercise full rights of
ownership of the Securities. At the time of the Closing, the purchase of the Securities to be purchased by the Purchaser hereunder shall be legally permitted by all laws and regulations to which the Purchaser and the Company are subject. 

6.3    Payment of Purchase Price.    The Company shall have received the Cash Payment, subject to the
provisions of Section 12.9 hereof. 
 6.4    Other Agreements and Documents. 
 (a)    The Purchaser shall have executed and delivered a Lock-Up Leak-Out Agreement with respect to the Securities in a form
reasonably satisfactory to the Company and the Purchaser. 
 (b)    The Purchaser shall have surrendered the Note for
cancellation and the Exchanged Shares. 
 ARTICLE VII 
 AFFIRMATIVE COVENANTS 
 The Company hereby covenants and agrees, so long as the Debenture remains
outstanding, as follows: 
 7.1    Maintenance of Corporate Existence.    The Company shall
and shall cause its subsidiaries to, maintain in full force and effect its corporate existence, rights and franchises and all material terms of licenses and other rights to use licenses, trademarks, trade names, service marks, copyrights, patents or
processes owned or possessed by it and necessary to the conduct of its business. 
 7.2    Maintenance of
Properties.    The Company shall and shall cause its subsidiaries to, keep each of its properties necessary to the conduct of its business in good repair, working order and condition, reasonable wear and tear excepted, and
from time to time make all needful and proper repairs, renewals, replacements, additions and improvements thereto; and the Company shall and shall its subsidiaries to at all times comply with each material provision of all leases to which it is a
party or under which it occupies property. 
  

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 7.3    Payment of Taxes.    The Company shall and shall
cause its subsidiaries to, promptly pay and discharge, or cause to be paid and discharged when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, assets, property or business of the
Company and its subsidiaries; provided, however, that any such tax, assessment, charge or levy need not be paid if the validity thereof shall be contested timely and in good faith by appropriate proceedings, if the Company or its subsidiaries shall
have set aside on its books adequate reserves with respect thereto, and the failure to pay shall not be prejudicial in any material respect to the holders of the Securities, and provided, further, that the Company or its subsidiaries will pay or
cause to be paid any such tax, assessment, charge or levy forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor. 
 7.4    Payment of Indebtedness.    The Company shall and shall cause its subsidiaries to pay or cause to
be paid all Indebtedness incident to the operations of the Company or its subsidiaries (including, without limitation, claims or demands of workmen, materialmen, vendors, suppliers, mechanics, carriers, warehousemen and landlords) which, if unpaid
might become a lien (except for Permitted Liens) upon the assets or property of the Company or its subsidiaries. 
 7.5    Maintenance of Insurance.    The Company shall and shall cause its subsidiaries to, keep its assets which are of an insurable character insured by financially sound and reputable
insurers against loss or damage by theft, fire, explosion and other risks customarily insured against by companies in the line of business of the Company or its subsidiaries, in amounts sufficient to prevent the Company and its subsidiaries from
becoming a co-insurer of the property insured; and the Company shall and shall cause its subsidiaries to maintain, with financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the
extent and in the manner customary for companies in similar businesses similarly situated or as may be required by law, including, without limitation, general liability, fire and business interruption insurance, and product liability insurance as
may be required pursuant to any license agreement to which the Company or its subsidiaries is a party or by which it is bound. 
 7.6    Notice of Adverse Change.    The Company shall promptly give notice to all holders of any Securities (but in any event within seven (7) days) after becoming aware of the existence
of any condition or event which constitutes, or the occurrence of, any of the following: 
 (a)    any Event of Default
(as hereinafter defined); 
 (b)    any other event of noncompliance by the Company or its subsidiaries under this
Agreement; 
 (c)    the institution or threatening of institution of an action, suit or proceeding against the Company
or any subsidiary before any court, administrative agency or arbitrator, including, without limitation, any action of a foreign government or instrumentality, which, if adversely decided, could materially adversely affect the business, prospects,
properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole whether or not arising in the ordinary course of business; or 
  

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 (d)    any information relating to the Company or any subsidiary which could
reasonably be expected to materially and adversely affect the assets, property, business or condition (financial or otherwise) of the Company or its ability to perform the terms of this Agreement. Any notice given under this Section 7.6 shall
specify the nature and period of existence of the condition, event, information, development or circumstance, the anticipated effect thereof and what actions the Company has taken and/or proposes to take with respect thereto. 
 7.7    Compliance With Agreements.    The Company shall and shall cause its subsidiaries to comply in all
material respects, with the terms and conditions of all material agreements, commitments or instruments to which the Company or any of its subsidiaries is a party or by which it or they may be bound. 
 7.8    Compliance With Laws.    The Company shall and shall cause each of its subsidiaries to duly comply
in all material respects with any material laws, ordinances, rules and regulations of any foreign, Federal, state or local government or any agency thereof, or any writ, order or decree, and conform to all valid requirements of governmental
authorities relating to the conduct of their respective businesses, properties or assets, including, but not limited to, the requirements of the FDA Act, the Prescription Drug Marketing Act, the Control Substance Act, the Employee Retirement Income
Security Act of 1978, the Environmental Protection Act, the Occupational Safety and Health Act, the Foreign Corrupt Practices Act and the rules and regulations of each of the agencies administering such acts. 
 7.9    Protection of Licenses, etc.    The Company shall and shall cause its subsidiaries to, maintain,
defend and protect to the best of their ability licenses and sublicenses (and to the extent the Company or a subsidiary is a licensee or sublicensee under any license or sublicense, as permitted by the license or sublicense agreement), trademarks,
trade names, service marks, patents and applications therefor and other proprietary information owned or used by it or them and shall keep duplicate copies of any licenses, trademarks, service marks or patents owned or used by it, if any, at a
secure place selected by the Company. 
 7.10    Accounts and Records; Inspections. 
 (a)    The Company shall keep true records and books of account in which full, true and correct entries will be made of all dealings
or transactions in relation to the business and affairs of the Company and its subsidiaries in accordance with generally accepted accounting principles applied on a consistent basis. 
 (b)    The Company shall permit each holder of any Securities or any of such holder’s officers, employees or representatives
during regular business hours of the Company, upon reasonable notice and as often as such holder may reasonably request, to visit and inspect the offices and properties of the Company and its subsidiaries and to make extracts or copies of the books,
accounts and records of the Company or its subsidiaries at such holder’s expense. 
  

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 (c) Nothing contained in this Section 7.10 shall be construed to limit any rights which a holder of
any Securities may otherwise have with respect to the books and records of the Company and its subsidiaries, to inspect its properties or to discuss its affairs, finances and accounts. 
 7.11 Maintenance of Office. The Company will maintain its principal office at the address of the Company set forth in Section 12.6 of this
Agreement where notices, presentments and demands in respect of this Agreement and any of the Securities may be made upon the Company, until such time as the Company shall notify the holders of the Securities in writing, at least thirty
(30) days prior thereto, of any change of location of such office. 
 7.12 Use of Proceeds. The Company shall use all the
proceeds received from the sale of the Securities pursuant to this Agreement solely for the purpose of working capital. 
 7.13 Payment of
the Debenture. The Company shall pay the principal of and interest on the Debenture in the time, the manner and the form provided therein, except to the extent converted into Common Stock in accordance with its terms. 
 7.14 SEC Reporting Requirements. The Company shall comply with its reporting and filing obligations pursuant to Section 13 or 15(d) of the
Exchange Act. The Company shall provide copies of such reports, including, without limitation to each holder of Securities promptly upon filing with the SEC. 
 7.15 Authorization of and Reservation of Additional Shares of Common Stock. 
 (a) Promptly after
Closing, but in any event within fifty (50) days after the Closing, the Company shall (i) file amended and restated articles of incorporation in the form attached hereto as Exhibit K, inter alia, to increase the number of
authorized shares of the Company’s Common Stock available for issuance from 50,000,000 to 100,000,000 shares in order to provide a sufficient number of shares of Common Stock for the issuance of the Debenture Shares and Warrant Shares; and
(ii) take all action necessary to reserve out of the newly-authorized Common Stock 25,661,088 shares for the issuance of the Debenture Shares and Warrant Shares. 
 (b) Upon fulfillment of the matters set forth in Section 7.15(a) above, the Company will at all times cause there to be reserved for issuance a sufficient number of shares of Common Stock for the issuance of the
Debenture Shares and Warrant Shares. 
 7.16 Amendments to Existing Warrants. For no consideration in addition to the Purchase Price,
the Company and the Purchaser shall amend the existing warrants held by the Purchaser (including those purchased by the Purchaser in the Resale Transaction) on the terms set forth under “New Warrant Terms” on Exhibit I,
attached hereto. 
 7.17 Investor Relations Firm. Promptly after Closing, the Company, at its sole expense will engage an investor
relations firm, subject to the Purchaser’s reasonable approval, to work on behalf of the Company. 
  

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 7.18 Further Assurances. From time to time the Company shall execute and deliver to the Purchaser
and the Purchaser shall execute and deliver to the Company such other instruments, certificates, agreements and documents and take such other action and do all other things as may be reasonably requested by the other party in order to implement or
effectuate the terms and provisions of this Agreement and any of the Securities. 
 ARTICLE VIII 
 NEGATIVE COVENANTS 
 The Company hereby
covenants and agrees, so long as the Debenture remains outstanding, it will not (and not allow any of its subsidiaries to), directly or indirectly, without the prior written consent of the Purchaser, as follows: 
 8.1 Payment of Dividends; Stock Purchase. Declare or pay any cash dividends on, or make any distribution to the holders of, any shares of capital
stock of the Company, other than dividends or distributions payable in such capital stock, or purchase, redeem or otherwise acquire or retire for value any shares of capital stock of the Company or warrants or rights to acquire such capital stock,
other than in connection with repurchases upon the termination of employment of employee equityholders. 
 8.2 Stay, Extension and Usury
Laws. At any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereinafter in force, which may affect the covenants or the
performance of the Debenture, the Company hereby expressly waiving all benefit or advantage of any such law, or by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Purchaser but will suffer and permit
the execution of every such power as though no such law had been enacted. 
 8.3 Reclassification. Effect any reclassification,
combination or reverse stock split of the Common Stock. 
 8.4 Liens. Except as otherwise provided in this Agreement, create, incur,
assume or permit to exist any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of the Company or any subsidiary under any conditional sale or
other title retention agreement or any capital lease, upon or with respect to any property or asset of the Company or any subsidiary (each a “Lien” and collectively, “Liens”), except that the foregoing restrictions shall not
apply to: 
 (a) liens for taxes, assessments and other governmental charges, if payment thereof shall not at the time be required to be made,
and provided such reserve as shall be required by generally accepted accounting principles consistently applied shall have been made therefor; 
 (b) liens of workmen, materialmen, vendors, suppliers, mechanics, carriers, warehouseman and landlords or other like liens, incurred in the ordinary course of business for sums not then due or being contested in good faith, if an adverse
decision in which contest would not materially affect the business of the Company; 
  

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 (c) liens securing indebtedness of the Company or any subsidiaries which is in an aggregate principal
amount not exceeding $250,000 and which liens are subordinate to liens on the same assets held by the Purchaser; 
 (d) statutory liens of
landlords, statutory liens of banks and rights of set-off, and other liens imposed by law, in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that are being
contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by generally accepted accounting principles shall have been made for any such contested amounts; 

(e) liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money); 
 (f) any attachment or judgment lien not constituting an Event of Default; 
 (g) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not
interfere in any material respect with the ordinary conduct of the business of the Company or any of its subsidiaries; 
 (h) any
(i) interest or title of a lessor or sublessor under any lease, (ii) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (iii) subordination of the interest of the lessee or
sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (ii), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under such lease; 

(i) liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation
of goods; 
 (j) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use
of any real property; 
 (k) liens securing obligations (other than obligations representing debt for borrowed money) under operating,
reciprocal easement or similar agreements entered into in the ordinary course of business of the Company and its subsidiaries; and 
 (l) the
replacement, extension or renewal of any lien permitted by this Section 8.4 upon or in the same property theretofore subject or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor)
of the indebtedness secured thereby. 
  

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 All of the Foregoing Liens described in subsections (a) – (l) above shall be referred to as
“Permitted Liens”. 
 8.5 Indebtedness. Create, incur, assume, suffer, permit to exist, or guarantee, directly or
indirectly, any Indebtedness, excluding, however, from the operation of this covenant: 
 (a) any indebtedness or the incurring, creating or
assumption of any indebtedness secured by liens permitted by the provisions of Section 8.4(c) above; 
 (b) the endorsement of
instruments for the purpose of deposit or collection in the ordinary course of business; 
 (c) indebtedness which may, from time to time be
incurred or guaranteed by the Company which in the aggregate principal amount does not exceed $250,000 and is subordinate to the indebtedness under this Agreement; 
 (d) indebtedness under the Debenture and otherwise existing on the date hereof; 
 (e) indebtedness relating
to contingent obligations of the Company and its subsidiaries under guaranties in the ordinary course of business of the obligations of suppliers, customers, and licensees of the Company and its subsidiaries; 
 (f) indebtedness relating to loans from the Company to its subsidiaries; 
 (g) indebtedness relating to capital leases in an amount not to exceed $500,000; 
 (h) accounts or notes
payable arising out of the purchase of merchandise or services in the ordinary course of business; or 
 (i) indebtedness (if any) expressly
permitted by, and in accordance with, the terms and conditions of this Agreement. 
 8.6 Liquidation or Sale. Sell, transfer, lease or
otherwise dispose of 10% or more of its consolidated assets (as shown on the most recent financial statements of the Company or the subsidiary, as the case may be) in any single transaction or series of related transactions (other than the sale of
inventory in the ordinary course of business), or liquidate, dissolve, recapitalize or reorganize in any form of transaction, or acquire all or substantially all of the capital stock or assets of another business or entity. 
 8.7 Change of Control Transaction. Enter into a Change in Control Transaction. For purposes of this Agreement, “Change in Control
Transaction” means, except with respect to acquisitions by the Company in the normal course of business or in connection with the contemplated expansion of the Board to five persons, the occurrence of (a) an acquisition by an individual or
legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital 

  

 24 








 
stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of the Company (except that the acquisition
of voting securities by the Purchaser shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the Board of the Company which is not approved
by a majority of those individuals who are members of the Board on the date hereof (or by those individuals who are serving as members of the Board on any date whose nomination to the Board was approved by a majority of the members of the Board who
are members on the date hereof), (c) the merger or consolidation of the Company or any subsidiary of the Company in one or a series of related transactions with or into another entity (except in connection with a reincorporation merger
involving the Company or with respect to which the Company is the survivor), or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a),
(b) or (c). 
 8.8 Amendment of Charter Documents. Except as contemplated by Section 7.15(a)(i) hereof or in connection with
the Company’s contemplated amendment and restatement of its by-laws, make any further amendment to the articles of incorporation or by-laws of the Company or any of its subsidiaries. 
 8.9 Loans and Advances. Except for loans and advances outstanding as of the Closing Date, directly or indirectly, make any advance or loan to, or
guarantee any obligation of, any person, firm or entity, except for intercompany loans or advances and those provided for in this Agreement. 
 8.10 Transactions with Affiliates. 
 (a) Make any intercompany transfers of monies or other assets in any single transaction
or series of transactions, except as otherwise permitted in this Agreement. 
 (b) Engage in any transaction with any of the officers,
directors, employees or affiliates of the Company or of its subsidiaries, except on terms no less favorable to the Company or the subsidiary as could be obtained in an arm’s length transaction. 
 (c) Divert (or permit anyone to divert) any business or opportunity of the Company or subsidiary to any other corporate or business entity. 
 8.11 Other Business. Enter into or engage, directly or indirectly, in any business other than the business currently conducted or proposed to be
conducted as of the date of this Agreement by the Company or any subsidiary. 
 8.12 Investments. Make any investments in, or purchase
any stock, option, warrant, or other security or evidence of indebtedness of, any person or entity (exclusive of any subsidiary), other than obligations of the United States Government or certificates of deposit or other instruments maturing within
one year from the date of purchase from financial institutions with capital in excess of $50 million. 
  

 25 








 ARTICLE IX 
 EVENTS OF DEFAULT 
 9.1 Events of Default. The occurrence and continuance of any of the
following events shall constitute an event of default under this Agreement and the Debenture (each an “Event of Default” and, collectively, “Events of Default”): 
 (a) if the Company shall default in the payment of (i) any part of the principal of the Debenture, when the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or otherwise; or (ii) the interest on the Debenture; when the same shall become due and payable; and in each case such default shall have continued without cure for ten
(10) days after written notice (a “Default Notice”) is given to the Company of such default; 
 (b) if the Company shall
default in the performance of any of the covenants contained in Articles VIII or IX hereof and such default shall have continued without cure for fifteen (15) days after a Default Notice is given to the Company; 
 (c) if the Company shall default in the performance of any other material agreement or covenant contained in this Agreement and such default shall not
have been remedied to the satisfaction of the Purchaser within thirty-five (35) days after a Default Notice shall have been given to the Company; 
 (d) if the Company shall have failed to obtain the waivers of all persons holding preemptive or anti-dilution adjustment rights as required by Section 5.4(n) hereof and such default shall not have been remedied
to the satisfaction of the Purchaser, within thirty-five (35) days after a Default Notice shall have been given to the Company; 
 (e) if
any representation or warranty made in this Agreement or in or any certificate delivered pursuant hereto shall prove to have been incorrect in any material respect when made; 
 (f) if any default shall occur under any indenture, mortgage, agreement, instrument or commitment evidencing or under which there is at the time
outstanding any indebtedness of the Company or a subsidiary, in excess of $100,000, or which results in such indebtedness, in an aggregate amount (with other defaulted indebtedness) in excess of $250,000 becoming due and payable prior to its due
date and if such indenture or instrument so requires, the holder or holders thereof (or a trustee on their behalf) shall have declared such indebtedness due and payable; 
 (g) if any of the Company or its subsidiaries shall default in the observance or performance of any term or provision of an agreement to which it is a party or by which it is bound, which default will have a Material
Adverse Effect and such default is not waived or cured within the applicable grace period provided for in such agreement; 
 (h) if a final
judgment which, either alone or together with other outstanding final judgments against the Company and its subsidiaries, exceeds an aggregate of $250,000 

  

 26 








 
shall be rendered against the Company or any subsidiary and such judgment shall have continued undischarged or unstayed for thirty-five (35) days after
entry thereof; 
 (i) if the Company or any subsidiary shall make an assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts; or if the Company or any subsidiary shall suffer a receiver or trustee for it or substantially all of its assets to be appointed, and, if appointed without its consent, not to be discharged or stayed within ninety
(90) days; or if the Company or any subsidiary shall suffer proceedings under any law relating to bankruptcy, insolvency or the reorganization or relief of debtors to be instituted by or against it, and, if contested by it, not to be dismissed
or stayed within ninety (90) days; or if the Company or any subsidiary shall suffer any writ of attachment or execution or any similar process to be issued or levied against it or any significant part of its property which is not released,
stayed, bonded or vacated within ninety (90) days after its issue or levy; or if the Company or any subsidiary takes corporate action in furtherance of any of the aforesaid purposes or conditions; or 
 (j) The Company shall have failed to comply with its obligations under Section 7.15 hereof. 
 9.2 Remedies. 
 (a) Upon the
occurrence and continuance of an Event of Default, the Purchaser may at any time (unless all defaults shall theretofore have been remedied) at its option, by written notice or notices to the Company (i) declare the Debenture to be due and
payable, whereupon the same shall forthwith mature and become due and payable, together with interest accrued thereon, without presentment, demand, protest or notice, all of which are hereby waived; and (ii) declare any other amounts payable to
the Purchaser under this Agreement or as contemplated hereby due and payable. 
 (b) Notwithstanding anything contained in
Section 9.2(a), in the event that at any time after the principal of the Debenture shall so become due and payable and prior to the date of maturity stated in the Debenture all arrears of principal of and interest on the Debenture (with
interest at the rate specified in the Debenture on any overdue principal and, to the extent legally enforceable, on any interest overdue) shall be paid by or for the account of the Company, then the Purchaser, by written notice or notices to the
Company, may (but shall not be obligated to) waive such Event of Default and its consequences and rescind or annul such declaration, but no such waiver shall extend to or affect any subsequent Event of Default or impair any right resulting
therefrom. 
 (c) If the Company fails to comply with its obligations under Section 7.15 hereof, and if the Purchaser elects to waive
such Event of Default pursuant to Section 9.2(b), the Company shall be obligated to pay to the Purchaser the sum of $40,000 per month pro rata for each day that such Event of Default remains uncured. For purposes of this Section 9.2(c),
the amount payable to the Purchaser shall be computed based upon 30-day months. 
 9.3 Enforcement. In case any one or more Events of
Default shall occur and be continuing, the Purchaser may proceed to protect and enforce its rights by an action at law, suit 

  

 27 








 
in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in the Debenture or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law. In case of a default in the payment of any principal of or interest on the Debenture, the Company will pay to the
Purchaser such further amount as shall be sufficient to cover the cost and the expenses of collection, including, without limitation, reasonable attorney’s fees, expenses and disbursements. No course of dealing and no delay on the part of the
Purchaser in exercising any rights shall operate as a waiver thereof or otherwise prejudice the Purchaser’s rights. No right conferred hereby or by the Debenture upon the Purchaser shall be exclusive of any other right referred to herein or
therein or now available at law in equity, by statute or otherwise. 
 ARTICLE X 
 [INTENTIONALLY OMITTED] 
 ARTICLE XI

 INDEMNIFICATION 
 11.1 Indemnification by the Company. The Company agrees to defend, indemnify and hold harmless the Purchaser and shall reimburse the Purchaser for, from and against each claim, loss, liability, cost and expense (including without
limitation, interest, penalties, costs of preparation and investigation, and the reasonable fees, disbursements and expenses of attorneys, accountants and other professional advisors) (collectively, “Losses”) directly or indirectly
relating to, resulting from or arising out of any untrue representation, misrepresentation, breach of warranty or non-fulfillment of any covenant, agreement or other obligation by or of the Company contained herein or in any certificate, document,
or instrument delivered to the Purchaser pursuant hereto. 
 11.2 Indemnification by the Purchaser. The Purchaser agrees to defend,
indemnify and hold harmless the Company and shall reimburse the Company for, from and against all Losses directly or indirectly relating to, resulting from or arising out of any untrue representation, misrepresentation, breach of warranty or
non-fulfillment of any covenant, agreement or other obligation of the Purchaser contained herein or in any certificate, document or instrument delivered to the Company pursuant hereto. 
 11.3 Procedure. The indemnified party shall promptly notify the indemnifying party of any claim, demand, action or proceeding for which
indemnification will be sought under Sections 11.1 or 11.2 of this Agreement, and, if such claim, demand, action or proceeding is a third party claim, demand, action or proceeding, the indemnifying party will have the right at its expense to assume
the defense thereof using counsel reasonably acceptable to the indemnified party. The indemnified party shall have the right to participate, at its own expense, with respect to any such third party claim, demand, action or proceeding. In connection
with any such third party claim, demand, action or proceeding, the Purchaser and the Company shall cooperate with each other and provide each other with access to relevant books and records in their possession. No such third party claim, demand,
action or proceeding shall be settled without the prior written consent of the indemnified party, which shall not be unreasonably withheld. If a firm written offer is made to settle any such third party claim, 

  

 28 








 
demand, action or proceeding and the indemnifying party proposes to accept such settlement and the indemnified party refuses to consent to such settlement,
then: (i) the indemnifying party shall be excused from, and the indemnified party shall be solely responsible for, all further defense of such third party claim, demand, action or proceeding; and (ii) the maximum liability of the
indemnifying party relating to such third party claim, demand, action or proceeding shall be the amount of the proposed settlement if the amount thereafter recovered from the indemnified party on such third party claim, demand, action or proceeding
is greater than the amount of the proposed settlement. 
 ARTICLE XII 
 MISCELLANEOUS 
 12.1 Governing Law. This Agreement and the rights of the
parties hereunder shall be governed in all respects by the laws of the State of New York wherein the terms of this Agreement were negotiated. 
 12.2 Survival. Except as specifically provided herein, the representations, warranties, covenants and agreements made herein shall survive the Closing. 
 12.3 Amendment. This Agreement may not be amended, discharged or terminated (or any provision hereof waived) without the written consent of the Company and the Purchaser. 
 12.4 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding
upon and enforceable by and against, the successors, assigns, heirs, executors and administrators of the parties hereto. The Purchaser may assign its rights hereunder (provided, that the Purchaser may not so assign any of such rights to any
competitor of the Company), and the Company may not assign its rights or obligations hereunder without the consent of the Purchaser or any of its successors, assigns, heirs, executors and administrators. 
 12.5 Entire Agreement. This Agreement, the Transaction Documents and the other documents delivered pursuant hereto and simultaneously herewith
constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof. 
  

 29 








 12.6 Notices, etc. All notices, demands or other communications given hereunder shall be in
writing and shall be sufficiently given if delivered either personally or by a nationally recognized courier service marked for next business day delivery or sent in a sealed envelope by first class mail, postage prepaid and either registered or
certified, addressed as follows: 
  

	 	(a)	if to the Company: 

  

	 	    	China Media Networks International, Inc. 


	 	    	237 Cedar Hill Street 


	 	    	Marlboro MA 01752 


	 	    	Attn: Chief Executive Officer 

  

	 	    	with a copy to: 

  

	 	    	Andrew B. White, Esq. 


	 	    	Bingham McCutchen LLP 


	 	    	150 Federal Street 


	 	    	Boston, Massachusetts 02110 

  

	 	(b)	if to a Purchaser: 

  

	 	    	Vicis Capital Master Fund 


	 	    	Tower 56, Suite 700 


	 	    	126 E. 56th Street, 7th Floor 


	 	    	New York, NY 10022 


	 	    	Attn: Shad Stastney 

  

	 	    	with a copy to: 

  

	 	    	Andrew D. Ketter, Esq. 


	 	    	Quarles & Brady LLP 


	 	    	411 East Wisconsin Avenue 


	 	    	Milwaukee, Wisconsin 53202 

 12.7 Delays or
Omissions. No delay or omission to exercise any right, power or remedy accruing to any holder of any Securities upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such holder nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence, therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any holder of any breach or default under this Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be, made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative. 
  

 30 








 12.8 Severability. The invalidity of any provision or portion of a provision of this Agreement
shall not affect the validity of any other provision of this Agreement or the remaining portion of the applicable provision. It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated to be invalid or unenforceable, such provision shall
be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made.

 12.9 Expenses. The Company shall bear its own expenses and legal fees incurred on its behalf with respect to the negotiation,
execution and consummation of the transactions contemplated by this Agreement, and without requiring any documentation therefor, the Company will reimburse the Purchaser $60,000 for all fees and expenses incurred by the Purchaser with respect to the
negotiation, execution and consummation of the transactions contemplated by this Agreement and the transactions contemplated hereby and due diligence conducted in connection therewith, including the fees and disbursements of counsel and auditors for
the Purchaser. Such reimbursement shall be paid on the Closing Date by the Purchaser deducting such $60,000 from the Cash Payment. 
 12.10
Consent to Jurisdiction; Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED THE STATE AND COUNTY OF NEW YORK FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTION DOCUMENTS. EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY CONSENTS TO SERVICE OF PROCESS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 12.6 AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION SUCH PARTY MAY NOW OR HEREAFTER HAVE TO SERVICE OF PROCESS IN SUCH MANNER. 
 12.11 Titles and Subtitles. The titles of the articles, sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 
 12.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. 
  

 31 








 IN WITNESS WHEREOF, the parties hereto have duly executed this Securities Purchase Agreement, as of the
day and year first above written. 
  

	
	 COMPANY:
  
 CHINA MEDIA NETWORKS
 INTERNATIONAL, INC.

	
	 /s/ Brian Lesperance

	 Brian Lesperance

	 Chief Executive Officer



  

	
	 PURCHASER:
  
 VICIS CAPITAL MASTER FUND

	
	 /s/ Shad Stastney

	 Shad Stastney



  

 32 








 EXHIBIT A 
 FORM OF DEBENTURE 







 EXHIBIT B 
 FORM OF $.345 WARRANTS 







 EXHIBIT C 
 FORM OF $.375 WARRANTS 







 EXHIBIT D 
 FORM OF NEW INVESTOR RIGHTS AGREEMENT 







 EXHIBIT E 
 FORM OF SECURITY AGREEMENT 







 EXHIBIT F 
 FORM OF STOCK PLEDGE AGREEMENT 







 EXHIBIT G 
 FORM OF GUARANTY AGREEMENT 







 EXHIBIT H 
 FORM OF GUARANTOR SECURITY AGREEMENT 







 EXHIBIT I 
 RESALE TRANSACTION 
 ACQUIRED WARRANTS AND MODIFICATIONS THERETO 
  

					
	 EXISTING INVESTOR
	  	 WARRANTS AND
 COMMON STOCK
 ACQUIRED
	  	 NEW WARRANT TERMS

			
	 Thunderbird/Firle
 Trading
	  	 All held by
 Thunderbird/ Firle
 Trading
	  	 •      reprice all warrants to $.345 per share
 •      cashless exercise feature of all warrants to be eliminated

			
	 Rehab Medical Holdings,
 Inc. and The
Mayflower
 Group
	  	 All shares of Common
 Stock held
	  	








 EXHIBIT K 
 FORM OF AMENDED AND RESTATED ARTICLES OF INCORPORATION 







 DISCLOSURE SCHEDULE 
 Schedule 3.12 Placement Agent’s Fees 
 None. 
 Schedule 3.16 Absence of Certain Changes 
 None. 
 Schedule 3.22 Intellectual Property Rights 
 None.