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                                                                    EXHIBIT 10.1

                    INTERIM CHIEF EXECUTIVE OFFICER AGREEMENT

This Agreement ("the Agreement") is entered into as of October 10, 2002
("Effective Date") between FLAG TELECOM GROUP LIMITED, a limited company
organized under the laws of Bermuda ("Company") and SPAGNOLO GROUP LP, a Texas
limited partnership whose address is 6641 Woodland Hills Lane Plano, Texas 75024
(hereinafter "CEO").

1.   SERVICES; PLACE OF PERFORMANCE; TERM

     1.1   SCOPE OF SERVICES. CEO's Designee (as defined below) will perform the
     services ("Services") described in the Task Orders executed by the parties
     and attached hereto as EXHIBIT A.

     1.2   PLACE OF PERFORMANCE. CEO's Designee shall perform Services primarily
     at Company's or its affiliates' office in London, England; PROVIDED, THAT,
     CEO's Designee may be required to travel on Company business during the
     Term.

     1.3   TERM. Unless terminated earlier in accordance with this Agreement,
     the term of this Agreement shall be the lesser of six months, beginning on
     the Effective Date, or until such time as the Company retains a new chief
     executive officer (the "Term").

2.   PAYMENT

     2.1   PAYMENT. Company will pay CEO in the amounts and in accordance with
     the arrangements specified in each Task Order. CEO shall not be eligible
     for any other payments or benefits other than those that are specifically
     provided in the Task Order.

     2.2   INVOICING. Except as otherwise set forth in a Task Order, CEO will
     invoice semi-monthly for the Services. Company will pay the amounts
     properly invoiced as soon as administratively possible following Company's
     receipt of the invoice.

     2.3   EXPENSES. Company will reimburse CEO for all reasonable business
     expenses incurred by CEO in connection with the Services in accordance with
     Company's business expense reimbursement policy as it may exist from time
     to time.

3.   WARRANTIES

     3.1   CEO and Designee (as defined below) warrant that (a) it will perform
     the Services hereunder in a competent, professional and workmanlike manner
     utilizing reasonable care, prudence and skill as would be reasonably
     expected for the chief executive officer of a comparable company, (b) Mark
     F. Spagnolo, an employee of CEO (the "Designee"), will be the only
     individual providing the Services and acting as a service provider to
     Company, and (c) neither CEO nor Designee is precluded from providing the
     Services pursuant to any law, regulation, contract or otherwise. During the
     Term, CEO shall cause the Designee to adhere to all Company employment
     policies, including, without limitation, those relating to conduct, as
     though Designee were an employee of Company for that purpose.

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4.   TERMINATION

     4.1   TERMINATION. Either party may terminate this Agreement for any
     reason, or no reason, upon thirty (30) days prior written notice; PROVIDED,
     THAT, this Agreement shall automatically terminate without notice upon (i)
     expiration of the Term, (ii) Designee's death or disability, or (iii) CEO's
     and/or Designee's, as the case may be, termination by Company for cause or
     due to any other material breach of this Agreement. In the event of a
     termination, Company will pay CEO for all Services rendered and reasonable
     expenses (to the extent such expenses would otherwise be reimbursable)
     incurred by CEO prior to the termination of the Agreement, and otherwise
     will have no further obligations hereunder. CEO shall have no liability to
     the Company for acts or omissions committed by the CEO in good faith and
     with a reasonable belief that such acts or omission were in the best
     interests of the Company unless CEO acted negligently with respect thereto.

     4.2   SURVIVAL. The terms of Sections 3 through 8 will survive the
     termination or expiration of this Agreement for any reason to carry out
     their intended effect.

5.   INDEPENDENT CONTRACTOR RELATIONSHIP

     5.1   CEO will undertake the Services to be performed hereunder as an
     independent contractor. CEO will determine the manner and method of its
     performance of the Services, and Company's general right to direct the
     Services will not make CEO, or its agents, or personnel, the agents or
     employees of Company. The provision of Services under this Agreement will
     not result in any partnership, joint venture, or trust relationship between
     CEO and Company. Neither party will have the authority to make any
     statements, representations, or commitments of any kind on behalf of the
     other party, or to take any action binding upon the other. As an
     independent contractor, CEO shall not participate in any employee benefit
     plan, program or policy, including vacation.

     5.2   All wages paid to employees of CEO, including, without limitation,
     the Designee, shall constitute wages paid to such employees solely by CEO
     and neither Company, nor its officers, directors, and employees shall have
     any obligation or liability whatsoever to CEO for workers' compensation,
     federal and state payroll taxes, unemployment compensation, minimum wages,
     Social Security assessments or similar charges, taxes or liabilities
     applicable to an employment relationship. CEO further agrees that it shall
     maintain sufficient insurance to protect it, its Designee and such other
     parties who may perform services on its behalf hereunder from claims under
     workers' compensation laws and other similar acts, and also from any
     damage, personal injury or death suffered by it, its Designee or any
     parties engaged by it, and which may arise in the performance of services
     hereunder.

     5.3   CEO recognizes and acknowledges that it is free from control or
     direction over the performance of its services, both under this Agreement
     and in fact, and CEO represents to Company that it (i) has established a
     place of business separate, independent and outside of any place of
     business of Company, (ii) is engaged in an independently established trade,
     occupation, or business, and (iii) has other customers and clients for
     which it performs services. Designee may, at the direction of Company's
     Chairman, meet with third parties on behalf of Company to discuss potential
     client, strategic or financial relationships with Company. CEO may not
     contact the same third parties in any matters for at least six (6) months
     following the end of the Term in any way that would violate the provisions
     of this Agreement.

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     5.4   CEO and/or Designee agrees to fully indemnify Company and its
     shareholders, subsidiaries, affiliates, officers, directors, employees and
     independent contractors against and will hold Company, its shareholders,
     subsidiaries, affiliates, officers, directors, employees and independent
     contractors harmless from any and all claims, costs, damages, demands,
     expenses (including without limitation attorneys' fees), judgments, losses
     or other liabilities of any kind or nature whatsoever arising from or
     directly or indirectly related to CEO's and/or Designee's breach of any
     provision(s) of this Agreement, including but not limited to any breach or
     failure, and the resulting tax ramifications thereof, of CEO and/or
     Designee to comply with this Section 5.

6.   INTELLECTUAL PROPERTY; CONFIDENTIALITY

     6.1   The provisions of EXHIBIT B are hereby incorporated herein and made a
     part hereof.

     6.2   The parties have executed a confidentiality and non-disclosure
     agreement on September 13, 2002 whose terms shall be incorporated herein
     and made a part hereof. For the avoidance of doubt, the parties to such
     agreement are CEO, the Designee and Company.

7.   GENERAL PROVISIONS

     7.1   INDEMNIFICATION. Company shall provide indemnification coverage for
     CEO and its Designee to the same extent as if such parties were executive
     officers of Company to the maximum extent permitted under Company's
     Bye-Laws.

     7.2   NON-SOLICITATION. During the Term of this Agreement, and for a period
     of one year thereafter, CEO and/or Designee will not, directly or
     indirectly, on behalf of itself or as a partner or as an officer, director,
     employee, agent, consultant or shareholder of any other entity or person,
     or as a trustee, fiduciary or other representative of any other person or
     entity, induce, or attempt to induce any employee of Company or its
     affiliates to leave the employ of Company or its affiliates, or in any way
     interfere with the relationship between any such employee and Company or
     its affiliates.

     7.3   SEVERABILITY. If any term or provision of this Agreement is be found
     by a court of competent jurisdiction or by an arbitrator to be invalid,
     illegal or otherwise unenforceable, such finding will not affect the other
     terms or provisions of this Agreement or the whole of this Agreement, but
     such term or provision found to be invalid, illegal or otherwise
     unenforceable will be deemed modified or narrowed to the extent necessary
     in the court's or arbitrator's opinion to render such term or provision
     enforceable, and the rights and obligations of the parties will be
     construed and enforced accordingly, preserving to the fullest permissible
     extent the intent and agreements of the parties set forth in this
     Agreement.

     7.4   NOTICES. Any notice or other communication given pursuant to this
     Agreement must be in writing and will be effective when delivered
     personally to the party for whom intended, or when signed for by that
     person (or that person's authorized representative) if delivered by
     messenger or express courier service or by certified or registered United
     States or United Kingdom mail, or five (5) days following deposit of the
     same into the United States or United Kingdom mail, first class postage
     prepaid, provided that in each case other than personal delivery the notice
     is addressed and sent to such party at the address set forth above.

     7.5   FORCE MAJEURE. Neither party will be liable for any delays or
     failures in performance of any obligations under this Agreement, due to
     causes beyond its reasonable control,

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     including, but not limited to: acts of God, fire, explosion, or other
     similar catastrophes; any law, order, regulation, direction, action or
     request of any government (or body thereof) having jurisdiction over either
     of the parties; national emergencies, insurrections, riots, wars or
     terrorist attacks; or strikes, lock-outs, work stoppages or other labor
     difficulties.

     7.6   COMPLETE AGREEMENT. This Agreement includes Task Orders executed
     hereunder (which are incorporated herein and made a part hereof) and sets
     forth the entire understanding between the parties with respect to the
     performance of the Services and the subject matter of this Agreement, and
     supersedes all prior and contemporaneous agreements, arrangements,
     correspondence, requests for proposals, proposals, and communications,
     whether oral or written, with respect to the performance of the Services or
     the subject matter of this Agreement.

     7.7   GOVERNING LAW. This Agreement will be governed by and construed in
     accordance with the laws of the State of New York without giving effect to
     any choice-of-law rules that may otherwise require application of the laws
     of another jurisdiction.

     7.8   LEGAL AND EQUITABLE REMEDIES. Company shall have the right to enforce
     this Agreement and any of its provisions by injunction, specific
     performance or other equitable relief, without bond and without prejudice
     to any other rights and remedies that Company may have for a breach of this
     Agreement by CEO and/or Designee.

     7.9   ASSIGNMENT. Neither this Agreement nor any interest herein nor any
     claim arising under or in connection with or relating to this Agreement may
     be assigned by CEO or Designee without Company's prior written consent, and
     any attempted assignment without such consent will be void. Company may
     assign this Agreement without the consent of CEO or Designee.

     7.10  SUCCESSORS. This Agreement will inure to the benefit of and will be
     binding upon the parties, their respective successors and permitted
     assignees and transferees, unless otherwise provided in this Agreement.

     7.11  AMENDMENTS. The terms and conditions of this Agreement may not be
     amended, changed, modified, supplemented or waived without the signature of
     each party. No waiver of any breach, delay or default under this Agreement
     will constitute a waiver of any other or subsequent breach, delay or
     default hereunder, whether or not similar.

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AGREED AND ACCEPTED:

FLAG TELECOM GROUP LIMITED            SPAGNOLO GROUP, LP

/s/ Edward McCormack                  /s/ Mark F. Spagnolo
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Authorized Signature                  Authorized Signature

Edward McCormack                      Mark F. Spagnolo, President
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Printed Name                          Printed Name

October 10, 2002                      October 10, 2002
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Date                                  Date

With respect to the obligations and rights under Sections 6.1 (including
Exhibit B), 6.2, and 7.2:

DESIGNEE

/s/ Mark F. Spagnolo
---------------------------------
Name: Mark F. Spagnolo
Date: October 10, 2002

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                                    EXHIBIT A

                                   TASK ORDER

Task Order under Interim CEO Agreement (the "Agreement") with Flag Telecom Group
Limited dated as of October 10, 2002.

DESCRIPTION OF SERVICES:

Designee will be named as the Interim CEO of Company reporting to the Board of
Directors of Company and, except as specifically provided in the Agreement,
shall have such duties and responsibilities as are normally associated with the
position of chief executive officer and such other duties and responsibilities
as may be reasonably assigned by the Board of Directors of Company. These
services shall be rendered on a substantially full-time basis, provided Designee
shall be permitted to engage in outside activities which do not materially
interfere or conflict with his responsibilities to Company.

COMPENSATION:

During the Term, CEO shall be paid a consulting fee of $80,000 per month for
each full month of the Term (partial months to be pro-rated based on the number
of days engaged during such month over the number of days in any such month).
Other than expense reimbursements, neither CEO or Designee shall receive any
additional compensation or benefits from Company or its affiliates.

In addition to the foregoing, if CEO is subject to income taxes in the United
Kingdom and/or Bermuda with respect to the Services which is in excess of such
obligations that the CEO would otherwise have in the United States, then the CEO
shall be paid an additional amount by the Company such that it is in the same
income tax position as if it were only subject to U.S. income taxation.

AGREED AND ACCEPTED:

FLAG TELECOM GROUP LIMITED            SPAGNOLO GROUP, LP

/s/ Edward McCormack                  /s/ Mark F. Spagnolo
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Authorized Signature                  Authorized Signature

Edward McCormack                      Mark F. Spagnolo, President
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Printed Name                          Printed Name

October 10, 2002                      October 10, 2002
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Date                                  Date

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                                    EXHIBIT B

                              INTELLECTUAL PROPERTY

A.   NO USE OF NAME OR TRADEMARKS. Neither party will utilize the names or
trademarks of the other in connection with any advertising, marketing or
promotion of any kind without obtaining the other party's prior written consent.

B.   COMPANY WORK PRODUCT. Company retains all right, title and interest in and
to all software, programming documentation, technical ideas, concepts, know-how,
inventions, discoveries, improvements, techniques, notes, models, writings,
reports, formulas, specifications, memoranda, computer source code and
documentation and other data and all related intellectual property rights,
created, conceived and developed by Company prior to the commencement of this
Agreement (the "Company Prior Technology"). All right, title, and interest in
and to all derivative works, enhancements, extensions and modifications of or
related to Company Prior Technology or other products developed in whole or in
part by Company, including without limitation all intellectual property rights
therein (the "Company Developed Technology") shall be the sole property of
Company whether developed by Company, CEO or any other party in performing the
Services or otherwise.

C.   CEO WORK PRODUCT. CEO retains all right, title and interest in and to all
software, programming documentation, technical ideas, concepts, know-how,
inventions, discoveries, improvements, techniques, notes, models, writings,
reports, formulas, specifications, memoranda, computer source code and
documentation and other data and all related intellectual property rights,
originated, developed or owned by CEO or its employees or representatives prior
to the commencement of this Agreement (the "CEO Prior Technology"). All right,
title, and interest in and to all derivative works, enhancements, extensions and
modifications of or related to CEO Prior Technology developed in whole or in
part by CEO, including without limitation all intellectual property rights
therein (the "CEO Developed Technology") shall be the sole property of CEO. All
ideas, know-how, techniques or other intellectual property rights originated or
developed by CEO, excluding Company Prior Technology and Company Developed
Technology, developed by CEO during the term of the Agreement for work not
performed under this Agreement shall be the sole property of CEO. CEO will
notify Company of any CEO Prior Technology or CEO Developed Technology which CEO
uses in the performance of this Agreement.

D.   INVENTIONS AND DATA RIGHTS

     D.1   CEO and Designee agree that all notes, models, writings, reports,
     formulas, specifications, memoranda, computer source code and documentation
     and other data prepared and/or produced by CEO and Designee in the
     performance of this Agreement and which are or relate to Company Prior
     Technology or Company Developed Technology or result from work by CEO
     or/and Designee in the performance of this Agreement and all derivative
     works thereof are works made for hire and are assigned to and shall become
     the sole property of Company, including all rights therein of whatever kind
     or nature, and CEO and Designee agree not to disclose same to any other
     person, firm or corporation. Upon termination of its work on the project,
     or upon the termination or expiration of this Agreement, CEO and Designee
     agree to promptly deliver to Company all documents and other records that
     relate to the business activities of Company, and all other materials which
     belong to Company.

     D.2   CEO and Designee agree and do hereby assign to Company as its
     exclusive property,

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     their entire right, title and interest in those inventions, innovations or
     ideas developed or conceived by them solely or jointly with others, during
     the term of CEO's and/or Designee's work for or at Company, which
     inventions, innovations or ideas are or relate to Company Prior Technology
     or Company Developed Technology, or result from work by CEO and/or Designee
     in the performance of this Agreement. All rights, title and interest in
     such inventions shall be vested in Company immediately upon such
     development or conception. CEO and Designee further agree that, when
     requested, CEO and Designee will without charge to Company, but at Company
     `s expense, sign all papers, take all rightful oaths, and do all acts which
     may be necessary, desirable or convenient for securing and maintaining the
     patents, copyrights and legal protection for such inventions or innovations
     in any and all countries and for vesting title in Company, its successors,
     assigns, and legal representatives or nominees.

     D.3   If CEO and/or Designee, in the performance of this Agreement,
     discover, invent, or produce, without limitation, any information, computer
     programs,   software  or  other  associated  intangible  property,  network
     configuration,  formulae,  product,  device,  system,  technique,  drawing,
     program or process which is a trade  secret,  such  information,  formulae,
     product,  device, system,  technique,  drawing, program or process shall be
     assigned to Company. CEO and Designee agree to fully cooperate with Company
     in protecting  the value and secrecy of any such trade secret,  and further
     agree to execute any and all documents  Company deems necessary to document
     any such assignment to Company.  CEO and Designee  appoint Company as CEO's
     and Designee's  attorney-in-fact  to execute any documents Company may deem
     necessary  that relate to any such trade  secret or  assignment  thereof to
     Company.

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                                                                    EXHIBIT 10.1

                               PURCHASE AGREEMENT

    THIS PURCHASE AGREEMENT (together with all schedules, exhibits and all
ancillary agreements contemplated herein are hereinafter referred to as this
"Agreement"), is entered into as of the 18th of August, 2002 by and between
American Oriental Bioengineering, Inc. ("AOBO"), a Nevada corporation and Shujun
Liu (the "Project Owner"), a natural person residing in the People's Republic of
China ("China"). The Project Owner is Chairman of AOBO and is the sole owner of
the protein peptide project (the "Project"). The Project is the subject of an
independent valuation (the "Appraisal") by Vigers, an independent appraiser in
Hong Kong. The Appraisal is attached as Exhibit A to this Agreement.
Hereinafter, AOBO and the Project Owner are each referred to individually as a
"Party" and collectively as "Parties".

                                    PREMISES

                            ------------------------

    Whereas, the Project Owner and AOBO believe the acquisition of the Project
is of great importance to AOBO's expansion;

    Whereas, certain assets of the Project (the "Purchased Assets") including,
but not limited to: (i) plant buildings, (ii) manufacturing equipment,
(iii) environmental control equipment, (iv) the right to produce products
arising from the operation of the Project, and (v) the ownership rights to any
intellectual property arising from the operations of the Project have an
historical value of approximately $3,205,000; and,

    Whereas, the Project Owner owns 100% of the equity interest in the Project;

                                   AGREEMENT

                            ------------------------

    NOW THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the Parties to be derived herefrom, it is hereby agreed as follows.

                                   ARTICLE I
                   REPRESENTATIONS, COVENANTS, AND WARRANTIES
                      OF THE PROJECT AND THE PROJECT OWNER

    As an inducement to, and to obtain the reliance of AOBO, the Project Owner,
for himself and on behalf of the Project, as applicable, represents and warrants
as follows:

    Section 1.01--OWNERSHIP OF THE PROJECT. The Project Owner is the sole legal
and beneficial owner of the Project free and clear of any claims, charges,
equities, liens, security interests, and encumbrances whatsoever.

    Section 1.02--VALID TRANSFER OF FULLY VESTED SHARES. The Project Owner has
full right, power, and authority to transfer, assign, convey, and deliver his
ownership of the Project. The delivery by the Project Owner of the ownership
interest of the Project at the Closing (as described in Section 3.03 herein)
will convey to AOBO good and marketable title to the Project, free and clear of
any claims, charges, equities, liens, security interests, and encumbrances
whatsoever.

    Section 1.03--ORGANIZATION OF PROJECT SHAREHOLDERS. The Project Owner has
taken, or will have taken prior to Closing (as described in Section 3.03
herein), all actions required by law, or otherwise to

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authorize the execution and delivery of this Agreement. The Project Owner has or
will have prior to Closing (as described in Section 3.03 herein), the full
power, authority, and legal right and has or will have prior to Closing (as
described in Section 3.03 herein), taken all action required by law to
consummate the transactions herein contemplated.

    Section 1.04--ENFORCEABLE OBLIGATION. The transactions contemplated by this
Agreement are the valid and binding obligations of the Project Owner,
enforceable against the Project Owner, by AOBO in accordance with the terms of
this Agreement.

    Section 1.05--NO CONFLICTS. The execution and delivery by the Project Owner
of this Agreement, the performance by the Project Owner of its obligations under
this Agreement and the consummation of the transactions contemplated hereby and
thereby do not and will not: (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or both) a
default under, (iii) require the Project Owner or the Project to obtain any
consent, approval or action of, make any filing with or give any notice to any
person as a result or under the terms of, (iv) result in or give to any person
any right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
or (vi) result in the creation or imposition of any lien upon the Project Owner
or the Project or any of their respective assets and properties under, any
contract to which the Project Owner or the Project is a party or by which any of
the Purchased Assets is bound.

    Section 1.06--GOVERNMENTAL AUTHORIZATIONS AND LICENSES. The Project Owner
has, or will have upon Closing (as described in Section 3.03 herein), all
licenses, franchises, permits, and other governmental authorizations that are
legally required to enable it to conduct its business in all material respects
as conducted. No authorization, approval, consent, or order of, or registration,
declaration, or filing with, any court or other governmental body is required in
connection with the execution and delivery by the Project Owner of this
Agreement and consummation by the Project Owner of the transaction contemplated
hereby.

    Section 1.07--COMPLIANCE WITH LAWS AND REGULATIONS. The Project and the
Project Owner each has complied with all applicable statutes and regulations
except to the extent that noncompliance would not result in the occurrence of
any material liability for the Project or for the Project Owner.

                                   ARTICLE II
                        REPRESENTATIONS, COVENANTS, AND
                               WARRANTIES OF AOBO

    As an inducement to, and to obtain the reliance of the Project Owner, AOBO
represents and warrants as follows:

    Section 2.01--ORGANIZATION AND DUE AUTHORIZATION. AOBO is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Nevada and has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of its properties and assets. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not violate any provision of AOBO's
articles of incorporation or bylaws. AOBO has taken all action required by law,
its articles of incorporation, its bylaws, or otherwise to authorize the
execution and delivery of this Agreement, and AOBO has full power, authority,
and legal right and has taken all action required by law, its articles of
incorporation, bylaws, or otherwise to consummate the transactions herein
contemplated.

    Section 2.02--CAPITALIZATION AND OUTSTANDING SHARES. As of August 14, 2002,
AOBO'S authorized capital currently consists of 20,000,000 shares of common
stock, par value $0.01, of which 10,141,017 shares of common stock are issued
and outstanding. All issued and outstanding shares are legally

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issued, fully paid, non-assessable and not issued in violation of the
pre-emptive or other rights of any person.

    Section 2.03--APPROVAL OF AGREEMENT. The board of directors of AOBO has
approved this Agreement and the transactions contemplated herein.

                                  ARTICLE III
                                PLAN OF EXCHANGE

    Section 3.01--THE EXCHANGE. The Project Owner agrees to assign, transfer,
and deliver to AOBO, free and clear of all liens, pledges, encumbrances,
charges, restrictions or known claims of any kind, nature, or description, the
whole ownership interest of the Purchased Assets, as of the date of this
Agreement, and AOBO agrees to issue and deliver: (i) the aggregate of 20,284,810
shares of AOBO's common stock to the individuals listed in Exhibit A hereto (the
"Share Recipients") in the amounts set forth opposite the name of each, and
(ii) 1,000,000 shares of AOBO's preferred stock having a voting power of 25% of
the combined voting power of AOBO's common and preferred stocks.

    Section 3.02--[Reserved]

    Section 3.03--CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be no sooner than twenty days after the
filing with the Securities and Exchange Commission of an Information Statement
on Form 14C disclosing the transactions contemplated by this Agreement ("Closing
Date").

    Section 3.04--CLOSING EVENTS. At the Closing, each of the Parties hereto
shall execute, acknowledge, and deliver (or shall ensure to be executed,
acknowledged, and delivered) the following:

    (a) in the case of the Project Owner, an originally-executed Bill of Sale
for the Purchased Assets; and,

    (b) in the case of AOBO, stock certificates evidencing the share ownership
of each of the Share Recipients as set forth on Schedule 3.04 hereto.

    Each Party shall also deliver such other items as may be reasonably
requested by the other Party and/or their respective legal counsel in order to
effectuate or evidence the transactions contemplated hereby.

                                   ARTICLE IV
                  CONDITIONS PRECEDENT TO OBLIGATIONS OF AOBO

    The obligations of AOBO under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:

    Section 4.01--ACCURACY OF REPRESENTATIONS. The representations and
warranties made by the Project Owner in this Agreement were true when made and
shall be true at the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement), and the Project Owner and each
Project Shareholder shall have performed or complied with all covenants and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.

    Section 4.02--NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business, or operations of the Project nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business or operations of the
Project.

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                                   ARTICLE V
            CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PROJECT OWNER

    The obligations of the Project Owner under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:

    Section 5.01--ACCURACY OF REPRESENTATIONS. The representations and
warranties made by AOBO in this Agreement were true when made and shall be true
as of the Closing Date (except for changes therein permitted by this Agreement)
with the same force and effect as if such representations and warranties were
made at and as of the Closing Date, and AOBO shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by the Project prior to or at the Closing.

    Section 5.02--NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business, or operations of AOBO nor shall any event have occurred which, with
the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business or operations of AOBO.

                                   ARTICLE VI
                                 MISCELLANEOUS

    Section 6.01--GOVERNING LAW. This Agreement shall be governed by, enforced,
and construed under and in accordance with the laws of the United States of
America and, with respect to the matters of state law, with the laws of the
State of New York.

    Section 6.02--RESOLUTION OF DISPUTES.

    (a) Any dispute, controversy or claim arising out of or relating to this
       Agreement, or the interpretation, breach, termination or validity hereof,
       shall first be resolved through friendly consultation, if possible. Such
       consultation shall begin immediately after one party has delivered to the
       other party a written request for such consultation (the "Consultation
       Date"). If the dispute cannot be resolved within 30 days following the
       Consultation Date, the dispute shall be submitted to arbitration upon the
       request of either party, with written notice to the other party.

    (b) ARBITRATION. The arbitration shall be conducted in New York, New York
       under the auspices of the American Arbitration Association ("AAA") in
       accordance with the commercial arbitration rules and supplementary
       procedures for international commercial arbitration of the AAA. There
       shall be three arbitrators--one arbitrator shall be chosen by each party
       to the dispute and those two arbitrators shall choose the third
       arbitrator. All arbitration proceedings shall be conducted in English.
       Each party shall cooperate with the other in making full disclosure of
       and providing complete access to all information and documents requested
       by the other party in connection with the arbitration proceedings.
       Arbitration shall be the sole, binding, exclusive and final remedy for
       resolving any dispute between the parties; either party may apply to any
       court of competent jurisdiction in the State of New York for enforcement
       of any award granted by the arbitrators.

    (c) During the period when a dispute is being resolved, except for the
       matter being disputed, the parties shall in all other respects continue
       to abide by the terms of this Agreement.

    Section 6.03--ATTORNEY'S FEES. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall reimburse the
nonbreaching party or parties for all costs, including reasonable attorney's
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.

                                       4
<Page>
    Section 6.04--SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.

    Section 6.05--ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter thereof.

    Section 6.06--SURVIVAL; TERMINATION. The representations, warranties, and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for a period of three
months. All rights and obligations under this entire Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators and
assigns of the parties.

    Section 6.07--COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument. For purposes of this Agreement,
facsimile signatures may be deemed originals.

    Section 6.08--AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same of any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance may be extended by a writing
signed by the party or parties for whose benefit the provision is intended.

    Section 6.09--THIRD PARTY CONSENTS AND CERTIFICATES. The Parties agree to
cooperate with each other in order to obtain any required third party consents
to this Agreement and the transactions herein and therein contemplated.

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

AMERICAN ORIENTAL BIOENGINEERING, INC.

/s/ YANCHUN LI
------------------------
By:  Yanchun Li
Its: COO

/s/ SHUJUN LIU
------------------------
By:  Shujun Liu
     Project Owner

                                       5
<Page>
                                 SCHEDULE 3.04

    List of Project Shareholders and the number of shares of each is to receive
pursuant to this Agreement:

<Table>
<S>                      <C>
Shujun LIU.............  11,484,810 common shares; 1,000,000 preferred shares
Chang Min WANG.........  1,500,000 common shares
Gui Xiang QIU..........  1,500,000 common shares
Wei HU.................  1,400,000 common shares
Zi Yun ZHOU............  1,500,000 common shares
Yan WANG...............  1,400,000 common shares
Sheng JIANG............  1,500,000 common shares
</Table>

<Page>
EXHIBIT A

                           APPRAISAL REPORT (REVISED)
                       BIOCHEMICAL ENGINEERING PROJECT OF
                            SOYBEAN PROTEIN PEPTIDE
                                   FIN0206034
                                 30TH JUNE 2002

                                  PREPARED BY
                            VIGERS HONG KONG LIMITED
<Page>

<Table>
<Caption>
CONTENT                                                       PAGE NO.
-------                                                       ---------
<S>                                                           <C>
INTRODUCTION................................................     1-2

BASIS OF VALUATION..........................................       2

VALUATION METHODOLOGY.......................................       2

INVESTIGATION AND ANALYSIS..................................     2-3

ASSUMPTIONS.................................................       3

LIMITING CONDITIONS.........................................       4

OPINION OF VALUE............................................       4

GENERAL SERVICE CONDITIONS..................................       5

END OF REPORT
</Table>
<Page>
<Table>
<S>                                                          <C>                    <C>                              <C>
VIGERS HONG KONG LTD.
International Property Consultants
HONG KONG OFFICE
21/F STANDARD CHARTERED BANK BUILDING,                       KOWLOON OFFICE
4-4A DES VOEUX ROAD CENTRAL, HONG KONG.                      1GFMIRAMAR TOWER, 132                                   [illegible]
TEL: 2810 1100      FAX: 2810 1571                           NATHAN ROAD, KOWLOON
URL HTTP://WWW.VIGERS.COM                                                                    ISO 900: 1994
Estate Agent's Licence (Company) No.; C-004676               TEL: 2810 1100             Certificate No. CC896i
                                                             FAX: 2377 0118         Building Consultancy Departent

<S>                                                          <C>
VIGERS HONG KONG LTD.
International Property Consultants

HONG KONG OFFICE
21/F STANDARD CHARTERED BANK BUILDING,
4-4A DES VOEUX ROAD CENTRAL, HONG KONG.
TEL: 2810 1100      FAX: 2810 1571
URL HTTP://WWW.VIGERS.COM
Estate Agent's Licence (Company) No.; C-004676

                                                             OFFICES
                                                             ASIA
                                                             Hong Kong
                                                             Singapore
                                                             Beijing
                                                             Shanghai
                                                             Guangzhou
                                                             Taipei
                                                             Seoul
                                                             Bangkok
                                                             Tokyo
                                                             Kuala Lumpur
                                                             Johor Bahru
                                                             Petaling Jaya
                                                             Penang
                                                             Sabah
                                                             Jakarta
                                                             Surabaya
</Table>
<Page>
REF.: JLG/HL/VA2891-2002

Date: 24th July 2002

The Directors
American Oriental Bioengineering Inc.
51 East 25th Street--Suite 401
New York City
United States of America

Dear Sirs,

    In accordance with your instructions, we have completed an appraisal of the
fair market value of 100 per cent. interest in the biochemical engineering
project of soybean protein peptide (referred to as the "Soybean Peptide"),
researched, developed and with the extraction and production technical know-how
owned by Mr. Liu Shu Jun (referred to as the "Mr. Liu"), for the production,
marketing and sales of various functional Soybean Peptide healthy and medical
tablets or powders (together referred to as the "Project") and submitted our
findings m this report. This letter identifies the property appraised, describes
the basis of valuation, investigation and analysis, assumptions, limiting
conditions and presents our opinion of value. It is our understanding that this
appraisal will be used by your company for the purpose of the acquisition of
certain interest of the Project and our appraisal report will be incorporated in
a public document. Our analysis was conducted for this purpose only and this
report should be used for no other purposes.

    We confirm that we have made relevant enquiries and obtained such further
information as we consider necessary for the purpose of providing our opinion of
the fair market value of 100 per cent. interest in the Project as at 30th
June 2002 (referred as the "valuation date").

INTRODUCTION

    In the early of year 1996, Mr. Liu set up a biochemical engineering project
for the study, research, development and extraction of plant protein peptide at
Harbin Medical University of the Harbin City, Heilongjiang Province, The
People's Republic of China (referred to as the "PRC"). During the five-year
analysis, research and development, production, project management, and after
hundreds of tests performed by various related technical consultations from
various academic institutes including China Agricultural University, Institute
of Chemistry of Chinese Academy of Sciences, Institute of Oceanology Chinese
Academy of Sciences, Institute of Life of Beijing Tsinghua University, Shenyang
Branch of Chinese Academy of Sciences, Northeast Agricultural University,
Chinese Medicine University of Heilongjiang Province and Industrial University
of Harbin, the biochemical engineering for the technical and designs,
development and extraction of plant protein peptide from soybean has been
completed in year 2000. As advised by the management of your company, Mr. Liu
has already applied for the patent right of the technical know-how of As
extraction and production of Soybean Peptide and the patent registration is
expected to be available in December 2002 without obstacle.

    Soybean Peptide is a series of enzyme separated biologically functional
active peptide substances derived from the soybeans as raw material and through
the biochemical engineering process of cutting, decomposition, conversion and
synthesis of soybean protein that can be easily absorbed by the body. It can
meet the body's need for special high-energy nutrition, accelerate metabolism,
and at the same time improve body immunity. As human body takes in the protein
and absorbs it in me form of peptide therefore it can men be directly absorbed
by the human intensive tracts. Thus the protein carrying amount and digestion
absorption ratio are greatly increased. Soybean Peptide has multi effects in
curing cancer, lowing blood pressure, pain relieving, curing diabetic disease
and enhancing immunity ability, etc. Because of the fast adsorption rate and
multi effects in various areas of the human body and in consideration of the
heath concern by the general public, in addition to adsorb Soybean Peptide
directly in the form of various tablets or powders, it can be regarded as an
additive in various foods and beverages including milk, tea, coffee and bear
etc. As advised by the management of your company, various functional Soybean
Peptide healthy and medical tablets or powders will be developed,
<Page>
produced, promoted and marketed in the PRC throughout your company's existing
sales network with various promotion programme including advertisements on me
televisions and newspapers and buses, free trail sample to the potentials.

BASIS OF VALUATION

    We have appraised the Project on the basis of fair market value. Fair market
value is defined as me estimated amount at which the property might be expected
to exchange between a willing buyer and a willing seller, neither being under
compulsion, each having reasonable knowledge of all relevant facts, with equity
to both and with the buyer and the seller contemplating the retention of the
business at its present location for continuation of current operations unless
the breakup of the business or the sale of its assets would yield greater
investment returns.

VALUATION METHODOLOGY

    The value of the Project has been developed through the application of
discounted economic income method to discount future cash flows derived from the
business back to present value.

    In this method, value depends on the present worth of future economic
benefits to be derived from ownership of business operation. Thus, an indication
of value is developed by discounting future free cash flows available for
distribution to the business owners to their present worth at the market-
derived rate of return, the unlevered cost of equity, appropriate for the risks
and hazards of the business.

    The unlevered cost of equity is developed through the Capital Asset Pricing
Model method ("CAPM"). The CAPM states that an investor requires excess returns
to compensate for any risk that is correlated to the risk in the return from the
stock market as a whole, but requires no excess return for other risks. Risks
that are correlated with the return from the stock market arc referred to as
systematic; other risks are referred to as nonsystematic. According to the CAPM,
the cost of equity is equal to the return on risk-free securities, plus the
average comparative business's systematic risk (beta), multiplied by the market
risk premium, adjusted for increments for risk differentials of the business
being valued versus the average comparative business, which include risk
adjustment for size and other risk factors in relation to the comparative
business.

INVESTIGATION AND ANALYSIS

    Our investigation mainly included review and analysis of relevant business
and operational information of the Project and interview of your company's
management regard.

    For the purposes of this appraisal, we have reviewed projected operational
data of the Project as well as other relevant records and documents. We have
also interviewed and discussed with the members of your company's management. We
have assumed their accuracy and have not performed audit of the said information
and relied to a very considerable extent on such information in arriving at our
opinion of value.

    Before arriving at our opinion of value, we have also considered the
following principal factors of the Project:

    --  the nature of the business from its inception;

    --  the economic outlook m general and the specific economic and competitive
       elements affecting each segment of the business;

    --  the business plan for the future development and projected operational
       data prepared by the company;

                                       2
<Page>
    --  market-derived investment returns of comparable business; and

    --  the risk factors of the business.

ASSUMPTIONS

    As the Soybean Peptide is an emerging and dynamic industry and is developing
at a very rapid pace, the Project's business is subject to uncertainty and there
is no assurance that the Project's business plans will materialise, a number of
assumptions have to be established in order to sufficiently support our
concluded value of the Project. The major assumptions adopted in this appraisal
are:

    --  there will be no material changes in the existing political, legal,
       fiscal, foreign trade and economic conditions in the territory or other
       countries in which the Project carries on or intends to carry on
       business;

    --  there will be no material changes in the current taxation law in the
       territory or other countries in which the Project carries on or intends
       to carry on business, that the races of tax payable remain unchanged and
       that all applicable laws and regulations will be complied with;

    --  there will be no material changes in interest rates or foreign currency
       exchange rates from those currently prevailing;

    --  the number of consumers using Soybean Peptide in the territory or other
       countries in which the Project operates or intends to operate will grow
       as projected in the business plans prepared by your company;

    --  the Project will implement all the business, marketing and promotion
       plans as stated in the Project's business plans prepared by your company
       in order to meet the following two assumptions;

    --  sales growth of the Project will conform to the level as projected by
       your company;

    --  cost of sales and operating expenses of the Project will conform to the
       level as projected by your company;

    --  your company is able to renew the business registration before the
       expiry of yours articles and business registration certificate;

    --  all relevant legal approvals and business certificates or licenses to
       operate business in the territory or other countries in which the Project
       operates or intends to operate should be formally obtained and renewable
       before the expiry of your company's articles and business registration
       certificate;

    --  there will be a sufficient supply of technical staff in the industry in
       which the Project operates; and

    --  the Project will retain competent management, key personnel, and
       technical staff to support its ongoing operation and development.

LIMITING CONDITIONS

    We have made no investigation of and assumed no responsibility for the title
to or any liabilities against the property appraised.

    This appraisal reflects facts and conditions existing at the valuation date.
Subsequent events have not been considered, and we have no obligation to update
our report for such events and conditions.

                                       3
<Page>
OPINION OF VALUE

    Based on the investigation and analysis stated above and on the appraisal
method employed, in our opinion, the fair market value of 100 per cent. interest
in the biochemical engineering project of soybean protein peptide for the
production, marketing and sales of various functional Soybean Peptide healthy
and medical tablets or powders, as at 30th June 2002 is reasonably stated by the
amount of US DOLLARS FORTY MILLION FOUR HUNDRED AND SIX THOUSAND ONLY
(US$40,406,000-).

    The opinion of value was based on generally accepted valuation procedures
and practices that rely extensively on the use of numerous assumptions and
consideration of many uncertainties, not all of which can be easily quantified
or ascertained,

    We hereby certify that we have neither present nor prospective interests in
the company or the property appraised and have neither personal interest nor
bias with respect to the parties involved.

    This valuation report is issued subject to our general service conditions.

<Table>
<S>                                            <C>
                                                             Yours faithfully,
                                                           For and on behalf of
                                                         VIGERS HONG KONG LIMITED

                                                           /s/ JOSEPH K.P. LEUNG
                                               --------------------------------------------
                                                             Joseph K.P. Leung
                                                             MRICS, AHKIS, RPS
                                                                 Director
                                                           Valuation Department
</Table>

                                       4
<Page>
                           GENERAL SERVICE CONDITIONS

    The service(s) provided by Vigers Hong Kong Limited will be performed in
accordance with professional appraisal standard. Our fee is not contingent in
any way upon our conclusions of value or result. We assume, without independent
verification, the accuracy of all data provided to us. We will act as an
independent contractor and reserve the right to use subcontractors. All files,
working papers or documents developed by us during the course of the engagement
will be our property. We will retain this data for as long as we wish.

    Our report is to be used only for the specific purpose stated herein and any
other use is prohibited. No reliance may be made by any third party on the
report or part thereof without our prior written consent. You may show our
report in its entirety including this General Services Conditions to those third
parties who need to review the information contained herein. No one should rely
on our report as a substitute for their own due diligence. No reference to our
name or our report, in whole or in part, in any document you prepare and/or
distribute to third parties may be made without our written consent.

    You agree to indemnify and hold us harmless against and from any and all
losses, claims, actions, damages, expenses, or liabilities, including all fees
of lawyers, including ours and the parties successfully suing us, to which we
may become subject in connection with this engagement except in respect of our
own negligence. Your obligation for indemnification and reimbursement shall
extend to any person working for Vigors Hong Kong Limited, including any
director, officer, employee, subcontractor, affiliate or agent. In the event we
are subject to any liability in connection with this engagement, regardless the
nature of the claim, such liability will be limited to the amount of fees we
received for this engagement.

    We reserve the right to include your company/firm name in our client list,
but we will maintain the confidentiality of all conversations, documents
provided to us, and the contents of our reports, subject to legal or
administrative process or proceedings. These conditions can only be modified by
written documents executed by both parties.

                                       5
<Page>
                                 END OF REPORT

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