Document:

Exhibit
10.2

    

    SECURITIES
PURCHASE AGREEMENT

    

    This
SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated May 20,
2010, is between China Broadband, Inc., a Nevada corporation (the “Company”) and Shane McMahon
(including his respective successors and assigns, the “Investor”).

     

    WHEREAS, this Agreement has
been entered into pursuant to the terms of the Company’s Confidential Private
Placement Memorandum, dated May 18, 2010 (together with any and all amendments
and/or supplements thereto, the “Memorandum”);

    

    WHEREAS, the Investor desires
to purchase from the Company, and the Company desires to sell and issue to the
Investor, upon the terms and conditions stated in this Agreement, 7,000,000
units at a purchase price of $0.50 per unit (each, a “Unit”);

     

    WHEREAS, each Unit shall
consist of: (i) one share (collectively, the “Shares”) of the Company’s
Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”; and
(ii) a common stock purchase warrant (each a “Warrant,” and, collectively,
the “Series A Warrants”) to purchase 34.2857
shares (collectively, the “Warrant Shares”) of Common
Stock at an exercise price of $0.05 per share (subject to adjustment as set
forth in the Series A Warrants), which Series A Warrants shall be in the form
attached hereto as Exhibit A , upon the
terms and conditions set forth in this Agreement; and

     

    WHEREAS, the Company and the
Investor are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by the rules and regulations as
promulgated by the SEC under the Securities Act.

    

    NOW, THEREFORE, in
consideration of, and subject to, the mutual terms, conditions and other
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound by the terms and conditions hereof, the parties hereto hereby
agree as follows:

    

    1.           DEFINITIONS.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings indicated in this Section
1.

    

    “Adnet” means Wanshi Wangjing
Media Technologies (Beijing) Co., Ltd. (a/k/a Adnet Media Technologies (Beijing)
Co., Ltd.), a PRC company controlled by CB Cayman through a Trustee Arrangement
under which a PRC individual holds a controlling interest in the company for the
benefit of CB Cayman.

    

    “Affiliate” means, with respect
to any specified Person: (i) if such Person is an individual, the spouse of that
Person and, if deceased or disabled, his heirs, executors, or legal
representatives, if applicable, or any trusts for the benefit of such individual
or such individual’s spouse and/or lineal descendants, or (ii) otherwise,
another Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified. As used in this definition, “control” shall mean the possession,
directly or indirectly, of the power to cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
by contract or other written instrument.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    “Business Day” means any day on
which banks located in New York City are not required or authorized by law to
remain closed.

    

    “CB Cayman” means China
Broadband Ltd., a Cayman Islands company 100% owned by the Company.

    

    “Closing” has the meaning set
forth in Section 2.2 hereof.

    

    “Closing Date” means the date
of the Closing.

    

    “Company’s knowledge” means the
information and/or other items that the executive officers of the Company and
its Subsidiaries have actual knowledge of after due inquiry.

    

    “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.

    

    “Debt Conversion” means the
conversion of (i) $600,000 of debt owed by the Company to Steven Oliviera that
is being cancelled and exchanged for $600,000 worth of Units (as defined in the
Series B Purchase Agreement) and warrants to purchase 24 million shares of the
Company’s common stock at an exercise price of $0.05 per share, all pursuant to
the Loan Cancellation Agreement between the Company and the Investor in the form
attached as Exhibit
B-1 hereto,
(ii) at least $4,846,250 of the $4,971,250 of principal amount of promissory
notes issued in January 2008 into shares of Common Stock at a conversion price
of $0.05 and one five-year warrant to purchase a share of Common Stock, at a per
share exercise price of $0.05, for each share of Common Stock received upon such
conversion all in accordance with the Waiver, Amendment and Agreement to Convert
in the form attached as Exhibit B-2, and
(iii) $304,902 of principal amount of promissory notes issued in June 2009 into
shares of Common Stock at a conversion price of $0.05 and one five-year warrant
to purchase a share of Common Stock, at a per share exercise price of $0.05, for
each share of Common Stock received upon such conversion all in accordance with
the Waiver, Amendment and Agreement to Convert in the form attached as Exhibit
B-3.

    

    “Debt Conversion Documents”
means the agreements and instruments attached hereto as Exhibits B-1, B-2 and B-3.

    

    “Disclosure Schedule Date”
means that date on which the Company shall have delivered the Disclosure
Schedules in compliance with Section 6.6 hereof.

    

    “Disclosure Schedules” means
the disclosure schedules issued by the Company to the Investor (pursuant to
Section 6.6 hereof), which schedules correspond to the representations and
warranties of the Company in Section 5 hereof.

    
      
         

      

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

    

    “Framework Agreement” means
that certain Framework Agreement, dated as of December 2009, by and among Hua
Cheng Film and Television Digital Program Co., Ltd., Beijing Husen Technology
Co., Ltd. and Beijing Sino Top Scope Technology Co., Ltd.

    

    “Governmental Body” means any:
(a) nation, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; or (c) governmental or
quasi-governmental authority of any nature (including any governmental or
administrative division, department, agency, commission, instrumentality,
official, organization, unit, body or entity) and any court or other
tribunal.

    

    “Intellectual Property” means
the Company’s patents, patent applications, provisional patents, trademarks,
service marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses, formulae, mask works, customer lists, internet domain
names, know-how and other intellectual property, including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems, procedures or registrations or applications relating to the
same.

    

    “Indebtedness” means, with
respect to any Person, without duplication, all obligations of such Person: (a)
for borrowed money; (b) issued, undertaken or assumed as the deferred purchase
price of property or services (including, without limitation, "capital leases"
in accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business); (c) with respect to
letters of credit, surety bonds and other similar instruments; (d) evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses; (e) 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); (f)
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; (g) referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien 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 (h) in
respect of Contingent Obligations for indebtedness or obligations of others of
the kinds referred to in clauses (a) through (g) above.

    
      
         

      

      
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    “Insolvent” means, (a) with
respect to the Company and its Subsidiaries, on a consolidated basis, (i) the
present fair saleable value of the Company's and its Subsidiaries' assets is
less than the amount required to pay the Company's and its Subsidiaries' total
Indebtedness, (ii) the Company and its Subsidiaries are unable to pay their
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company and its
Subsidiaries intend to incur or believe that they will incur debts that would be
beyond their ability to pay as such debts mature; and (b) with respect to the
Company and each Subsidiary, individually, (i) the present fair saleable value
of the Company's or such Subsidiary's (as the case may be) assets is less than
the amount required to pay its respective total Indebtedness, (ii) the Company
or such Subsidiary (as the case may be) is unable to pay its respective debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company or such Subsidiary
(as the case may be) intends to incur or believes that it will incur debts that
would be beyond its respective ability to pay as such debts mature.

     

    “Jinan Broadband” means Jinan
Guangdian Jiahe Broadband Co., Ltd., a PRC equity joint venture owned 51% by CB
Cayman, 25.48% by Jinan Parent, and 23.52% by Networks Center.

     

    “Jinan Parent” means Jinan
Guangdian Jiahe Digital Television Co., Ltd., a PRC company.

     

    “Jinan Zhongkuan” means Jinan
Zhongkuan Dian Guang Information Technology Co., Ltd., a PRC company owned at
least 90% by Pu Yue, a PRC individual and controlled by CB Cayman pursuant to
the terms of a Loan Agreement between CB Cayman and Pu Yue dated as of January
22, 2008.

     

    “Legal Requirement” means any federal,
state, local, municipal, foreign or other law, statute, constitution, principle
of common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body (or
under the authority of any national securities exchange upon which the Common
Stock is then listed or traded).  Reference to any Legal Requirement
means such Legal Requirement as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, and reference
to any section or other provision of any Legal Requirement means that provision
of such Legal Requirement from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or reenactment of
such section or other provision.

     

    “Lien(s)” means any interest in
Property securing an obligation owed to a Person whether such interest is based
on the common law, statute or contract, and including but not limited to a
security interest arising from a mortgage, lien, title claim, assignment,
encumbrance, adverse claim, contract of sale, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security
purposes.  The term “Lien” includes but is not limited to mechanics’,
materialmens’, warehousemens’ and carriers’ liens and other similar
encumbrances. For the purposes hereof, a Person shall be deemed to be the owner
of Property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.

    

    “Material Adverse Effect” means
a material adverse effect on, and a “Material Adverse Change ”
means a material adverse change in: (i) the assets, liabilities, results of
operations, condition (financial or otherwise), business or prospects of the
Company or any Subsidiary individually or taken as a whole; or (ii) the ability
of the Company or any of its Subsidiaries to perform their respective
obligations under the Transaction Documents, but, to the extent applicable,
shall exclude any circumstance, change or effect to the extent resulting or
arising from: (w) any change in general economic conditions in the industries or
markets in which the Company and its Subsidiaries operate so long as the Company
and its Subsidiaries are not disproportionately (in a material manner) affected
by such changes; (x) changes in United States generally accepted accounting
principles, or the interpretation thereof; or (y) the entry into or announcement
of this Agreement, actions contemplated by this Agreement, or the consummation
of the transactions contemplated hereby.

    
      
         

      

      
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    “Memorandum” means the
Confidential Private Placement Memorandum, dated May 18, 2010, in the form
attached hereto as Exhibit
E.

    

    “McMahon Employment Agreement”
means the Employment Agreement, dated as of the Closing Date, by and between the
Company and the Investor, in the form attached as Exhibit C
hereto.

    

    “McMahon Indemnification
Agreement” means the Indemnification Agreement, dated as of the Closing
Date, by and between the Company and the Investor, in the form attached as Exhibit D
hereto.

    

    “Network Center” means Jinan
Broadcasting and Television Information Networks Center.

    

    “Offering” means the offering
and sale of the Units pursuant to this Agreement and pursuant to the
Memorandum.

    

    “Offering Documents” means the
Memorandum and the securities purchase agreement relating to the purchases of
the units of Common Stock and warrants described in the Memorandum, and the
registration rights agreement contemplated thereby.

    

    “Person” means an individual,
entity, corporation, partnership, association, limited liability company,
limited liability partnership, joint-stock company, trust or unincorporated
organization.

    

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

    

    “Property” means any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.

    

    “Purchase Price” means
$3,500,000.

    

    “Recent SEC Reports” means all
SEC Reports filed since and including November 23, 2009 through and including
the Disclosure Schedule Date.

    

    “Registration Rights Agreement” means the Registration
Rights Agreement, dated as of the Closing Date, by and between the Company and
the Investor, in the form attached as Exhibit F
hereto.

    
      
         

      

      
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    “SEC” means the United States
Securities and Exchange Commission.

    

    “SEC Reports” means the
reports, documents and other filings and information made by the Company with
the SEC, including the Company’s last annual report on Form 10-K.

    

    “Securities” means the Units,
the Shares, the Series A Warrants and the Warrant Shares.

    

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

    

    “Series A Certificate of
Designation” has the meaning set forth in Section
6.2(b).

    

    “Series A Transaction
Documents” means this Agreement, the Memorandum, the Series A Warrants,
the Series A Certificate of Designations, the Registration Rights Agreement, the
McMahon Employment Agreement and the McMahon Indemnification
Agreement.

    

    “Series A Warrants” has the meaning
set forth in the recitals hereof.

    

    “Series B Preferred Stock”
means the Company’s Series B Preferred Stock, par value $0.001 per
share.

    

    “Series B Purchase Agreement”
means the Securities Purchase Agreement, dated May 18, 2010, by and between the
Company and Steven Oliviera or an Affiliate of Steven Oliviera, pursuant to
which, at Closing, Mr. Oliviera or his Affiliate will purchase 4,800,000 Units
consisting of an aggregate of 4,800,000 shares of Series B Preferred Stock and a
warrant to purchase 48,000,000 shares of Common Stock for an aggregate purchase
price of $2,400,000.

    

    “Series B Transaction Documents” means the Series B
Securities Purchase Agreement, the Series B Warrants and the Series B
Certificate of Designations, each in the form attached as Exhibits G-1, G-2 and G-3 hereto,
respectively.

    

    “Series B Warrants” means the
Common Stock Purchase Warrant issued by the Company to Mr. Oliviera or his
Affiliate pursuant to the Series B Purchase Agreement.

    

    “Shandong Publishing” means
Shandong Rushi Media Co., Ltd., a PRC equity joint venture owned 50% by Jinan
Zhongkuan, 30% by Shandong Broadcast & TV Weekly Press, a PRC company
unaffiliated with the Company, and 20% by Modern Movie and TV Biweekly Press, a
PRC company unaffiliated with the Company.

    

    “SinoTop Acquisition” means the acquisition by the
Company or an affiliate of 100% of the issued and outstanding shares of SinoTop
HK in exchange for common stock of the Company.

    

    “SinoTop Acquisition
Documents” means an agreement or
agreements pursuant to which the Company shall consummate the SinoTop
Acquisition.

    
      
         

      

      
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    “SinoTop Beijing” means Beijing
Sino Top Scope Technology Co., Ltd., a limited liability company established
under the laws of the PRC wholly owned by Zhang Yan, a PRC
individual.

    

    “SinoTop Beijing Documents”
means those agreements contemplated by the Framework Agreement and as more
particularly described in Section 7.14 hereof.

    

    “SinoTop Convertible Loan”
means the purchase by CB Cayman of that certain Convertible Promissory Note of
SinoTop HK dated as of March 9, 2010, in the principal amount of $580,000,
pursuant to a Note Purchase Agreement of even date therewith.

    

    “SinoTop HK” means SinoTop
Group Limited, a company limited by shares incorporated under the laws of Hong
Kong.

    

    “SinoTop VIE Agreements” means
the following agreements:

    

    
      	
               
      

            	
              ·

            	
              Management
      Services Agreement, dated as of March 9, 2010, by and between Beijing Sino
      Top Scope Technology Co., Ltd. and SinoTop Group
  Limited.

            

    

    

    
      	
               
      

            	
              ·

            	
              Option
      Agreement, dated as of March 9, 2101, between and among Beijing Sino Top
      Scope Technology Co., Ltd., SinoTop Group Limited, and Zhang Yan as the
      sold shareholder of Beijing Sino Top Scope Technology Co.,
      Ltd.

            

    

    

    
      	
               
      

            	
              ·

            	
              Equity
      Pledge Agreement, dated as of March 9, 2010, between and among Beijing
      Sino Top Scope Technology Co., Ltd., SinoTop Group Limited, and Zhang Yan
      as the sold shareholder of Beijing Sino Top Scope Technology Co.,
      Ltd.

            

    

    

    
      	
               
      

            	
              ·

            	
              Voting
      Rights Proxy Agreement, dated as of March 9, 2010, between and among
      Beijing Sino Top Scope Technology Co., Ltd., SinoTop Group Limited, and
      Zhang Yan as the sold shareholder of Beijing Sino Top Scope Technology
      Co., Ltd.

            

    

    

    “Subsidiaries” means any
corporation or other entity or organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly, any
controlling equity or other controlling ownership interest or otherwise controls
through contract or otherwise, including, without limitation, any
VIE.

    

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

    
      
         

      

      
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    “Trading Market” means
whichever of the New York Stock Exchange, the NYSE AMEX, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, or, with
respect to the foregoing exchanges, any successor exchange, entity or
organization performing the same a substantially similar function, or the OTCBB
on which the Common Stock is listed or quoted for trading on the date in
question.

    

    “Transaction Documents” means
(a) on the date hereof, the Series A Transaction Documents and the Offering
Documents and (b) on the Closing Date, the Offering Documents, the Series A
Transaction Documents, the Series B Transaction Documents, the Debt Conversion
Documents, the VIE Structure Documents, the SinoTop Acquisition Documents and
the SinoTop Beijing Documents.

    

    “Transfer” means any sale,
transfer, assignment, conveyance, charge, pledge, mortgage, encumbrance,
hypothecation, security interest or other disposition, or to make or effect any
of the above.

    

    “VIE Structure Documents” means
the following agreements, each as may be amended in accordance
herewith:

    

    
      	
               
      

            	
              ·

            	
              The
      SinoTop VIE Agreements.

            

    

     

    
      	
               
      

            	
              ·

            	
              Cooperation
      Agreement, dated as of December 2006, by and between China Broadband Ltd.
      and Jinan Guangdian Jiahe Digital Television Co.,
  Ltd.

            

    

     

    
      	
               
      

            	
              ·

            	
              Exclusive
      Service Agreement, dated as of December 2006, between and among Beijing
      China Broadband Network Technology Co., Ltd., Jinan Guangdian Jiahe
      Digital Television Co., Ltd., and Jinan Broadcasting and Television
      Information Networks Center.

            

    

     

    
      	
               
      

            	
              ·

            	
              Loan
      Agreement, dated as of January 22, 2008, by and between China Broadband
      Ltd. and Pu Yue.

            

    

     

    
      	
               
      

            	
              ·

            	
              Cooperation
      Agreement, dated as of March 2008, between and among Shandong Broadcast
      & TV Weekly Press, Modern Movie and TV Biweekly Press and Jinan
      Zhongkuan Dian Guang Information Technology Co.,
  Ltd.

            

    

     

    
      	
               
      

            	
              ·

            	
              Exclusive
      Advertising Agency Agreement, between and among Shandong Rushi Media Co.,
      Ltd., Shandong Broadcast & TV Weekly Press, Modern Movie and TV
      Biweekly Press.

            

    

     

    
      	
               
      

            	
              ·

            	
              Exclusive
      Consulting Service Agreement, between and among Shandong Rushi Media Co.,
      Ltd., Shandong Broadcast & TV Weekly Press, Modern Movie and TV
      Biweekly Press.

            

    

     

    
      	
               
      

            	
              ·

            	
              Trustee
      Arrangement, dated as of April 2009, by and between CB Cayman and Wang
      Ying Qi.

            

    

     

    “WFOE” means Beijing China
Broadband Network Technology Co., Ltd., a PRC company owned 100% by CB
Cayman.

    
      
         

      

      
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    “VIE” means variable interest
entity, and herein refers to Jinan Broadband, Jinan Parent, Shandong Publishing,
Adnet, and SinoTop Beijing, together with other variable interest entities both
the Company and the Investor agree to set up from time to time.

    

    2.           SALE
AND PURCHASE OF UNITS.

    

    2.1.           Purchase of Units by
Investor.  Subject to the terms and conditions of this
Agreement, on the Closing Date, the Investor shall purchase, and the Company
shall sell and issue to the Investor, Units as consideration for payment of the
Purchase Price.

    

    2.2.           Closing.  Subject to
the terms and conditions set forth in this Agreement, the Company shall issue
and sell to the Investor and the Investor shall purchase from the Company on the
Closing Date, the Units (the “Closing”).  The
Closing shall occur with the time periods set forth in the Memorandum at the
offices of Pillsbury Winthrop Shaw Pittman LLP, 2300 N Street, N.W., Washington,
DC  20037, or remotely via the exchange of documents and
signatures. The Company shall provide the Investor with written notice not
less than two Business Days of the
scheduled date of the Closing. 

    

    2.3.           Closing Deliveries. At the
Closing, the Company shall deliver to the Investor, against delivery by the
Investor of the Purchase Price (as provided below), the Shares and the Series A
Warrants.  At the Closing, the Investor shall deliver or cause to be
delivered to the Company the Purchase Price by paying United States dollars via
bank, certified or personal check which has cleared prior to the Closing or in
immediately available funds, by wire transfer to an account designated in
writing by the Company at least two (2) Business Days prior to the Closing
Date.

    

    2.4.           The Warrants.  The
Series A Warrants shall have the terms and
conditions and be in the form attached hereto as Exhibit
A.

    

    2.5.           Use of
Proceeds.  The Company hereby covenants and agrees that the
proceeds from the sale of Units and the sale of securities in the financings
contemplated by Sections 7.15 and 7.16 hereof shall be used as provided for in
the Memorandum as more fully set forth in Schedule
2.5.

    

    3.           ACKNOWLEDGEMENTS
OF THE INVESTOR.

    

    The
Investor acknowledges that:

    

    3.1.           Resale
Restrictions.  None of the Securities have been registered
under the Securities Act, or under any state securities or “blue sky” laws of
any state of the United States, and, unless so registered, none of the
Securities may be offered or sold by the Investor except pursuant to an
effective registration statement under the Securities Act, or pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and in each case only in accordance with
applicable state securities laws.

    
      
         

      

      
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    3.2.           Agreements.  The
Investor has received, carefully read and acknowledges the terms of the Series A
Transaction Documents, including the Risk Factors set forth in the
Memorandum.

    

    3.3.           Books and Records.  As a
condition to the Company’s obligations to close hereunder, at Closing, the
Investor will be required to acknowledge that the books and records of the
Company were available upon reasonable notice for inspection, subject to certain
confidentiality restrictions, by the Investor during reasonable business hours
at its principal place of business, that all documents, records and books in
connection with the sale of the Securities hereunder have been made available
for inspection by it and its attorney and/or advisor(s) and that the Investor
and/or its advisor has reviewed all such documents, records and books to its
full satisfaction and all questions it and/or its advisor may have had been
answered to their respective full satisfaction.

    

    3.4.           Independent Advice. The
Investor has been advised to consult the Investor’s own legal, tax and other
advisors with respect to the merits and risks of an investment in the Securities
and with respect to applicable resale restrictions, and it is solely responsible
for compliance with:

    

     
(a)           any
applicable laws of the jurisdiction in which the Investor is resident in
connection with the distribution of the Securities hereunder, and

    

     
(b)           applicable
resale restrictions.

    

    3.5.           No Governmental Review or
Insurance.  Neither the SEC nor any other securities
commission, securities regulator or similar regulatory authority has reviewed or
passed on the merits of the Securities or on any of the documents reviewed or
executed by the Investor in connection with the sale of the Securities,
including the Transaction Documents, and there is no government or other
insurance covering any of the Securities.

    

    4.           REPRESENTATIONS,
WARRANTIES AND ACKNOWLEDGMENTS OF THE INVESTOR.

    

    The
Investor represents and warrants to the Company that:

    

    4.1.           Capacity.  The
Investor represents that the Investor has reached the age of 21 and has full
authority, legal capacity and competence to enter into, execute and deliver this
Agreement and the Transaction Documents to which the Investor is a party and all
other related agreements or certificates and to take all actions required
pursuant hereto and thereto and to carry out the provisions hereof and
thereof.

    

    4.2.           Binding Agreement. The
Investor has duly executed and delivered this Agreement and will execute and
deliver on the Closing Date the other Transaction Documents to which it is a
party, and this Agreement and the other Transaction Documents to which it is a
party constitute, subject to Section 11 hereof, a valid and binding agreement of
the Investor enforceable against the Investor in accordance with their
respective terms, except as such enforceability may be limited by general
principals of equity, or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and
remedies.

    
      
         

      

      
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    4.3.           Purchase Entirely for Own
Account.  The Securities are being acquired for the Investor’s
own account, not as nominee or agent, for investment purposes only and not with
a view to the resale or distribution of any part thereof in violation of the
Securities Act, and the Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
Securities Act, without prejudice, however, to the Investor’s right at all times
to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable federal and state securities laws.

    

    4.4.           Not a
Broker-Dealer.  The Investor is neither a registered
representative under the Financial Industry Regulatory Authority (“FINRA”), a member of FINRA or
associated or Affiliated with any member of FINRA, nor a broker-dealer
registered with the SEC under the Exchange Act or engaged in a business that
would require the Investor to be so registered, nor is the Investor an Affiliate
of a such a broker-dealer or any Person engaged in a business that would require
it to be registered as a broker-dealer.  In the event the Investor is
a member of FINRA, or associated or Affiliated with a member of FINRA, the
Investor agrees, if requested by FINRA, to sign a lock-up, the form of
which shall be satisfactory to FINRA with respect to the
Securities.

    

    4.5.           Not an
Underwriter.  The Investor is not an underwriter of the
Securities, nor is it an Affiliate of an underwriter of the
Securities.

    

    4.6.           Investment Experience. The
Investor acknowledges that the purchase of the Securities is a highly
speculative investment and that it can bear the economic risk and complete loss
of its investment in the Securities and has such knowledge and experience in
financial and/or business matters that it is capable of evaluating the merits
and risks of the investment contemplated hereby.

    

    4.7.           Disclosure of
Information.  As a condition to the Company’s obligations to
close hereunder, at Closing, the Investor will be required to represent and
warrant as follows:  The Investor has had an opportunity to receive,
and fully and carefully review, all information related to the Company and the
Securities requested by it and to ask questions of and receive answers from the
Company regarding the Company and its business and the terms and conditions of
the offering of the Securities.  Neither such inquiries nor any other
due diligence investigation conducted by the Investor shall modify, amend or
affect the Investor’s right to rely on the Company’s representations and
warranties contained in this Agreement.  The Investor acknowledges
that it has received, and fully and carefully reviewed and understands all of
the  Series A Transaction Documents, including, but not limited to,
the Memorandum describing, among other items, the Company, its businesses and
risks, the Securities and the Offering of the Securities.  Investor
acknowledges that it has received, and fully and carefully reviewed and
understands, copies of the Recent SEC Reports, either in hard copy or
electronically through the SEC’s Electronic Data Gathering Analysis and
Retrieval system.  The Investor understands that its investment in the
Securities involves a high degree of risk.  The Investor’s decision to
enter into this Agreement and the Transaction Documents to which it is a
party has been made based solely on the independent evaluation of the Investor
and its representatives.  The Investor has received such accounting,
tax and legal advice from Persons (other than the Company) as it has
considered necessary to make an informed investment decision with respect to the
acquisition of the Securities.

    
      
         

      

      
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    4.8.           Restricted
Securities.  The Investor understands that the sale or re-sale
of the Securities has not been and is not being registered under the Securities
Act or any applicable state securities laws, and the Securities, as applicable,
may not be transferred unless:

    

      (a)           they
are sold pursuant to an effective registration statement under the Securities
Act; or

    

      (b)           they
are being sold pursuant to a valid exemption from the registration requirements
of the Securities Act; or

    

     
(c)           they are
sold or transferred to an “affiliate” (as defined in Rule 144, or any successor
rule, promulgated under the Securities Act (“Rule 144”) of the Investor who
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 4.9 and who is an accredited investor, or

    

     
(d)           they are
validly sold pursuant to Rule 144.

    

    The
Investor shall provide the Company with no less than three (3) Trading Days
notice of its intention to dispose of any Securities and agrees that the
Investor shall only dispose of any Securities in accordance with all applicable
Legal Requirements.  The Investor further understands that any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and other than as provided in the Transaction Documents,
neither the Company nor any other Person is under any obligation to register the
Securities under the Securities Act or any state securities
laws.  Notwithstanding the foregoing or anything else contained herein
to the contrary, the Securities may be pledged as collateral in connection with
a bona fide margin
account or other lending arrangement.

    

    4.9.           Accredited
Investor.  The Investor is an “accredited investor” as defined
in Rule 501(a) of Regulation D, as amended, under the Securities Act (“Regulation D”).

    

    4.10.         No General
Solicitation.  The Investor did not learn of the investment in
the Securities as a result of any public advertising, and is not aware of any
public advertisement or general solicitation in respect of the Company or its
securities.

    

    4.11.         Brokers and
Finders.  The Investor will not have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company or any Subsidiary for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investor.

    
      
         

      

      
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    4.12.         Prohibited
Transactions.  Other than with respect to the transactions
contemplated herein, since the earlier to occur of: (i) the time that the
Investor was first contacted by the Company, or any other Person regarding an
investment in the Company and (ii) the thirtieth (30th) day
prior to the date hereof, neither the Investor nor any Affiliate of the Investor
which (x) had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to the Investor’s investments or trading or
information concerning the Investor’s investments, including in respect of the
Securities, or (z) is subject to the Investor’s review or input concerning such
Affiliate’s investments or trading decisions (collectively, “Trading Affiliates”) has,
directly or indirectly, nor has any Person acting on behalf of, or pursuant to,
any understanding with the Investor or Trading Affiliate effected or agreed to
effect any transactions in the securities of the Company or involving the
Company’s securities (a “Prohibited
Transaction”).

    

    4.13.         Residency.  The
Investor is a resident of the jurisdiction set forth on the Investor’s signature
page hereto.

    

    4.14.         Reliance on
Exemptions.  The Investor understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Investor’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Securities.

    

    5.           REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

    

    Except as
set forth in the Recent SEC Reports, the Company hereby makes the following
representations and warranties as of the Disclosure Schedule Date and as of the
Closing Date to the Investor:

    

    5.1.           Subsidiaries.  A
true and correct structure chart of the Company and its Subsidiaries is included
as Schedule 5.1
to the Disclosure Schedules.  Except as disclosed in Schedule 5.1 to the
Disclosure Schedules, the Company owns, directly or indirectly, all of the
capital stock, or other equity interests, of each Subsidiary free and clear of
any Liens, and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. The Company, directly or through one of its
Subsidiaries, controls all of the VIEs from a financial perspective. As a
result, the financial statements of all of the VIEs can be consolidated with
those of the Company.  The legal relationships evidenced by the VIE
Structure Documents , taken as a whole, are valid and will not be challenged by
any Governmental Body as constituting unpermitted foreign investment in the
PRC.  Each of the VIE Structure Documents is valid and
binding.

    

    5.2.           Organization and
Qualification.  Each of the Company and each Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as set forth on Schedule 5.1), with
the requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted and as presently proposed to be
conducted.  Neither the Company nor any Subsidiary is in violation of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational, charter or governing
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
have or reasonably be expected to result in a Material Adverse
Effect.

    
      
         

      

      
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    5.3.           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
thereunder and to issue the Securities in accordance with the terms
thereof.  Each Subsidiary has the requisite power and authority to
enter into and perform its obligations under the Transaction Documents to which
it is a party.  The execution and delivery of each of the Transaction
Documents by the Company and its Subsidiaries and the consummation by the
Company and its Subsidiaries of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and its
Subsidiaries and no further action is required by the Company and its
Subsidiaries in connection therewith.  Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other laws of general application
relating to or affecting enforcement of creditors’ rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.  Each Transaction Document to
which each Subsidiary is a party has been (or upon delivery will have been) duly
executed by each such Subsidiary and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of each such
Subsidiary enforceable against it in accordance with its terms except: (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other laws of general application relating to or affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.

    

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

    
      
         

      

      
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    5.5.           Filings, Consents and
Approvals.  Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other foreign, federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by it of any of its obligations under or
contemplated by the Transaction Documents, other than (a) the filing with the
SEC of the Registration Statement, the application(s) to each Trading Market for
the listing of the Shares and Warrant Shares for trading thereon in the time and
manner required thereby, and applicable “blue sky” or other securities law
filings, (b) such as have already been obtained or such exemptive filings as are
required to be made under applicable securities laws, or (c) such other filings
that have been made pursuant to applicable state securities laws and post-sale
filings pursuant to applicable state and federal securities laws which the
Company undertakes to file within the applicable time
periods.  Subject to the accuracy of the representations and
warranties of the Investor set forth in Section 4 hereof, the Company has taken
all action necessary to exempt: (i) the issuance and sale of the Securities,
(ii) the issuance of the Warrant Shares upon due exercise of the Series A
Warrants, and (iii) the other transactions contemplated by the Transaction
Documents from the provisions of any stockholder rights plan or other “poison
pill” arrangement, any anti-takeover, business combination or control share law
or statute binding on the Company or to which the Company or any of its assets
and properties may be subject and any provision of the Company’s Articles of
Incorporation or Bylaws that is or could reasonably be expected to become
applicable to the Investor as a result of the transactions contemplated hereby,
including without limitation, the issuance of the Securities and the ownership,
disposition or voting of the Securities by the Investor or the exercise of any
right granted to the Investor pursuant to this Agreement or the other
Transaction Documents.

    

    5.6.           Issuance of the
Securities.  The Shares are duly authorized and, when issued
and paid for in accordance with the Series A Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all
Liens.  The Series A Warrants have been duly and validly
authorized.  Upon the due exercise of the Series A Warrants, the
Warrant Shares will be validly issued, fully paid and non-assessable free and
clear of all Liens.  The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement and the Series A Warrants; provided, however, with respect
to the Series A Warrants, the Company has only reserved from its duly authorized
capital stock the shares of Common Stock issuable as of the Closing Date,
assuming the valid exercise of all of the Series A Warrants by the
Investor.

    
      
         

      

      
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    5.7.           Capitalization.  Schedule 5.7 to the
Disclosure Schedules sets forth as of the date hereof and as of the Closing (a)
the authorized capital stock of the Company; (b) the number of shares of capital
stock issued and outstanding; (c) the number of shares of capital stock issuable
pursuant to the Company’s stock plans; and (d) the number of shares of capital
stock issuable and reserved for issuance pursuant to securities (other than the
Series A Warrants) exercisable for, or convertible into or exchangeable for any
shares of capital stock of the Company.  All of the issued and
outstanding shares of the Company’s capital stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of pre-emptive rights
and were issued in full compliance with applicable state and federal securities
law and any rights of third parties.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents,
except for the seller in the SinoTop Acquisition pursuant to the SinoTop
Acquisition Documents.  Except as described on Schedule 5.7 to the
Disclosure Schedules, there are no outstanding options, warrants, script rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, stockholder rights plan or “poison pill” arrangement or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock,
other than in connection with the Company’s stock option plans.  The
issue and sale of the Securities will not obligate the Company to issue shares
of Common Stock or other securities to any Person (other than the Investor) and
will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such
securities.  Except as described on Schedule 5.7 to the
Disclosure Schedules, there are no voting agreements, buy-sell agreements,
option or right of first purchase agreements or other agreements of any kind
among the Company and any of the securityholders of the Company relating to the
securities of the Company held by them.  Except as described on Schedule 5.7 to the
Disclosure Schedules, no Person has the right to require the Company to register
any securities of the Company under the Securities Act, whether on a demand
basis or in connection with the registration of securities of the Company for
its own account or for the account of any other Person.

    

    5.8.           SEC Reports; Financial
Statements.  The Company has filed with the SEC all SEC Reports
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and the
rules and regulations promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the SEC with respect thereto as in effect at
the time of filing.  Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.

    

    5.9.           Material
Changes.  Since the date of the latest audited financial
statements included within the Recent SEC Reports, the Company and its
Subsidiaries have not:

    

     
(a)           suffered
any Material Adverse Change;

     

     
(b)           suffered
any damage, destruction or loss, whether or not covered by insurance, in an
amount in excess of $100,000 in the aggregate;

     

     
(c)           granted or
agreed to make any increase in the compensation payable or to become payable by
the Company or any of its Subsidiaries to any officer or employee, except for
normal raises for nonexecutive personnel made in the ordinary course of business
that are usual and normal in amount;

    
      
         

      

      
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(d)           declared,
set aside or paid any dividend or made any other distribution on or in respect
of the shares of capital stock of the Company or any of its Subsidiaries, or
declared or agreed to any direct or indirect redemption, retirement, purchase or
other acquisition by the Company or any of its Subsidiaries of such
shares;

     

     
(e)           issued any
shares of capital stock of the Company or any of its Subsidiaries, or any
warrants, rights or options thereof, or entered into any commitment relating to
the shares of capital stock of the Company or any of its
Subsidiaries;

     

     
(f)           adopted or
proposed the adoption of any change in the Company’s charter, bylaws or other
organizational or governing documents;

     

     
(g)           made any
change in the accounting methods or practices they follow, whether for general
financial or tax purposes, or any change in depreciation or amortization
policies or rates adopted therein, or any tax election;

     

     
(h)           sold,
leased, abandoned or otherwise disposed of any real property or any machinery,
equipment or other operating property other than in the ordinary course of their
business;

     

     
(i)           sold,
assigned, transferred, licensed or otherwise disposed of any of the Company’s
Intellectual Property or interest thereunder or other intangible asset except in
the ordinary course of their business;

     

     
(j)           been
involved in any disputes involving any employees which would reasonably be
expected to involve in excess of $50,000 in the aggregate;

     

     
(k)           entered
into, terminated or modified any employment, severance, termination or similar
agreement or arrangement with, or granted any bonuses (or bonus opportunity) to,
or otherwise increased the compensation of any executive officer;

     

     
(l)           entered
into any material commitment or transaction (including without limitation any
borrowing or capital expenditure), except the SinoTop Acquisition
Documents;

     

     
(m)           amended or
modified, or waived any default under, any Material Contract (as defined
below);

     

     
(n)           incurred
any material liabilities, contingent or otherwise, either matured or unmatured
(whether or not required to be reflected in financial statements in accordance
with GAAP, and whether due or to become due), except for accounts payable or
accrued salaries that have been incurred by the Company since the date of the
latest audited financial statements included within the SEC Reports, in the
ordinary course of its business and consistent with the Company’s past
practices;

    
      
         

      

      
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(o)           permitted
or allowed any of their material property or assets to be subjected to any
Lien;

     

     
(p)           settled any
claim, litigation or action, whether now pending or hereafter made or
brought;

     

     
(q)           made any
capital expenditure or commitment for additions to property, plant or equipment
individually in excess of $50,000, or in the aggregate, in excess of
$100,000;

     

     
(r)           paid,
loaned or advanced any amount to, or sold, transferred or leased any properties
or assets to, or entered into any agreement or arrangement with any of their
Affiliates, officers, directors or stockholders or, to the Company’s knowledge,
any Affiliate or associate of any of the foregoing, except for the SinoTop
Convertible Loan;

     

     
(s)           made any
amendment to, or terminated any agreement that, if not so amended or terminated,
would be material to the business, assets, liabilities, operations or financial
performance of the Company or any of its Subsidiaries;

     

     
(t)           compromised
or settled any claims relating to taxes, any tax audit or other tax proceeding,
or filed any amended tax returns;

     

     
(u)           merged or
consolidated with any other Person, or acquired a material amount of assets of
any other Person;

     

     
(v)           entered
into any agreement in contemplation of the transactions specified herein other
than this Agreement and the other Transaction Documents; or

     

     
(w)           agreed to
take any action described in this Section 5.9 or which would reasonably be
expected to otherwise constitute a breach of any of the representations or
warranties contained in this Agreement or any other Transaction
Documents.

     

    5.10.         Litigation.  Except
as described on Schedule 5.10 to the Disclosure Schedules, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to
the Company’s knowledge, threatened against or affecting the Company, any
Subsidiary or any of their respective properties, the Common Stock or any of the
Company's or its Subsidiaries' officers or directors before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which is outside of
the ordinary course of business or involves in excess of
$50,000.  Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  There has not been, and to the Company’s
knowledge, there is not pending or contemplated, any investigation by the SEC
involving the Company, any of its Subsidiaries or any current or former director
or officer of the Company or any of its Subsidiaries.  The SEC has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

    
      
         

      

      
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    5.11.         Labor
Relations.  Except as set forth on Schedule 5.11 to the
Disclosure Schedules, neither the Company nor any Subsidiary is a party to or
bound by any collective bargaining agreements or other agreements with labor
organizations.  The Company believes that its and its Subsidiaries'
relations with their respective employees are good.  Neither the
Company nor any Subsidiary has violated in any material respect any federal,
state, local or foreign laws, regulations, orders or contract terms, affecting
the collective bargaining rights of employees, labor organizations or any
federal, state, local or foreign laws, regulations or orders affecting
employment discrimination, equal opportunity employment, or employees’ health,
safety, welfare, wages and hours.  No material labor dispute exists
or, to the Company’s knowledge, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.

    

    5.12.         Compliance.  Except
as set forth on Schedule 5.12 to the
Disclosure Schedules, neither the Company nor any Subsidiary: (i) in any
material respect, is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
Governmental Body, or (iii) is or has been in violation, in any material
respect, of any statute, rule or regulation of any governmental authority,
including, without limitation, all foreign, federal, state and local laws
applicable to its business.

    

    5.13.         Regulatory
Permits.  Except as disclosed in Schedule 5.13 to the
Disclosure Schedules, the Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
(a) as described in the Recent SEC Reports and the Memorandum, except where the
failure to possess such permits would not have or reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and (b) as
contemplated by the Transaction Documents, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

    

    5.14.         Title to
Assets.  Neither the Company nor any of its Subsidiaries owns
any real estate or PRC land use rights.  Except as set forth on Schedule 5.14 to the
Disclosure Schedules, the Company and the Subsidiaries have good and marketable
title in all personal property owned by them that is material to the business of
the Company and the Subsidiaries (including such business as is contemplated by
the Transaction Documents), in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries and Liens for the payment of federal, state
or other taxes, the payment of which is neither delinquent nor subject to
penalties.  Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
compliance.

    
      
         

      

      
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    5.15.         Contracts.

    

     
(a)           Neither the
Company nor any of its Subsidiaries is party or subject to, or bound
by:

     

    (i)           any
agreements, contracts or commitments that call for prospective fixed and/or
contingent payments or expenditures by or to the Company or any of its
Subsidiaries of more than $50,000, or which is otherwise material and not
entered into in the ordinary course of business;

     

    (ii)          any
contract, lease or agreement involving payments in excess of $50,000, which is
not cancelable by the Company or any of its Subsidiaries, as applicable, without
penalty on not less than sixty (60) days notice;

     

    (iii)         any
contract, including any distribution agreements, containing covenants directly
or explicitly limiting the freedom of the Company or any of its Subsidiaries to
compete in any line of business or with any Person or to offer any of its
products or services;

     

    (iv)         any
indenture, mortgage, promissory note, loan agreement, guaranty or other
agreement or commitment for the borrowing of money or pledging or granting a
security interest in any assets;

     

    (v)          any
employment contracts, non-competition agreements, invention assignments,
severance or other agreements with officers, directors, employees, stockholders
or consultants of the Company or any of its Subsidiaries or Persons related to
or affiliated with such Persons;

     

    (vi)         any
stock redemption or purchase agreements or stockholders rights plan or “poison
pill” arrangement or other agreements affecting or relating to the capital stock
of the Company or any of its Subsidiaries, including, without limitation, any
agreement with any stockholder of the Company or any of its Subsidiaries which
includes, without limitation, antidilution rights, voting arrangements or
operating covenants;

     

    (vii)        any
pension, profit sharing, retirement, stock option or stock ownership
plans;

     

    (viii)       any
royalty, dividend or similar arrangement based on the revenues or profits of the
Company or any of its Subsidiaries or based on the revenues or profits derived
from any Material Contract;

     

    (ix)         any
acquisition, merger, asset purchase or other similar agreement;

     

    (x)          any
sales agreement which entitles any customer to a right of set-off, or right to a
refund after acceptance thereof;

     

    (xi)         any
agreement with any supplier or licensor containing any provision permitting such
supplier or licensor to change the price or other terms upon a breach or failure
by the Company or any of its Subsidiaries, as applicable, to meet its
obligations under such agreement; or

     

    (xii)        any
agreement under which the Company or any of its Subsidiaries has granted any
Person registration rights for securities.

    
      
         

      

      
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(b)           Schedule 5.15(b) to
the Disclosure Schedules contains a listing or description of all agreements,
contracts or instruments, including all amendments thereto, to which the Company
or its Subsidiaries are bound which meet the criteria set forth in Section
5.15(a) (such agreements, contracts or instruments, collectively, the “Material
Contracts”).  The Company has made available to the Investor
copies of the Material Contracts.  Neither the Company nor any of its
Subsidiaries has entered into any oral contracts which, if written, would
qualify as a Material Contract.  Each of the Material Contracts is
valid and in full force and effect, is enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or similar laws affecting creditors’ rights generally and
general principles of equity, and will continue to be so immediately following
the Closing Date.

    

     
(c)           Actions
with Respect to Material Contracts.

     

    (i)           Neither
the Company nor any of its Subsidiaries has violated or breached, or committed
any default under, any Material Contract in any material respect, and, to the
Company’s knowledge, no other Person has violated or breached, or committed any
default under any Material Contract; and

     

    (ii)          To
the Company’s knowledge, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or would reasonably
be expected to: (A) result in a material violation or breach of any of the
provisions of any Material Contract, (B) give any Person the right to declare a
default or exercise any remedy under any Material Contract, (C) give any Person
the right to accelerate the maturity or performance of any Material Contract or
(D) give any Person the right to cancel, terminate or modify any Material
Contract.

    

    5.16.         Taxes.

    

     
(a)           The Company
and its Subsidiaries have timely and properly filed all tax returns required to
be filed by them for all years and periods (and portions thereof) for which any
such tax returns were due.  All such filed tax returns are accurate in
all material respects.  The Company has timely paid all taxes due and
payable (whether or not shown on filed tax returns).  There are no
pending assessments, asserted deficiencies or claims for additional taxes that
have not been paid.  The reserves for taxes, if any, reflected in the
Recent SEC Reports or in the Memorandum are adequate, and there are no Liens for
taxes on any property or assets of the Company and any of its Subsidiaries
(other than Liens for taxes not yet due and payable).  There have been
no audits or examinations of any tax returns by any Governmental Body, and the
Company or its Subsidiaries have not received any notice that such audit or
examination is pending or contemplated.  No claim has been made by any
Governmental Body in a jurisdiction where the Company or any of its Subsidiaries
does not file tax returns that it is or may be subject to taxation by that
jurisdiction.  To the Company’s knowledge, no state of facts exists or
has existed which would constitute grounds for the assessment of any penalty or
any further tax liability beyond that shown on the respective tax
returns.  There are no outstanding agreements or waivers extending the
statutory period of limitation for the assessment or collection of any
tax.

    

     
(b)           Neither the
Company nor any of its Subsidiaries is a party to any tax-sharing agreement or
similar arrangement with any other Person.

    
      
         

      

      
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(c)           The Company
has made all necessary disclosures required by Treasury Regulation Section
1.6011-4.  The Company has not been a participant in a “reportable
transaction” within the meaning of Treasury Regulation Section
1.6011-4(b).

    

     
(d)           No payment
or benefit paid or provided, or to be paid or provided, to current or former
employees, directors or other service providers of the Company will fail to be
deductible for federal income tax purposes under Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”).

    

    5.17.         Employees.

    

     
(a)           The Company
and its Subsidiaries are not party to any collective bargaining agreements and,
to the Company’s knowledge, there are no attempts to organize the employees of
the Company or any of its Subsidiaries.

     

     
(b)           Except as
set forth on Schedule
5.17 to the Disclosure Schedules, the Company and its Subsidiaries have
no policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment
services.

     

     
(c)           Each Person
who performs services for the Company or any of its Subsidiaries has been, and
is, properly classified by the Company or its Subsidiaries as an employee or an
independent contractor (or its PRC equivalent).  Each of the Company’s
PRC Subsidiaries, including, without limitation, WFOE and VIEs, have
respectively executed valid employment contracts with all of its employees who
work in the PRC, and such contracts are valid and in force.  Each of
the Company’s PRC Subsidiaries, including, without limitation, WFOE and VIEs, is
in compliance with all mandatory social benefit and welfare benefit plans with
respect to its employees in the PRC, has made full payments to the mandatory
employee social benefits and welfare benefits in a timely manner, and is not or
has not been in default of any of the payments.

     

     
(d)           To the
Company’s knowledge, no employee or advisor of the Company or any of its
Subsidiaries is or is alleged to be in violation of any term of any employment
contract, disclosure agreement, proprietary information and inventions agreement
or any other contract or agreement or any restrictive covenant or any other
common law obligation to a former employer relating to the right of any such
employee to be employed by the Company or any of its Subsidiaries because of the
nature of the business conducted or to be conducted by the Company or any of its
Subsidiaries or to the use of trade secrets or proprietary information of
others, and the employment of the employees of the Company and its Subsidiaries
does not subject the Company or the Company's stockholders to any
liability.  There is neither pending nor, to the Company’s knowledge,
threatened any actions, suits, proceedings or claims, or, to the Company’s
knowledge, any basis therefor or threat thereof with respect to any contract,
agreement, covenant or obligation referred to in the preceding
sentence.  To the Company’s knowledge, no key employee or advisor of
the Company or any of its Subsidiaries intends to terminate or otherwise not
extend his or her employment with the Company or a Subsidiary, as
applicable.

    
      
         

      

      
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    5.18.         Employee Benefit
Plans.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan (as defined below) by the
Company or any of its Subsidiaries which is or would be materially adverse to
the Company and its Subsidiaries.  The execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated
thereby will not involve any transaction which is subject to the prohibitions of
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Code. As used in this Section 5.18, the term “Plan” shall mean an “employee
pension benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.

    

    5.19.         Patents and
Trademarks.  Except as set forth on Schedule 5.19 to the
Disclosure Schedules, the Company and the Subsidiaries have, or have rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other similar rights that are
necessary or material for use in connection with their respective businesses as
described in the SEC Reports and the Memorandum and as contemplated by the
Transaction Documents (collectively, the “Intellectual Property
Rights”).  None of the Company's or its Subsidiaries'
Intellectual Property Rights have expired, terminated or been abandoned, or are
expected to expire, terminate or be abandoned, within three years from the date
of this Agreement.  Neither the Company nor any Subsidiary has
received a written notice that any of the Intellectual Property Rights used by
the Company or any Subsidiary violates or infringes upon the rights of any
Person.  To the Company’s knowledge, all such Intellectual Property
Rights are enforceable.  There is no claim, action or proceeding being
made or brought, or to the knowledge of the Company or any of its Subsidiaries,
being threatened, against the Company or any of its Subsidiaries regarding their
Intellectual Property Rights. The Company is not aware 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 steps to protect the Company’s and its Subsidiaries’ rights in
their Intellectual Property Rights and confidential information (the “Confidential
Information”).  Each employee, consultant and contractor who
has had access to Confidential Information which is necessary for the conduct of
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement to
maintain the confidentiality of such Confidential Information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof.  Except under confidentiality obligations,
there has been no material disclosure of any of the Company’s or its
Subsidiaries’ Confidential Information to any third party.

    

    5.20.         Environmental
Matters.  Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
Governmental Body relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or
operates any real property contaminated with any substance that is subject to
any Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to involve an amount in excess of $25,000 in the
aggregate; and there is no pending or, to the Company’s knowledge, threatened
investigation that might lead to such a claim.

    
      
         

      

      
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    5.21.         Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged as described in the SEC Reports and/or the
Memorandum.  Neither the Company nor any Subsidiary 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 without a significant increase in
cost.

    

    5.22.         Transactions With Affiliates and
Employees.  Except as set forth on Schedule 5.22 to the
Disclosure Schedules, none of the officers, directors or employees of the
Company  or any of its Subsidiaries is presently a party to any
transaction with the Company or any Subsidiary (other than for ordinary course
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company’s knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $25,000 other than (a) for payment of salary
or consulting fees for services rendered, (b) reimbursement for expenses
incurred on behalf of the Company and (c) for other employee benefits, including
stock option agreements under any stock option plan of the Company.

    

    5.23.         Private Placement. Assuming
the accuracy of each of the Investor’ representations and warranties set forth
in Section 4, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Investor as contemplated
hereby.

    

    5.24.         No Integrated
Offering.  Neither the Company, nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the issuance of any of
the Securities under the Securities Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require
approval of shareholders of the Company under any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market on which any of the securities of the Company
are listed or designated, except for the shareholder approval of the Common
Stock Amendment and the Preferred Stock Amendment contemplated by Section 6.2 of
this Agreement.

    

    5.25.         Brokers and
Finders.  Other than as set forth on Schedule 5.25, no
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company or any Subsidiary.

    
      
         

      

      
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    5.26.         No Directed Selling Efforts or
General Solicitation; Disclosure.  Neither the Company, any
Subsidiary or Affiliates, nor any Person acting on its or their behalf has
conducted any general solicitation or general advertising (as those terms are
used in Regulation D) in connection with the offer or sale of any of the
Securities.  No offering materials were used in connection with the
Offering other than the Offering Documents.

    

    5.27.         Questionable Payments. Neither
the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary, has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any foreign or domestic
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of the Company
or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.

    

    5.28.         Disclosures.  Neither
the Company nor any Person acting on its behalf has provided the Investor or
their agents or counsel with any information that constitutes or might
constitute material, non-public information, other than the terms of the
transactions contemplated hereby.  The Company understands and
confirms that each of the Investors will rely on the foregoing representations
in effecting transactions in securities of the Company.  The written
materials delivered to the Investor in connection with the transactions
contemplated by the Transaction Documents do not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.  No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under applicable
law, rule or regulation, requires public disclosure at or before the date hereof
or announcement by the Company but which has not been so publicly announced or
disclosed.

    

    5.29.         Solvency.  Neither
the Company nor any of its Subsidiaries has: (a) made a general assignment for
the benefit of creditors; (b) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by its creditors; (c) suffered
the appointment of a receiver to take possession of all, or substantially all,
of its assets; (d) suffered the attachment or other judicial seizure of all, or
substantially all, of its assets; (e) admitted in writing its inability to pay
its debts as they come due; or (f) made an offer of settlement, extension or
composition to its creditors generally. Neither the Company nor any of its
Subsidiaries has engaged in business or in any transaction, and is not about to
engage in business or in any transaction, for which the Company's or such
Subsidiary's remaining assets constitute unreasonably small capital. Neither the
Company nor any of its Subsidiaries has any knowledge or reason to believe that
any of their respective creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a
creditor to do so.  The Company and its Subsidiaries, individually and
on a consolidated basis, are not as of the date hereof, and after giving effect
to the transactions contemplated hereby to occur at the Closing will not be
Insolvent.

    
      
         

      

      
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    5.30.         Related
Party Transactions.  Except as set
forth in Schedule
5.30 to the
Disclosure Schedules: (a) none of the Company or any of its Affiliates,
officers, directors, stockholders or employees, or any Affiliate of any of such
Person, has any material interest in any property, real or personal, tangible or
intangible, including the Company’s Intellectual Property used in or pertaining
to the business of the Company, except for the normal rights of a stockholder,
or, to the Company’s knowledge, any supplier, distributor or customer of the
Company; (b) there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, employees,
Affiliates, or, to the Company’s knowledge, any Affiliate thereof; (c) to the Company’s
knowledge, no employee, officer or director of the Company or any of its
Subsidiaries has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company; (d) to the Company’s
knowledge, no member of the immediate family of any officer or director of the
Company is directly or indirectly interested in any Material Contract; or (e)
there are no amounts owed (cash and stock) to officers, directors and
consultants (salary, bonuses or other forms of compensation).

    

    5.31.         Foreign Corrupt Practices
Act.  None of the Company or any of its Subsidiaries, nor to
the Company’s knowledge, any agent or other person acting on behalf of the
Company or any of its Subsidiaries, has, directly or indirectly: (a) used any
funds, or will use any proceeds from the sale of the Units, for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity; (b) made any unlawful payment to foreign
or domestic government officials or employees or to any foreign or domestic
political parties or campaigns from corporate funds; (c) failed to disclose
fully any contribution made by the Company or any of its Subsidiaries (or made
by any Person acting on their behalf of which the Company is aware) or any
members of their respective management which is in violation of any Legal
Requirement; or (d) has violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder which was applicable to the Company or any of its
Subsidiaries.

    

    5.32.         PFIC.  None of the
Company or any of its Subsidiaries is or intends to become a “passive foreign
investment company” within the meaning of Section 1297 of the Code.

    

    5.33.         OFAC. None of the Company or
any of its Subsidiaries nor, to the Company’s knowledge, any director, officer,
agent, employee, Affiliate or Person acting on behalf of the Company or any of
its Subsidiaries, is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the sale of the Units, or lend,
contribute or otherwise make available such proceeds to any of the Company’s
Subsidiaries, joint venture partner or other Person or entity, towards any sales
or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country
sanctioned by OFAC or for the purpose of financing the activities of any Person
currently subject to any U.S. sanctions administered by OFAC.

    
      
         

      

      
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    5.34.         Money Laundering
Laws.  The operations of each of the Company or any of its
Subsidiaries are and have been conducted at all times in compliance with the
money laundering Legal Requirements of all applicable Governmental Bodies of the
PRC and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any PRC Governmental Body (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any PRC court or PRC Governmental Body
or any arbitrator involving the Company or any of its Subsidiaries with respect
to the Money Laundering Laws is pending or, to the best of the Company’s
knowledge, threatened.

    

    5.35.         Subsidiary
Rights.  The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

    

    5.36.         Sarbanes-Oxley
Act.  The Company and each Subsidiary is in compliance with all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and all applicable rules and regulations promulgated by the
SEC thereunder that are effective as of the date hereof.

    

    5.37.         Internal Accounting and Disclosure
Controls.  The Company and each of its Subsidiaries maintains
internal control over financial reporting (as such term is defined in Rule
13a-15(f) under the Securities Act) that is effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles, including that (a) transactions are executed in
accordance with management's general or specific authorizations, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (c) access to assets or incurrence
of liabilities is permitted only in accordance with management's general or
specific authorization and (d) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. The
Company maintains disclosure controls and procedures (as such term is defined in
Rule 13a-15(e) under the Securities Act) that are effective in ensuring that
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the SEC,
including, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Act is accumulated and communicated to the
Company's management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure.  Neither the Company nor any
of its Subsidiaries has received any notice or correspondence from any
accountant or other Person relating to any potential material weakness or
significant deficiency in any part of the internal controls over financial
reporting of the Company or any of its Subsidiaries.

    

    5.38.         Off Balance Sheet
Arrangements.  There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Securities Act filings and is not so disclosed
or that otherwise could be reasonably likely to have a Material Adverse
Effect.

    
      
         

      

      
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    5.39.         Investment Company
Status.  The Company is not, and upon consummation of the sale
of the Securities will not be, an "investment company," an affiliate of an
"investment company," a company controlled by an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.

    

    5.40.         Manipulation of
Price.  Neither the Company nor any of its Subsidiaries has,
and, to the knowledge of the Company, no Person acting on their behalf has, (a)
taken, directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company or any
of its Subsidiaries to facilitate the sale or resale of any of the Securities,
(b) sold, bid for, purchased, or paid any compensation for soliciting purchases
of, any of the Securities (other than the lead placement agent), or (b) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company or any of its Subsidiaries.

    

    5.41.         U.S Real Property Holding
Corporation.  Neither the Company nor any of its Subsidiaries
is, or has ever been, and so long as any of the Securities are held by any of
the Investors, shall become, a U.S. real property holding corporation within the
meaning of Section 897 of the Code, and the Company and each Subsidiary shall so
certify upon the Investor’s request.

    

    5.42.         Transfer Taxes.  On
the Closing Date, all stock transfer or other taxes (other than income or
similar taxes) which are required to be paid in connection with the sale and
transfer of the Securities to be sold to each Investor hereunder will be, or
will have been, fully paid or provided for by the Company, and all laws imposing
such taxes will be or will have been complied with.

    

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

    

    5.44.         Other Representations and Warranties
Relating to WFOE.

    

     
(a)           All
material consents, approvals, authorizations or licenses requisite under PRC
Legal Requirements for the due and proper establishment and operation of WFOE
have been duly obtained from the relevant PRC Governmental Bodies and are in
full force and effect.

    

     
(b)           All filings
and registrations with the PRC Governmental Bodies required in respect of WFOE
and its capital structure and operations including, without limitation, the
registration with the PRC Ministry of Commerce or its local counterpart, the PRC
the State Administration of Industry and Commerce or its local counterpart, the
PRC State Administration of Foreign Exchange and applicable PRC tax bureau and
customs authorities have been duly completed in accordance with the relevant PRC
Legal Requirements, except where, the failure to complete such filings and
registrations does not, and would not, individually or in the aggregate, have a
Material Adverse Effect.

    
      
         

      

      
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(c)           WFOE has
complied with all relevant PRC Legal Requirements regarding the contribution and
payment of its registered share capital, the payment schedule of which has been
approved by the relevant PRC Governmental Bodies.  There are no
outstanding commitments made by the Company or any Subsidiary (or any of their
shareholders) to sell any equity interest in WFOE.  . The conversion
and use of the capital contribution received by WFOE is legal and permitted
under PRC Legal Requirements.

    

     
(d)           WFOE has
not received any letter or notice from any relevant PRC Governmental Body
notifying it of revocation of any licenses or qualifications issued to it or any
subsidy granted to it by any PRC Governmental Body for non-compliance with the
terms thereof or with applicable PRC Legal Requirements, or the lack of
compliance or remedial actions in respect of the activities carried out by WFOE,
except such revocation as does not, and would not, individually or in the
aggregate, have a Material Adverse Effect.

    

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

    

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

    

    6.           CERTAIN
PRE-CLOSING CONDITIONS.

    

    6.1.           Carry on in Ordinary
Course.  From the date hereof until the earlier of the Closing
Date or the termination of this Agreement in accordance with its terms, (a) the
Company shall, and shall cause each Subsidiary to, conduct the business and
operations of the Company and the Subsidiaries diligently and as heretofore
conducted; and (b) the Company shall not, and the Company shall cause each
Subsidiary to not, take any action which would reasonably be expected to cause
the representations and warranties of the Company contained in this Agreement to
be untrue at Closing. Notwithstanding the foregoing, the Company may consummate
the SinoTop Acquisition prior to the Closing Date.

    

    6.2.           Charter Amendments; Certificates of
Designation.  On or prior to the Closing Date, the Company
shall file with the Secretary of State of the State of Nevada (a) an amendment
to its Articles of Incorporation (i)  increasing the number of
authorized shares of Preferred Stock of the Company from 5,000,000 to
50,000,000 (the “Preferred
Stock Amendment”) in the form attached as Exhibit I, (ii)
increasing the number of authorized shares of Common Stock of the Company from
95,000,000 to 1,500,000,000 (the “Common Stock Amendment”), (b)
a certificate of designations, in the form of Exhibit H hereto,
establishing the relative rights, preferences and other features of the Shares
(“Series A Certificate of
Designation”) and (c) the Series B Certificate of
Designation.

    
      
         

      

      
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    6.3.           Amending Certain
Documents.  From the date hereof until the earlier of the
Closing Date and the termination of this Agreement in accordance with its terms,
the Company shall not amend the Offering Documents, the Series B Transaction
Documents or the Debt Conversion Documents, without the prior written consent of
the Investor, which may be given or withheld in his sole
discretion.

    

    6.4.           Satisfaction of Conditions and
Covenants. The Company will use its best efforts to take all action and
to do all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 7
below).

    

    6.5.           Full Access.  The
Company will permit, and the Investor, and his representatives to have full
access at all reasonable times, to all premises, properties, personnel,
accountants, customers, suppliers, third party lenders and other third parties,
books, records (including tax records), contracts, and documents of or
pertaining to each of the Company and its Subsidiaries.

    

    6.6.           Disclosure
Schedules.  On or before June 21, 2010, the Company shall
deliver the Disclosure Schedules to the Investor in  form and
substance satisfactory to the Investor in his sole discretion.  TIME
SHALL BE OF THE ESSENCE.

    

    6.7.           Compliance with
Documents.  At all times, the Company shall remain in
compliance with all terms and conditions of the Offering Documents, the Series A
Transaction Documents, the Series B Transaction Documents, the Debt Conversion
Documents, the VIE Structure Documents, the SinoTop Acquisition Documents and
the SinoTop Beijing Documents.

    

    7.           CONDITIONS
TO THE CLOSING OF THE INVESTOR.

    

    The
obligation of the Investor to purchase the Units at any Closing is subject to
the fulfillment to the satisfaction of the Investor, on or prior to the Closing
Date, of the following conditions, any of which may be waived by the Investor in
his sole discretion pursuant to Section 12.2:

    

    7.1.           Representations and
Warranties. The representations and warranties made by the Company in
Section 5 hereof shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date.

    

    7.2.           Performance of
Agreements.  The Company shall have performed all obligations
and covenants herein required to be performed by it on or prior to the Closing
Date.

    

    7.3.           Approvals. The Company shall
have obtained any and all consents, permits, approvals, registrations and
waivers necessary or appropriate for consummation of the purchase and sale of
the Securities and the consummation of the other transactions contemplated by
the Transaction Documents, all of which shall be in full force and
effect. 

    
      
         

      

      
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    7.4.           Judgments, etc.  No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.

    

    7.5.           Stop Orders.  No stop
order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body having jurisdiction over the Company or the
market(s) where the Common Stock is listed or quoted, with respect to public
trading in the Common Stock.

    

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

    

    7.7.           Company Officer Certificate.
The Company shall have delivered a certificate, executed on behalf of the
Company by its Chief Executive Officer or its Chief Financial Officer, dated as
of the Closing Date, certifying to the fulfillment of the conditions specified
in this Section 7.

    

    7.8.           Company Secretary Certificate.
The Company shall have delivered a certificate, executed on behalf of the
Company by its Secretary, dated as of the Closing Date, certifying the
resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
charter and bylaws of the Company, as the same may be amended and/or restated,
and certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the
Company.

    

    7.9.           Certificates of
Status.  The Company shall have delivered the Investors (a) a
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in each such entity’s jurisdiction of formation issued by
the Secretary of State (or comparable office) of such jurisdiction of formation
as of a date within ten (10) days of the Closing Date and (b) a certificate
evidencing the Company’s and each Subsidiary’s qualification as a foreign
corporation and good standing issued by the Secretary of State (or comparable
office) of each jurisdiction in which the Company and each Subsidiary conducts
business and is required to so qualify, as of a date within ten (10) days of the
Closing Date.

    

    7.10.         Opinions of Counsel.  The
Investor shall have received an opinion from Pillsbury Winthrop Shaw Pittman,
LLP, the Company’s U.S. legal counsel, dated as of the Closing Date, and an
opinion from TranAsia Lawyers, the Company’s PRC legal counsel, dated as of the
Closing Date, each in such form and substance as agreed to by the Company and
the Investor (it being agreed that such U.S. and PRC counsel shall not be
required to deliver a “10b-5” or negative assurances letter or
opinion).

    
      
         

      

      
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    7.11.         Preferred Stock and
Warrants.  The Company shall have delivered the Shares and the
Series A Warrants being sold at the Closing.

    

    7.12.         Amendment to Articles of
Incorporation.  The Company shall have filed the Common Stock
Amendment, the Preferred Stock Amendment, the Series A Certificate of
Designation and the Series B Certificate of Designation with the Secretary of
State of the State of Nevada and delivered filed, stamped copies thereof from
such Secretary of State pursuant to Section 7.8 hereof.

    

    7.13.         Increase Size of Board; Appointment
as Director.  The board of directors of the Company (the “Board”) shall have (a)
increased the number of directors serving on the Board by one and (b) appointed
the Investor as a director to fill the vacancy.

    

    7.14.         Joint Venture Operating
Agreements.  The various agreements and other steps
contemplated by the Framework Agreement with respect to the formation,
management, operation and funding of the two joint ventures in the PRC referred
to in that Agreement shall have been executed and/or completed in form and
substance satisfactory to the Investor in his sole discretion and copies thereof
duly executed by the parties thereto shall have been delivered to the Investor,
certified as true and complete by a duly authorized officer of the
Company.

    

    7.15.         Consummation of Common Stock
Financing.
The consummation of the sale of not less than $11,129,000 and up to
$15,000,000 worth of shares of Common Stock of the Company and warrants to
certain investors shall occur simultaneous with the Closing (including in such
amount the gross proceeds received from the sale of Shares and the Series A
Warrants hereunder and the Series B Transaction Documents) pursuant to the
Offering Documents (which shall be in form and substance satisfactory to the
Investor in his sole discretion) and the Series B Transaction Documents and
copies of all such agreements, documents and instruments, duly executed by the
parties thereto, shall have been delivered to the Investor, certified as true
and complete by a duly authorized officer of the Company.

    

    7.16.         Consummation of Series B
Financing. The
consummation of the sale of 6,000,000 shares of Series B Preferred Stock of the
Company to Steven Oliviera or his Affiliate shall occur simultaneous with the
Closing pursuant to the Series B Transaction Documents.

    

    7.17.         VIE Structure Documents.
  The VIE Structure Documents shall have been revised in form
and substance satisfactory to the Investor in his sole
discretion.  Additional VIE structure contracts shall have been
entered into by WFOE and VIEs that are satisfactory to the Investor in his sole
discretion.  Copies of all VIE Structure Documents, duly executed by
the parties thereto, shall have been delivered to the Investor, certified as
true and complete by a duly authorized officer of the Company.  If
requested by the Investor, the existing shareholders of the VIEs, shall have
been replaced by the Person nominated by the Investor.  For this
purpose, the such shareholders of the VIEs shall have executed appropriate
equity transfer agreements and the registration of the new equity holders with
the competent office(s) of the State Administration for Industry and Commerce
shall have been completed.

    
      
         

      

      
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    7.18.         Change of Management.
  Resignations, letters of removal/appointment,
shareholder/board resolutions, agreements, certificates, instruments or other
documents under PRC Legal Requirement and/or reasonably requested by the
Investor, effective immediately at the date of change of WFOE’s or the VIEs’
registration with the competent office(s) of the State Administration of
Industry and Commerce, shall have been duly signed.  If requested by
the Investor, the removal of such directors and legal representatives of the
Subsidiaries or other Persons having positions with the Subsidiaries and
corresponding changes, as necessary, made to registrations filed with the
competent office(s) of the State Administration of Industry and Commerce shall
have been made and completed to the Investor’s satisfaction.

    

    7.19.         Debt Conversion Documents. The
Company, Mr. Oliviera and the other holders of the promissory notes referred to
in the Debt Conversion Documents and any of their affiliates, if necessary,
shall have entered into the Debt Conversion Documents and consummated the
transactions contemplated thereby.

    

    7.20.         SinoTop
Documents.  The Company shall have consummated the SinoTop
Acquisition pursuant to the SinoTop Acquisition Documents, and the parties to
the SinoTop VIE Agreements shall have entered into the SinoTop VIE Agreements,
in each case in form and substance satisfactory to the Investor in his sole
discretion, copies of which shall have been delivered to the Investor, certified
as true and complete by a duly authorized officer of the Company.

    

    7.21.         Weicheng Liu Employment
Agreement.  The Company and Weicheng Liu shall have entered
into an employment in form and substance satisfactory to the
Investor.

    

    7.22.         Other Documents. The
Company and its Subsidiaries shall have delivered to the Investor true and
complete and fully executed copies of each of the Offering Documents, the Series
A Transaction Documents, the Series B Transaction Documents, the Sino Top
Acquisition Documents, the Debt Conversion Documents, the VIE Structure
Documents and the SinoTop Beijing Documents and such other documents relating to
the transactions contemplated by this Agreement as the Investor or his counsel
may reasonably request.

    

    7.23.         Due Diligence.  The
Investor shall have completed its due diligence investigation of the Company and
its Subsidiaries and the results thereof shall be satisfactory to the Investor
in his sole discretion.

    

    8.           CONDITIONS
TO THE CLOSING OF THE COMPANY.

    

    The
obligations, with respect to the Investor, of the Company to effect the
transactions contemplated by this Agreement are subject to the fulfillment at or
prior to the Closing Date of the conditions listed below.

    

    8.1.           Representations and Warranties. The
representations and warranties in Section 4 hereof made by the Investor shall be
true and correct in all material respects at the time of Closing as if made on
and as of such date.

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    8.2.           Corporate Proceedings. All
corporate and other proceedings required to be undertaken by the Investor in
connection with the transactions contemplated hereby shall have occurred and all
documents and instruments incident to such proceedings shall be reasonably
satisfactory in substance and form to the Company.

    

    8.3.           Agreements.  The
Investor shall have completed and executed this Agreement, the Escrow Agreement
and an investor questionnaire as provided by the Company, and delivered the same
to the Company.

    

    8.4.           Certain Acknowledgements,
Representations, Etc.  The Investor
shall have made the acknowledgements, representations and warranties referred to
in Sections 3.3 and 4.7 hereof.

    

    8.5.           Purchase Price.  The
Investor shall have delivered or caused to be delivered the Purchase Price to
the Escrow Account.

    

    9.           OTHER
AGREEMENTS

    

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

    

    9.2.           Securities Laws Disclosure;
Publicity.  By 9:00 a.m. (New York City time) on the Trading
Day following the Closing Date, the Company shall issue a press release
disclosing the transactions contemplated hereby and the Closing.  By
no later than the fourth Trading Day following the Closing Date the Company will
file a Current Report on Form 8-K disclosing the material terms of this
Agreement and the other Transaction Documents (and attach as exhibits thereto
the Transaction Documents) and the Closing.  In addition, the Company
will make such other filings and notices in the manner and time required by the
SEC and the Trading Market on which the Common Stock is
listed.  Notwithstanding the foregoing, the Company shall not, at any
time, publicly disclose the name of the Investor or the terms of the Series A
Transaction Documents, or include the name of the Investor or the terms of the
Series A Transaction Documents in any filing with the SEC (other than the
Registration Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing requirements under the Exchange
Act) or any regulatory agency or Trading Market, without the prior written
consent of the Investor, except to the extent such disclosure is required by law
or Trading Market regulations.

    

    9.3.           Limitation on Issuance of Future Priced
Securities.  During the six months following the Closing Date,
the Company shall not issue any “Future Priced Securities” as such term is
described by the rules and regulations of FINRA.

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    9.4.           Reservation of
Shares.  The Company shall maintain a reserve from its duly
authorized shares of Common Stock to comply with its obligations to issue the
shares of Common Stock upon conversion of the Shares and the Warrant Shares upon
exercise of the Series A Warrants.

    

    9.5.           Form D and Blue Sky
Filings.  The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
the Investor promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to, qualify the securities
(including, the Shares and the Series A Warrants) for sale to the investors
(including the Investor) at the Closing pursuant to the Transaction Documents
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Investor on or prior to the Closing
Date.  The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following the Closing
Date.

    

    9.6.           Passive Foreign Investment
Company.  The Company shall conduct its business in such a
manner to ensure that it will not be deemed to constitute a passive foreign
investment company within the meaning of Section 1297 of the Code.

    

    10.           FURTHER
ASSURANCES.  The Company shall, and shall cause all of its
Subsidiaries to, and their management to, use their best efforts to satisfy all
of the closing conditions under Section 8, and shall not take any action which
could frustrate or delay the satisfaction of such conditions.  In
addition, either prior to or following the Closing, the Company shall, and shall
cause each of its Subsidiaries to, and its and their management to, perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the
intent and accomplish the purposes of the Transaction Documents and the
consummation of the transactions contemplated thereby.

    

    11.           TERMINATION.

    

      (a)           In
the event that the Closing shall not have occurred by July 15, 2010, the
Investor shall have the right to terminate its obligations under this Agreement
at any time on or after the close of business on such date without liability to
any other party.

    

     
(b)           Notwithstanding
any provision to the contrary contained herein, the Investor, in his sole
discretion, shall have the absolute, unqualified and unconditional right to
terminate this Agreement for any reason or for no reason.  The Company
hereby covenants and agrees that it shall not contest, challenge or seek to
delay the exercise of such Investor’s right and hereby waives any right to claim
promissory estoppel or other detrimental reliance, unconscionability or any
requirement of good faith or fair dealing.  The Investor’s right to
terminate this Agreement shall not affect the Investor’s rights with respect to
a breach hereof prior to such termination.

    
      
         

      

      
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    12.           MISCELLANEOUS.

    

    12.1.         Notices. All notices,
requests, demands and other communications provided in connection with this
Agreement shall be in writing and shall be deemed to have been duly given at the
time when hand delivered, delivered by express courier, or sent by facsimile
(with receipt confirmed by the sender’s transmitting device) in accordance with
the contact information provided below or such other contact information as the
parties may have duly provided by notice.

    

    
      
        	
                (a)

              	
                The
    Company:

              

      

      

      c/o China
Broadband Inc.

      1900
Ninth Street, 3rd
Floor

      Boulder,
Colorado 80302

      Attention:  Marc
Urbach

      Fax
Number: (303) 449.7799

      

      With
a copy to:

      

      Pillsbury
Winthrop Shaw Pittman LLP

      2300 N
Street, N.W.

      Washington,
DC  20037

      Attention :
Louis A. Bevilacqua, Esq.

      Fax
Number: (202) 663.8007

      

      
        	
                (b)

              	
                The
      Investor:

              

      

      

      As per
the contact information provided on the signature page hereof.

      

      With
copies to:

      

      K&L
Gates LLP

      K&L
Gates Center, 210 Sixth Avenue

      Pittsburgh,
PA 15222

      Attention:
Jerry S. McDevitt, Esq.

      Fax:
(412) 355.6501

       

      K&L
Gates LLP

      599
Lexington Avenue

      New York,
NY 10022

      Attention:
John D. Vaughan, Esq.

      Fax:
(212) 536.3901

    

    
      
         

      

      
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    12.2.         Amendments;
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Investor or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought.  Any amendment or
waiver by the Investor shall also be executed by his legal counsel to be
effective.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.

    

    12.3.         Construction.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

    

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

    

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

    

    12.6.         Governing Law, Consent to
Jurisdiction, etc.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof (except Section 5-1401 of New York’s General Obligations
Law).  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, New York for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of the any
of the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.

    
      
         

      

      
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    12.7.         Survival.  The
representations, warranties, agreements and covenants contained herein shall
survive the Closing of the transactions contemplated by this Agreement for a
period of three years.

    

    12.8.         Indemnification.

    

     
(a)           The Company
agrees to defend, indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”) to which such Person may become subject as a result of
any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company or any of its Subsidiaries under the
Transaction Documents, and shall reimburse any such Person for all such amounts
as they are incurred by such Person.

    

     
(b)           Promptly
after receipt by any Person (the “Indemnified Person”) of notice
of any demand, claim or circumstances which would or might give rise to a claim
or the commencement of any action, proceeding or investigation in respect of
which indemnity may be sought pursuant to this Section 12, such Indemnified
Person shall promptly notify the Company in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person, and shall assume the payment of all fees and
expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the Company is materially
prejudiced by such failure to notify.  In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed to
the retention of such counsel; or (ii) in the reasonable judgment of counsel to
such Indemnified Person representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between
them.  The Company shall not be liable for any settlement of any
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment.  Without the prior
written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Person from all liability arising out of such
proceeding.

    
      
         

      

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

    

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

    

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

    

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

     

    12.13.       Expenses.  The
Company shall pay all costs and expenses, including the fees and disbursements
of any counsel and accountants retained by the Investor, incurred by the
Investor in connection with the preparation, execution, delivery and performance
of the Series A Transaction Documents and the transactions contemplated thereby,
whether or not such transactions are consummated up to a maximum amount, or cap,
of $35,000.  Notwithstanding the foregoing, in the event that the
Company shall fail to deliver the Disclosure Schedules, in form and substance
reasonably satisfactory to the Investor and otherwise in accordance with Section
6.6 hereof, the Company shall pay the Investor, as a non-accountable expense
reimbursement, an additional sum of $35,000.

    

    [Signature
Pages Follow]

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

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

    

    
      
        
          
            
              
                
                  
                    	
                            COMPANY:

                          	 
      
	 
      	 
      
	
                            CHINA
      BROADBAND INC.

                          	 
      
	 
      	 
      	 
      
	
                            By:

                          	 
      	 
      
	 
      	
                            Name:
      Marc Urbach

                          	 
      
	 
      	
                            Title: 
       President

                          	 
      
	 	 	 
	
                                  
                              INVESTOR:

                            

                          

                  

                

              

            

          

        

      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    Name
      and Address, Fax No. and Social Security No. of
  Investor:

                                  
	 
      
	
                                    Shane McMahon

                                  
	 
      
	
                                    295 Greenwich St., Apartment
      301

                                  
	 
      
	
                                    New York, NY 10007

                                  
	 
      
	
                                    Fax No.: (212) 625-9442

                                  
	 
      
	
                                    Soc. Sec. No.:
  ###-##-####

                                  
	 
      
	 
      
	
                                    Signature

                                  
	 
	
                                    Total Purchase
      Price: 
      $3,500,000                                

                                  
	 
	
                                    Number of
      Units: 
      7,000,000                                       

                                  
	 
	
                                    Number of
      Warrants:  
      240,000,000                       

                                  

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    Form of Series A
Warrant

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
B-1

    

    Form
of

    $600,000 Debt Conversion
Documentation

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
B-2

    

    Form
of

    $4,971,250 Debt Conversion
Documentation

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
B-3

    

    Form
of

    $304,902 Debt Conversion
Documentation

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
C

    

    Form of McMahon Employment
Agreement

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
D

    

    Form of McMahon
Indemnification Agreement

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
E

    

    Offering
Documents

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
F

    

    Form of Registration Rights
Agreement

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
G-1

    

    Series B Securities Purchase
Agreement

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
G-2

    

    Series B
Warrant

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
G-3

    

    Series B Certificate of
Designations

    

    (See
Attached)

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
H

    

    Series A Certificate of
Designations

    

    (See
Attached)Exhibit
10.3
  

    SECURITIES
PURCHASE AGREEMENT

    

    This
SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated May 20,
2010, is between China Broadband, Inc., a Nevada corporation (the “Company”) and Chardan SPAC
Asset Management LLC (including his respective successors and assigns, an, the
“Investor”).

     

    WHEREAS, this Agreement has
been entered into pursuant to the terms of the Company’s Confidential Private
Placement Memorandum, dated May 18, 2010 (together with any and all amendments
and/or supplements thereto, the “Memorandum”);

    

    WHEREAS, the Investor desires
to purchase from the Company, and the Company desires to sell and issue to the
Investor, upon the terms and conditions stated in this Agreement, 4,800,000
units at a purchase price of $0.50 per unit (each, a “Unit”);

     

    WHEREAS, each Unit shall
consist of: (i) one share (collectively, the “Shares”) of the Company’s
Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”; and
(ii) a  common stock purchase warrant  (each a “Warrant,” and, collectively,
the “Warrants”) to
purchase ten (10) shares (collectively, the “Warrant Shares”) of Common
Stock at an exercise price of $0.05 per share (subject to adjustment as set
forth in the Warrants), which Warrants shall be in the form attached hereto as
Exhibit A , upon the terms
and conditions set forth in this Agreement; and

     

    WHEREAS, the Company and the
Investor are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by the rules and regulations as
promulgated by the SEC under the Securities Act.

    

    NOW, THEREFORE, in
consideration of the mutual terms, conditions and other agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree to the sale and purchase of the Units as
set forth herein.

    

    1.           DEFINITIONS.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings indicated in this Section
1.

    

    “Affiliate” means, with respect
to any specified Person: (i) if such Person is an individual, the spouse of that
Person and, if deceased or disabled, his heirs, executors, or legal
representatives, if applicable, or any trusts for the benefit of such individual
or such individual’s spouse and/or lineal descendants, or (ii) otherwise,
another Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified. As used in this definition, “control” shall mean the possession,
directly or indirectly, of the power to cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
by contract or other written instrument.

    

    “Business Day” means any day on
which banks located in New York City are not required or authorized by law to
remain closed.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

    “Closing” means the date on
which the funds representing the Purchase Price are released from the Escrow
Account to the Company and the Shares and Warrants are issued to the
Investor.

    

    “Closing Date” means the date
of the Closing.

    

    “Closing Escrow Agreement” means the Closing
Escrow Agreement, dated May 18, 2010, by and among the Company, the Investor and
the Escrow Agent.

    

    “Company’s knowledge” means the
information and/or other items that the executive officers of the Company have
actual knowledge of after due inquiry.

    

    “Disclosure Schedules” means
the disclosure schedules issued by the Company to the Investor, which schedules
correspond to the representations and warranties of the Company in Section 5
hereof.

    

    “Escrow Account” means the
escrow account established by the Escrow Agent pursuant to the Closing Escrow
Agreement where funds representing the Investor’ aggregate Purchase Price shall
be held pending the Closing.

    

    “Escrow Agent” means Collateral
Agents, LLC.

    

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

    

    “Governmental Body” means any:
(a) nation, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; or (c) governmental or
quasi-governmental authority of any nature (including any governmental or
administrative division, department, agency, commission, instrumentality,
official, organization, unit, body or entity) and any court or other
tribunal.

    

    “Intellectual Property” means
the Company’s patents, patent applications, provisional patents, trademarks,
service marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses, formulae, mask works, customer lists, internet domain
names, know-how and other intellectual property, including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems, procedures or registrations or applications
relating to the same.

    

    “Indebtedness” means, with
respect to any Person, without duplication, all obligations of such Person: (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases, and (v) in the nature of guarantees of the
obligations described above in clauses (i) through (iv).

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Legal Requirement” means any federal,
state, local, municipal, foreign or other law, statute, constitution, principle
of common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body (or
under the authority of any national securities exchange upon which the Common
Stock is then listed or traded).  Reference to any Legal Requirement
means such Legal Requirement as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, and reference
to any section or other provision of any Legal Requirement means that provision
of such Legal Requirement from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or reenactment of
such section or other provision.

     

    “Lien(s)” means any interest in
Property securing an obligation owed to a Person whether such interest is based
on the common law, statute or contract, and including but not limited to a
security interest arising from a mortgage, lien, title claim, assignment,
encumbrance, adverse claim, contract of sale, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes.  The
term “Lien” includes but is not limited to mechanics’, materialmens’,
warehousemens’ and carriers’ liens and other similar encumbrances. For the
purposes hereof, a Person shall be deemed to be the owner of Property which it
has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.

    

    “Material Adverse Effect” means
a material adverse effect on, and a “Material Adverse Change ”
means a material adverse change in: (i) the assets, liabilities, results of
operations, condition (financial or otherwise) or business of the Company taken
as a whole; or (ii) the ability of the Company to perform its obligations under
the Transaction Documents, but, to the extent applicable, shall exclude any
circumstance, change or effect to the extent resulting or arising from: (w) any
change in general economic conditions in the industries or markets in which the
Company and its Subsidiaries operate so long as the Company and its Subsidiaries
are not disproportionately (in a material manner) affected by such changes; (x)
national or international political conditions, including any engagement in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any military or terrorist attack so long as the
Company and its Subsidiaries are not disproportionately (in a material manner)
affected by such changes; (y) changes in United States generally accepted
accounting principles, or the interpretation thereof; or (z) the entry into or
announcement of this Agreement, actions contemplated by this Agreement, or the
consummation of the transactions contemplated hereby.

    

    “OTCBB” means the
Over-the-Counter Bulletin Board system or any successor system, entity or
organization performing the same or a substantially similar
function.

    

    “Offering” means the offering
and sale of the Units pursuant to this Agreement and the
Memorandum.

    

    “Person” means an individual,
entity, corporation, partnership, association, limited liability company,
limited liability partnership, joint-stock company, trust or unincorporated
organization.

    

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

    

    “Property” means any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    “Purchase Price” means
$2,400,000.

    

    “Registration Rights Agreement”
means the Registration Rights Agreement, dated as of the Closing Date, by and
between the Company and the Investor, in the form attached as Exhibit B
hereto.

    

    “SEC” means the United States
Securities and Exchange Commission.

    

    “SEC Reports” means the
reports, documents and other filings and information made by the Company with
the SEC, including the Company’s last annual report on Form 10-K.

    

    “Securities” means the Units,
the Shares, the Warrants and the Warrant Shares.

    

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

    

    “Subsidiaries” shall mean any
corporation or other entity or organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly, any
controlling equity or other controlling ownership interest or otherwise controls
through contract or otherwise, including, without limitation, any variable
interest entity of the Company.

    

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

    

    “Trading Market” means
whichever of the New York Stock Exchange, the NYSE AMEX, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, or, with
respect to the foregoing exchanges, any successor exchange, entity or
organization performing the same a substantially similar function, or the OTCBB
on which the Common Stock is listed or quoted for trading on the date in
question.

    

    “Transaction Documents” means
this Agreement, the Memorandum, the Warrants, the Registration Rights
Agreement and the Closing Escrow Agreement.

    

    “Transfer” means any sale,
transfer, assignment, conveyance, charge, pledge, mortgage, encumbrance,
hypothecation, security interest or other disposition, or to make or effect any
of the above.

    

    “WFOE” means Beijing China
Broadband Network Technology Co., Ltd., the Company’s wholly foreign owned
entity, located in the PRC.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    
      	
              2. 

            	
              SALE
      AND PURCHASE OF UNITS.

            

    

    

    2.1.           Purchase of Units by Investor.  Subject to the
terms and conditions of this Agreement, on the Closing Date, the Investor shall
purchase, and the Company shall sell and issue to the Investor, Units as
consideration for payment of the Purchase Price.

    

    2.2.           Closing. Subject to the
terms and conditions set forth in this Agreement, the Company shall issue and
sell to the Investor and the Investor shall purchase from the Company on
the Closing Date, the Units (the “Closing”). The Closing
shall occur with the time periods set forth in the Memorandum at the offices of
Pillsbury Winthrop Shaw Pittman LLP, 2300 N Street, N.W., Washington,
DC  20037, or remotely via the exchange of documents and
signatures. 

    

    2.3.           Closing Deliveries. At the
Closing, the Company shall deliver to the Investor, against delivery by the
Investor of the Purchase Price (as provided below), the Shares and the
Warrants.  At the Closing, the Investor shall deliver or cause to be
delivered to the Company the Purchase Price by paying United States dollars via
bank, certified or personal check which has cleared prior to the Closing or in
immediately available funds, by wire transfer to the Escrow Account pursuant to
the Closing Escrow Agreement.

    

    2.4.           The Warrants.  The
Warrants shall have
the terms and conditions and be in the form attached hereto as Exhibit A. 

    

    2.5.           Use of
Proceeds.  The Company hereby covenants and agrees that the
proceeds from the sale of Units shall be used as provided for in the
Memorandum.

    

    
      	
              3. 

            	
              ACKNOWLEDGEMENTS
      OF THE INVESTOR.

            

    

    

    The
Investor acknowledges that:

    

    3.1.           Resale
Restrictions.  None of the Securities have been registered
under the Securities Act, or under any state securities or “blue sky” laws of
any state of the United States, and, unless so registered, none of the
Securities may be offered or sold by the Investor except pursuant to an
effective registration statement under the Securities Act, or pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and in each case only in accordance with
applicable state securities laws.

    

    3.2.           Agreements.  The
Investor has received, carefully read and acknowledges the terms of the
Transaction Documents, including the Risk Factors set forth in the
Memorandum.

    

    3.3.           Books and Records. The books
and records of the Company were available upon reasonable notice for
inspection, subject to certain confidentiality restrictions, by the Investor
during reasonable business hours at its principal place of business, that all
documents, records and books in connection with the sale of the Securities
hereunder have been made available for inspection by it and its attorney and/or
advisor(s) and that the Investor and/or its advisor has reviewed all such
documents, records and books to its full satisfaction and all questions it
and/or its advisor may have had been answered to their respective full
satisfaction.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    3.4.           Independent Advice.  The Investor has been
advised to consult the Investor’s own legal, tax and other advisors with respect
to the merits and risks of an investment in the Securities and with respect to
applicable resale restrictions, and it is solely responsible for compliance
with:

    

     
(a)         any applicable laws of
the jurisdiction in which the Investor is resident in connection with the
distribution of the Securities hereunder, and

    

     
(b)         applicable resale
restrictions.

    

    3.5.           No Governmental Review or Insurance.  Neither
the SEC nor any other securities commission, securities regulator or similar
regulatory authority has reviewed or passed on the merits of the Securities or
on any of the documents reviewed or executed by the Investor in connection with
the sale of the Securities, including the Transaction Documents, and there is no
government or other insurance covering any of the Securities.

    

    
      	
              4. 

            	
              REPRESENTATIONS,
      WARRANTIES AND ACKNOWLEDGMENTS OF THE
INVESTOR.

            

    

    

    The
Investor represents and warrants to the Company that:

    

    4.1.           Capacity.  The
Investor represents that the Investor has reached the age of 21 and has full
authority, legal capacity and competence to enter into, execute and deliver this
Agreement and the Transaction Documents to which the Investor is a party and all
other related agreements or certificates and to take all actions required
pursuant hereto and thereto and to carry out the provisions hereof and
thereof.

    

    4.2.           Binding Agreement. The
Investor has duly executed and delivered this Agreement and the other
Transaction Documents to which it is a party, and this Agreement and the other
Transaction Documents to which it is a party constitute a valid and binding
agreement of the Investor enforceable against the Investor in accordance with
their respective terms, except as such enforceability may be limited by general
principals of equity, or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and
remedies.

    

    4.3.           Purchase Entirely for Own
Account.  The Securities are being acquired for the Investor’s own
account, not as nominee or agent, for investment purposes only and not with a
view to the resale or distribution of any part thereof in violation of the
Securities Act, and the Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
Securities Act, without prejudice, however, to the Investor’s right at all times
to sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    4.4.           Not a Broker-Dealer. The
Investor is neither a registered representative under the Financial Industry
Regulatory Authority (“FINRA”), a member of FINRA or
associated or Affiliated with any member of FINRA, nor a broker-dealer
registered with the SEC under the Exchange Act or engaged in a business that
would require the Investor to be so registered, nor is the Investor an Affiliate
of a such a broker-dealer or any Person engaged in a business that would require
it to be registered as a broker-dealer.  In the event the Investor is a
member of FINRA, or associated or Affiliated with a member of FINRA, the
Investor agrees, if requested by FINRA, to sign a lock-up, the form of which
shall be satisfactory to FINRA with respect to the Securities.

    

    4.5.           Not an
Underwriter.  The Investor is not an underwriter of the
Securities, nor is it an Affiliate of an underwriter of the
Securities.

    

    4.6.           Investment Experience. The
Investor acknowledges that the purchase of the Securities is a highly
speculative investment and that it can bear the economic risk and complete loss
of its investment in the Securities and has such knowledge and experience in
financial and/or business matters that it is capable of evaluating the merits
and risks of the investment contemplated hereby.

    

    4.7.           Disclosure of Information.
 The Investor has had an opportunity to receive, and fully and carefully
review, all information related to the Company and the Securities requested by
it and to ask questions of and receive answers from the Company regarding the
Company and its business and the terms and conditions of the offering of the
Securities.  Neither such inquiries nor any other due diligence
investigation conducted by the Investor shall modify, amend or affect the
Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.  The Investor acknowledges that it has
received, and fully and carefully reviewed and understands all of the
Transaction Documents, including, but not limited to, the Memorandum describing,
among other items, the Company, its businesses and risks, the Securities and the
Offering of the Securities.  Investor acknowledges that it has received,
and fully and carefully reviewed and understands, copies of the SEC Reports,
either in hard copy or electronically through the SEC’s Electronic Data
Gathering Analysis and Retrieval system.  The Investor understands that its
investment in the Securities involves a high degree of risk.  The
Investor’s decision to enter into this Agreement and the Transaction Documents
to which it is a party has been made based solely on the independent evaluation
of the Investor and its representatives.  The Investor has received such
accounting, tax and legal advice from Persons (other than the Company) as it has
considered necessary to make an informed investment decision with respect to the
acquisition of the Securities.

    

    4.8.           Restricted Securities.
 The Investor understands that the sale or re-sale of the Securities
has not been and is not being registered under the Securities Act or any
applicable state securities laws, and the Securities, as applicable, may not be
transferred unless:

    

     
(a)         they are sold pursuant
to an effective registration statement under the Securities Act; or

    

     
(b)         they are being sold
pursuant to a valid exemption from the registration requirements of the
Securities Act; or

    

     
(c)         they are sold or
transferred to an “affiliate” (as defined in Rule 144, or any successor rule,
promulgated under the Securities Act (“Rule 144”) of the Investor who
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 4.9 and who is an accredited investor, or

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

     
(d)         they are validly sold
pursuant to Rule 144.

    

    The
Investor shall provide the Company with no less than three (3) Trading Days
notice of its intention to dispose of any Securities and agrees that the
Investor shall only dispose of any Securities in accordance with all applicable
Legal Requirements.  The Investor further understands that any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and other than as provided in the Transaction Documents,
neither the Company nor any other Person is under any obligation to register the
Securities under the Securities Act or any state securities laws.
 Notwithstanding the foregoing or anything else contained herein to the
contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement.

    

    4.9.           Accredited Investor. The
Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D,
as amended, under the Securities Act (“Regulation D”).

    

    4.10.         No General Solicitation.
 The Investor did not learn of the investment in the Securities as a result
of any public advertising or general solicitation, and is not aware of any
public advertisement or general solicitation in respect of the Company or its
securities.

    

    4.11.         Brokers and Finders.  The
Investor will not have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company or any Subsidiary for any commission, fee or other compensation pursuant
to any agreement, arrangement or understanding entered into by or on behalf of
the Investor.

    

    4.12.         Prohibited Transactions.  Other than
with respect to the transactions contemplated herein, since the earlier to occur
of: (i) the time that the Investor was first contacted by the Company, or any
other Person regarding an investment in the Company and (ii) the thirtieth
(30th) day
prior to the date hereof, neither the Investor nor any Affiliate of the Investor
which (x) had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to the Investor’s investments or trading or
information concerning the Investor’s investments, including in respect of the
Securities, or (z) is subject to the Investor’s review or input concerning such
Affiliate’s investments or trading decisions (collectively, “Trading Affiliates”) has,
directly or indirectly, nor has any Person acting on behalf of, or pursuant to,
any understanding with the Investor or Trading Affiliate effected or agreed to
effect any transactions in the securities of the Company or involving the
Company’s securities (a “Prohibited
Transaction”).

    

    4.13.         Residency.  The Investor
is a resident of the jurisdiction set forth on the Investor’s signature page
hereto.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    4.14.         Reliance on Exemptions.
 The Investor understands that the Securities are being offered and sold to
it in reliance upon specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Investor set forth herein in order to determine the availability of such
exemptions and the eligibility of the Investor to acquire the Securities. All of
the information which the Investor has provided to the Company is true, correct
and complete as of the date this Agreement is signed, and if there should be any
change in such information prior to the Closing, the Investor will immediately
provide the Company with such information.

    

    
      	
              5. 

            	
              REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

            

    

    

    Except as
set forth in: (i) the SEC Reports, (ii) the Memorandum or (iii), if so stated
below, the corresponding section of the Disclosure Schedules, the Company hereby
makes the following representations and warranties as of the date hereof and as
of the Closing Date to the Investor:

    

    5.1.           Subsidiaries.  A
true and correct structure chart of the Company and its wholly-owned and
consolidated Subsidiaries is included as Schedule 5.1 to the
Disclosure Schedules.  Except as disclosed in Schedule 5.1 to the
Disclosure Schedules, the Company owns, directly or indirectly, all of the
capital stock, or other equity interests, of each Subsidiary free and clear of
any Liens, and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.

    

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

    

    5.3.           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
thereunder.  The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith.  Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other laws of general application
relating to or affecting enforcement of creditors’ rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

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

    

    5.5.           Filings, Consents and
Approvals.  Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other foreign, federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (a) the filing with the SEC of the Registration Statement,
the application(s) to each Trading Market for the listing of the Shares and
Warrant Shares for trading thereon in the time and manner required thereby, and
applicable “blue sky” or other securities law filings, (b) such as have already
been obtained or such exemptive filings as are required to be made under
applicable securities laws, or (c) such other filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws which the Company undertakes to
file within the applicable time periods.  Subject to the accuracy of
the representations and warranties of the Investor set forth in Section 4
hereof, the Company has taken all action necessary to exempt: (i) the issuance
and sale of the Securities, (ii) the issuance of the Warrant Shares upon due
exercise of the Warrants, and (iii) the other transactions contemplated by the
Transaction Documents from the provisions of any stockholder rights plan or
other “poison pill” arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company’s Articles of Incorporation or Bylaws that is or could reasonably be
expected to become applicable to the Investor as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Investor or the exercise of any right granted to the Investor pursuant to this
Agreement or the other Transaction Documents.

    

    5.6.           Issuance of the
Securities.  The Shares are duly authorized and, when issued
and paid for in accordance with the Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
Liens.  The Warrants have been duly and validly
authorized.  Upon the due exercise of the Warrants, the Warrant Shares
will be validly issued, fully paid and non-assessable free and clear of all
Liens.  The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Warrants; provided, however, with respect
to the Warrants, the Company has only reserved from its duly authorized capital
stock the shares of Common Stock issuable as of the Closing Date, assuming the
valid exercise of all of the Warrants by the Investor.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    5.7.           Capitalization.  Schedule 5.7 to the
Disclosure Schedules sets forth as of the date hereof (a) the authorized capital
stock of the Company; (b) the number of shares of capital stock issued and
outstanding; (c) the number of shares of capital stock issuable pursuant to the
Company’s stock plans; and (d) the number of shares of capital stock issuable
and reserved for issuance pursuant to securities (other than the Warrants)
exercisable for, or convertible into or exchangeable for any shares of capital
stock of the Company.  All of the issued and outstanding shares of the
Company’s capital stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of pre-emptive rights and were issued in full
compliance with applicable state and federal securities law and any rights of
third parties.  No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.  Except as
described on Schedule
5.7 to the Disclosure Schedules, there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock, other than in connection with the
Company’s stock option plans.  The issue and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investor) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.  Except as described on
Schedule 5.7 to
the Disclosure Schedules, there are no voting agreements, buy-sell agreements,
option or right of first purchase agreements or other agreements of any kind
among the Company and any of the securityholders of the Company relating to the
securities of the Company held by them.  Except as described on Schedule 5.7 to the
Disclosure Schedules, and no Person has the right to require the Company to
register any securities of the Company under the Securities Act, whether on a
demand basis or in connection with the registration of securities of the Company
for its own account or for the account of any other Person.

    

    5.8.           SEC Reports; Financial
Statements.  The Company has filed with the SEC all SEC Reports
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and the
rules and regulations promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing.  Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    5.9.           Material
Changes.  Since the date of the latest audited financial
statements included within the SEC Reports, the Company and its Subsidiaries
have not:

    

    (a)        suffered
any Material Adverse Change;

     

    (b)        suffered
any damage, destruction or loss, whether or not covered by insurance, in an
amount in excess of $100,000;

     

    (c)       
granted or agreed to make any increase in the compensation payable or to become
payable by the Company or any of its Subsidiaries to any officer or employee,
except for normal raises for nonexecutive personnel made in the ordinary course
of business that are usual and normal in amount;

     

    (d)     
  declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of capital stock of the Company or
any of its Subsidiaries, or declared or agreed to any direct or indirect
redemption, retirement, purchase or other acquisition by the Company or any of
its Subsidiaries of such shares;

     

    (e)        issued
any shares of capital stock of the Company or any of its Subsidiaries, or any
warrants, rights or options thereof, or entered into any commitment relating to
the shares of capital stock of the Company or any of its
Subsidiaries;

     

    (f)         adopted
or proposed the adoption of any change in the Company’s charter, bylaws or other
organizational or governing documents;

     

    (g)        made
any change in the accounting methods or practices they follow, whether for
general financial or tax purposes, or any change in depreciation or amortization
policies or rates adopted therein, or any tax election;

     

    (h)      
 sold, leased, abandoned or otherwise disposed of any real property or any
machinery, equipment or other operating property other than in the ordinary
course of their business;

     

    (i)         sold,
assigned, transferred, licensed or otherwise disposed of any of the Company’s
Intellectual Property or interest thereunder or other intangible asset except in
the ordinary course of their business;

     

    (j)         been
involved in any dispute involving any employee which would reasonably be
expected to result in a Material Adverse Change;

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (k)        entered
into, terminated or modified any employment, severance, termination or similar
agreement or arrangement with, or granted any bonuses (or bonus opportunity) to,
or otherwise increased the compensation of any executive officer;

     

    (l)         entered
into any material commitment or transaction (including without limitation any
borrowing or capital expenditure);

     

    (m)       amended
or modified, or waived any default under, any Material Contract;

     

    (n)       
to the Company’s knowledge, incurred any material liabilities, contingent or
otherwise, either matured or unmatured (whether or not required to be reflected
in financial statements in accordance with GAAP, and whether due or to become
due), except for accounts payable or accrued salaries that have been incurred by
the Company since the date of the latest audited financial statements included
within the SEC Reports, in the ordinary course of its business and consistent
with the Company’s past practices;

     

    (o)        permitted
or allowed any of their material property or assets to be subjected to any
Lien;

     

    (p)        settled
any claim, litigation or action, whether now pending or hereafter made or
brought;

     

    (q)        made
any capital expenditure or commitment for additions to property, plant or
equipment individually in excess of $100,000, or in the aggregate, in excess of
$250,000;

     

    (r)         paid,
loaned or advanced any amount to, or sold, transferred or leased any properties
or assets to, or entered into any agreement or arrangement with any of their
Affiliates, officers, directors or stockholders or, to the Company’s knowledge,
any Affiliate or associate of any of the foregoing;

     

    (s)        made
any amendment to, or terminated any agreement that, if not so amended or
terminated, would be material to the business, assets, liabilities, operations
or financial performance of the Company or any of its Subsidiaries;

     

    (t)         compromised
or settled any claims relating to taxes, any tax audit or other tax proceeding,
or filed any amended tax returns;

     

    (u)        merged
or consolidated with any other Person, or acquired a material amount of assets
of any other Person;

     

    (v)        entered
into any agreement in contemplation of the transactions specified herein other
than this Agreement and the other Transaction Documents; or

     

    (w)      
agreed to take any action described in this Section 5.9 or which would
reasonably be expected to otherwise constitute a breach of any of the
representations or warranties contained in this Agreement or any other
Transaction Documents.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    5.10.         Litigation.  Except
as described on Schedule 5.10 to the
Disclosure Schedules, there is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the Company’s knowledge, threatened
against or affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”) which: (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the
Company’s knowledge, there is not pending or contemplated, any investigation by
the SEC involving the Company or any current or former director or officer of
the Company.  The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

    

    5.11.         Labor
Relations.  Except as set forth on Schedule 5.11 to the
Disclosure Schedules, neither the Company nor any Subsidiary is a party to or
bound by any collective bargaining agreements or other agreements with labor
organizations.  Neither the Company nor any Subsidiary has violated in
any material respect any laws, regulations, orders or contract terms, affecting
the collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and
hours.  No material labor dispute exists or, to the Company’s
knowledge, is imminent with respect to any of the employees of the Company which
could reasonably be expected to result in a Material Adverse
Effect.

    

    5.12.         Compliance.  Except
as set forth on Schedule 5.12 to the
Disclosure Schedules, neither the Company nor any Subsidiary: (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or Governmental Body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business, except in the case of clauses (i), (ii) and (iii) as
would not have or reasonably be expected to result in a Material Adverse
Effect.

    

    5.13.         Regulatory
Permits.  Except as disclosed in Schedule 5.13 to the
Disclosure Schedules, the Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as described in the SEC Reports and the Memorandum, except where the failure to
possess such permits would not have or reasonably be expected to result in a
Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material
Permit.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

    5.14.         Title to
Assets.  Except as set forth on Schedule 5.14 to the
Disclosure Schedules, the Company and the Subsidiaries have good and marketable
title in fee simple or the right under PRC law, as the case may be, to all real
property owned by them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.  Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases of
which the Company and the Subsidiaries are in compliance.

    

    5.15.         Contracts.

    

     
(a)         Neither the Company nor
any of its Subsidiaries is party or subject to, or bound by:

     

     (i)           any
agreements, contracts or commitments that call for prospective fixed and/or
contingent payments or expenditures by or to the Company or any of its
Subsidiaries of more than $100,000, or which is otherwise material and not
entered into in the ordinary course of business;

     

     (ii)          any
contract, lease or agreement involving payments in excess of $100,000, which is
not cancelable by the Company or any of its Subsidiaries, as applicable, without
penalty on not less than sixty (60) days notice;

     

     (iii)         any
contract, including any distribution agreements, containing covenants directly
or explicitly limiting the freedom of the Company or any of its Subsidiaries to
compete in any line of business or with any Person or to offer any of its
products or services;

     

     (iv)    
   any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money or pledging
or granting a security interest in any assets;

     

     (v)       
any employment contracts, non-competition agreements, invention assignments,
severance or other agreements with officers, directors, employees, stockholders
or consultants of the Company or any of its Subsidiaries or Persons related to
or affiliated with such Persons;

     

     (vi)        any
stock redemption or purchase agreements or other agreements affecting or
relating to the capital stock of the Company or any of its Subsidiaries,
including, without limitation, any agreement with any stockholder of the Company
or any of its Subsidiaries which includes, without limitation, antidilution
rights, voting arrangements or operating covenants;

     

     (vii)       any
pension, profit sharing, retirement, stock option or stock ownership
plans;

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

     
(viii)     any royalty, dividend or similar arrangement
based on the revenues or profits of the Company or any of its Subsidiaries or
based on the revenues or profits derived from any Material
Contract;

     

     
(ix)        any acquisition, merger,
asset purchase or other similar agreement;

     

     
(x)         any sales agreement
which entitles any customer to a right of set-off, or right to a refund after
acceptance thereof;

     

     
(xi)        any agreement with any supplier
or licensor containing any provision permitting such supplier or licensor to
change the price or other terms upon a breach or failure by the Company or any
of its Subsidiaries, as applicable, to meet its obligations under such
agreement; or

     

     
(xii)       any agreement under which the
Company or any of its Subsidiaries has granted any Person registration rights
for securities.

    

    (b)           Schedule 5.15(b) to
the Disclosure Schedules contains a listing or description of all agreements,
contracts or instruments, including all amendments thereto, to which the Company
or its Subsidiaries are bound which meet the criteria set forth in Section
5.15(a) (such agreements, contracts or instruments, collectively, the “Material
Contracts”).  The Company has made available to the Investor
copies of the Material Contracts.  Neither the Company nor any of its
Subsidiaries has entered into any oral contracts which, if written, would
qualify as a Material Contract.  Each of the Material Contracts is
valid and in full force and effect, is enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or similar laws affecting creditors’ rights generally and
general principles of equity, and will continue to be so immediately following
the Closing Date.

    

    (c)           Actions
with Respect to Material Contracts.

     

     
(i)           Neither the
Company nor any of its Subsidiaries has violated or breached, or committed any
default under, any Material Contract in any material respect, and, to the
Company’s knowledge, no other Person has violated or breached, or committed any
default under any Material Contract, except for violations, breaches of defaults
which would not have a Material Adverse Effect; and

     

     
(ii)          To the Company’s
knowledge, no event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) will, or would reasonably be expected
to: (A) result in a material violation or breach of any of the provisions of any
Material Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Material Contract, (C) give any Person the right
to accelerate the maturity or performance of any Material Contract or (D) give
any Person the right to cancel, terminate or modify any Material Contract,
except, in each case, as would not have a Material Adverse
Effect.

    
      
         

      

      
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    5.16.         Taxes.

    

     
(a)         The Company and its
Subsidiaries have timely and properly filed all tax returns required to be filed
by them for all years and periods (and portions thereof) for which any such tax
returns were due,
except where the failure to so file would not have a Material Adverse
Effect.  All such filed tax returns are accurate in all
material respects.  The Company has timely paid all taxes due and
payable (whether or not shown on filed tax returns), except where the failure
to so pay would not have a Material Adverse
Effect.  There are no pending assessments, asserted
deficiencies or claims for additional taxes that have not been
paid.  The reserves for taxes, if any, reflected in the SEC Reports or
in the Memorandum are adequate, and there are no Liens for taxes on any property
or assets of the Company and any of its Subsidiaries (other than Liens for taxes
not yet due and payable).  There have been no audits or examinations
of any tax returns by any Governmental Body, and the Company or its Subsidiaries
have not received any notice that such audit or examination is pending or
contemplated.  No claim has been made by any Governmental Body in a
jurisdiction where the Company or any of its Subsidiaries does not file tax
returns that it is or may be subject to taxation by that
jurisdiction.  To the Company’s knowledge, no state of facts exists or
has existed which would constitute grounds for the assessment of any penalty or
any further tax liability beyond that shown on the respective tax
returns.  There are no outstanding agreements or waivers extending the
statutory period of limitation for the assessment or collection of any
tax.

    

     
(b)         Neither the Company nor
any of its Subsidiaries is a party to any tax-sharing agreement or similar
arrangement with any other Person.

    

     
(c)        The Company has made all necessary
disclosures required by Treasury Regulation Section 1.6011-4.  The
Company has not been a participant in a “reportable transaction” within the
meaning of Treasury Regulation Section 1.6011-4(b).

    

     
(d)         No payment or benefit
paid or provided, or to be paid or provided, to current or former employees,
directors or other service providers of the Company will fail to be deductible
for federal income tax purposes under Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”).

    

    5.17.         Employees.

    

     
(a)         The Company and its
Subsidiaries are not party to any collective bargaining agreements and, to the
Company’s knowledge, there are no attempts to organize the employees of the
Company or any of its Subsidiaries.

     

     
(b)        Except as set forth on Schedule 5.17 to the
Disclosure Schedules, the Company and its Subsidiaries have no policy, practice,
plan or program of paying severance pay or any form of severance compensation in
connection with the termination of employment services.

     

     
(c)         Each Person who
performs services for the Company or any of its Subsidiaries has been, and is,
properly classified by the Company or its Subsidiaries as an employee or an
independent contractor (or its PRC equivalent).

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     
(d)         To the Company’s
knowledge, no employee or advisor of the Company or any of its Subsidiaries is
or is alleged to be in violation of any term of any employment contract,
disclosure agreement, proprietary information and inventions agreement or any
other contract or agreement or any restrictive covenant or any other common law
obligation to a former employer relating to the right of any such employee to be
employed by the Company or any of its Subsidiaries because of the nature of the
business conducted or to be conducted by the Company or any of its Subsidiaries
or to the use of trade secrets or proprietary information of others, and the
employment of the employees of the Company and its Subsidiaries does not subject
the Company or the Company's stockholders to any liability.  There is
neither pending nor, to the Company’s knowledge, threatened any actions, suits,
proceedings or claims, or, to the Company’s knowledge, any basis therefor or
threat thereof with respect to any contract, agreement, covenant or obligation
referred to in the preceding sentence.

    

    5.18.         Employee Benefit
Plans.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan (as defined below) by the
Company or any of its Subsidiaries which is or would be materially adverse to
the Company and its Subsidiaries.  The execution and delivery of this
Agreement and the issuance and sale of the Securities will not involve any
transaction which is subject to the prohibitions of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), or in connection with
which a tax could be imposed pursuant to Section 4975 of the Code, provided
that, if any of the Investor, or any person or entity that owns a beneficial
interest in any of the Investor, is an “employee pension benefit plan” (within
the meaning of Section 3(2) of ERISA) with respect to which the Company is a
“party in interest” (within the meaning of Section 3(14) of ERISA), the
requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are
met.  As used in this Section 2.1(ac), the term “Plan” shall mean an “employee
pension benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by
the Company or any subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any subsidiary, is under
common control, as described in Section 414(b) or (c) of the Code.

    

    5.19.         Patents and
Trademarks.  Except as set forth on Schedule 5.19 to the
Disclosure Schedules, to the Company’s knowledge and each Subsidiary, the
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material for
use in connection with their respective businesses as described in the SEC
Reports and the Memorandum and which the failure to so have could have or
reasonably be expected to result in a Material Adverse Effect (collectively, the
“Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the Company or
any Subsidiary violates or infringes upon the rights of any
Person.  To the Company’s knowledge, all such Intellectual Property
Rights are enforceable.  The Company and its Subsidiaries have taken
reasonable steps to protect the Company’s and its Subsidiaries’ rights in their
Intellectual Property Rights and confidential information (the “Confidential
Information”).  Each employee, consultant and contractor who
has had access to Confidential Information which is necessary for the conduct of
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement to
maintain the confidentiality of such Confidential Information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof.  Except under confidentiality obligations,
there has been no material disclosure of any of the Company’s or its
Subsidiaries’ Confidential Information to any third party.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    5.20.         Environmental
Matters.  Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
Governmental Body relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or
operates any real property contaminated with any substance that is subject to
any Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s knowledge,
threatened investigation that might lead to such a claim.

    

    5.21.         Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged as described in the SEC Reports and/or the
Memorandum.  Neither the Company nor any Subsidiary 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 without a significant increase in
cost.

    

    5.22.         Transactions With Affiliates and
Employees.  Except as set forth on Schedule 5.22 to the
Disclosure Schedules, none of the officers or directors of the Company and, to
the Company’s knowledge, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company’s knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than (a) for payment of salary
or consulting fees for services rendered, (b) reimbursement for expenses
incurred on behalf of the Company and (c) for other employee benefits, including
stock option agreements under any stock option plan of the Company.

    

    5.23.         Private Placement. Assuming
the accuracy of each of the Investor’ representations and warranties set forth
in Section 4, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Investor as contemplated
hereby.

    

    5.24.         No Integrated
Offering.  Neither the Company, nor any of its affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market on which any
of the securities of the Company are listed or designated.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    5.25.         Brokers and
Finders.  No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company.

    

    5.26.         No Directed Selling Efforts or
General Solicitation.  Neither the Company nor any Person
acting on its behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Securities.

    

    5.27.         Questionable Payments. Neither
the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of
their respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary, has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary; or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.

    

    5.28.         Disclosures.  Neither
the Company nor any Person acting on its behalf has provided the Investor or
their agents or counsel with any information that constitutes or might
constitute material, non-public information, other than the terms of the
transactions contemplated hereby.  The written materials delivered to
the Investor in connection with the transactions contemplated by the Transaction
Documents do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading

    

    5.29.         Solvency.  The
Company has not: (a) made a general assignment for the benefit of creditors; (b)
filed any voluntary petition in bankruptcy or suffered the filing of any
involuntary petition by its creditors; (c) suffered the appointment of a
receiver to take possession of all, or substantially all, of its assets; (d)
suffered the attachment or other judicial seizure of all, or substantially all,
of its assets; (e) admitted in writing its inability to pay its debts as they
come due; or (f) made an offer of settlement, extension or composition to its
creditors generally.

    

    5.30.         Related
Party Transactions.  Except as set
forth in Schedule
5.30 to the
Disclosure Schedules: (a) none of the Company or any of its Affiliates,
officers, directors, stockholders or employees, or any Affiliate of any of such
Person, has any material interest in any property, real or personal, tangible or
intangible, including the Company’s Intellectual Property used in or pertaining
to the business of the Company, except for the normal rights of a stockholder,
or, to the Company’s knowledge, any supplier, distributor or customer of the
Company; (b) there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, employees,
Affiliates, or, to the Company’s knowledge, any Affiliate thereof; (c) to the Company’s
knowledge, no employee, officer or director of the Company or any of its
Subsidiaries has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company; (d) to the Company’s
knowledge, no member of the immediate family of any officer or director of the
Company is directly or indirectly interested in any Material Contract; or (e)
there are no amounts owed (cash and stock) to officers, directors and
consultants (salary, bonuses or other forms of compensation).

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    5.31.         Foreign Corrupt Practices
Act.  None of the Company or any of its Subsidiaries, nor to
the Company’s knowledge, any agent or other person acting on behalf of the
Company or any of its Subsidiaries, has, directly or indirectly: (a) used any
funds, or will use any proceeds from the sale of the Units, for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity; (b) made any unlawful payment to foreign
or domestic government officials or employees or to any foreign or domestic
political parties or campaigns from corporate funds; (c) failed to disclose
fully any contribution made by the Company or any of its Subsidiaries (or made
by any Person acting on their behalf of which the Company is aware) or any
members of their respective management which is in violation of any Legal
Requirement; or (d) has violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder which was applicable to the Company or any of its
Subsidiaries.

    

    5.32.         PFIC.  None of the
Company or any of its Subsidiaries is or intends to become a “passive foreign
investment company” within the meaning of Section 1297 of the Code of
1986.

    

    5.33.         OFAC. None of the Company or
any of its Subsidiaries nor, to the Company’s knowledge, any director, officer,
agent, employee, Affiliate or Person acting on behalf of the Company or any of
its Subsidiaries, is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will
not directly or indirectly use the proceeds of the sale of the Units, or lend,
contribute or otherwise make available such proceeds to any of the Company’s
Subsidiaries, joint venture partner or other Person or entity, towards any sales
or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other country
sanctioned by OFAC or for the purpose of financing the activities of any Person
currently subject to any U.S. sanctions administered by OFAC.

    

    5.34.         Money Laundering
Laws.  The operations of each of the Company or any of its
Subsidiaries are and have been conducted at all times in compliance with the
money laundering Legal Requirements of all applicable Governmental Bodies of the
PRC and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any PRC Governmental Body (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any PRC court or PRC Governmental Body
or any arbitrator involving the Company or any of its Subsidiaries with respect
to the Money Laundering Laws is pending or, to the best of the Company’s
knowledge, threatened.

    

    5.35.         Other Representations and Warranties
Relating to WFOE.

    

     
(a)         All material consents,
approvals, authorizations or licenses requisite under PRC Legal Requirements for
the due and proper establishment and operation of WFOE have been duly obtained
from the relevant PRC Governmental Bodies and are in full force and
effect.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     
(b)        All filings and registrations
with the PRC Governmental Bodies required in respect of WFOE and its capital
structure and operations including, without limitation, the registration with
the PRC Ministry of Commerce or its local counterpart, the PRC the State
Administration of Industry and Commerce or its local counterpart, the PRC State
Administration of Foreign Exchange and applicable PRC tax bureau and customs
authorities have been duly completed in accordance with the relevant PRC Legal
Requirements, except where, the failure to complete such filings and
registrations does not, and would not, individually or in the aggregate, have a
Material Adverse Effect.

    

     
(c)         WFOE has complied with
all relevant PRC Legal Requirements regarding the contribution and payment of
its registered share capital, the payment schedule of which has been approved by
the relevant PRC Governmental Bodies.  There are no outstanding
commitments made by the Company or any Subsidiary (or any of their shareholders)
to sell any equity interest in WFOE.

    

     
(d)         WFOE has not received
any letter or notice from any relevant PRC Governmental Body notifying it of
revocation of any licenses or qualifications issued to it or any subsidy granted
to it by any PRC Governmental Body for non-compliance with the terms thereof or
with applicable PRC Legal Requirements, or the lack of compliance or remedial
actions in respect of the activities carried out by WFOE, except such revocation
as does not, and would not, individually or in the aggregate, have a Material
Adverse Effect.

    

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

    

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

    

    
      	
              6. 

            	
              CONDITIONS
      TO THE CLOSING OF THE INVESTOR.

            

    

    

    The
obligation of the Investor to purchase the Units at any Closing is subject to
the fulfillment to the satisfaction of the Investor, on or prior to the Closing
Date, of the following conditions, any of which may be waived by the
Investor:

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    6.1.           Representations and
Warranties. The representations and warranties made by the Company in
Section 5 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section 5
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date.

    

    6.2.           Performance of Agreements.  The
Company shall have performed in all material respects all obligations and
covenants herein required to be performed by it on or prior to the Closing
Date.

    

    6.3.           Approvals. The Company shall
have obtained any and all consents, permits, approvals, registrations and
waivers necessary or appropriate for consummation of the purchase and sale of
the Securities and the consummation of the other transactions contemplated by
the Transaction Documents, all of which shall be in full force and
effect. 

    

    6.4.           Judgments, etc.  No judgment,
writ, order, injunction, award or decree of or by any court, or judge, justice
or magistrate, including any bankruptcy court or judge, or any order of or by
any governmental authority, shall have been issued, and no action or proceeding
shall have been instituted by any governmental authority, enjoining or
preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents.

    

    6.5.           Stop Orders.  No stop
order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body having jurisdiction over the Company or the
market(s) where the Common Stock is listed or quoted, with respect to public
trading in the Common Stock.

    

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

    

    6.7.           Company Officer Certificate. The Company
shall have delivered a certificate, executed on behalf of the Company by its
Chief Executive Officer or its Chief Financial Officer, dated as of the Closing
Date, certifying to the fulfillment of the conditions specified in this Section
6.

    

    6.8.           Company Secretary Certificate. The
Company shall have delivered a certificate, executed on behalf of the Company by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Securities, certifying the current versions of the charter and bylaws of the
Company, as the same may be amended and/or restated, and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company. 

    

    6.9.           Opinion of Counsel.  The
Investor shall have received an opinion from Pillsbury Winthrop Shaw Pittman,
LLP, the Company’s U.S. legal counsel, dated as of the Closing Date, in such
form and substance as agreed to by the Company and the Investor (it being agreed
that such counsel shall not be required to deliver a “10b-5” or negative
assurances letter or opinion).

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    6.10.         Common Stock and Warrants.  The
Company shall have delivered the Shares and Warrants being sold at the
Closing.

    

    6.11.         Amendment to Articles of
Incorporation.  The Company shall have filed with the Secretary
of State of the State of Nevada an amendment to its Articles of Incorporation
increasing the number of authorized shares of Preferred Stock of the Company
from 5,000,000 to 50,000,000.

    

    6.12.         Joint Venture Operating
Agreements.  The Company shall have entered into definitive
operating agreements with its partners in the PRC with respect to the operation
and funding of two joint ventures in the PRC.

    

    6.13.         Consummation of Common Stock Financing. The
consummation of the sale of up to $15,000,000 worth of shares of Common Stock of
the Company to certain investors shall occur simultaneous with the Closing
(including in such amount the gross proceeds received from the sale of Shares
and Warrants hereunder and the sale of Series A Preferred Shares and Warrants to
Shane McMahon.

    

    6.14.         Consummation of Series A Financing. The
consummation of the sale of 7,000,000 shares of Series A Preferred Stock of
the Company to Shane McMahon shall occur simultaneous with the
Closing.

    

    6.15.         Waiver of Certain Accrued Salaries.  Clive Ng, the
Company’s Chairman, and Pu Yue, the Company’s Vice Chairman and Principal
Financial and Accounting Officer, shall each discharge and waive all amounts of
accrued but unpaid salary owed to them by the Company as of the date of
Closing.

    

    6.16.         Registration Rights
Agreement.  The Company shall have delivered to the Investor
the duly executed Registration Rights Agreement.

    

    
      7.        
 CONDITIONS
TO THE CLOSING OF THE COMPANY.

    

    

    The
obligations, with respect to the Investor, of the Company to effect the
transactions contemplated by this Agreement are subject to the fulfillment at or
prior to the Closing Date of the conditions listed below.

    

    7.1.           Representations and
Warranties. The representations and warranties in Section 4 hereof made
by the Investor shall be true and correct in all material respects at the time
of Closing as if made on and as of such date.

    

    7.2.           Corporate Proceedings. All corporate and other
proceedings required to be undertaken by the Investor in connection with the
transactions contemplated hereby shall have occurred and all documents and
instruments incident to such proceedings shall be reasonably satisfactory in
substance and form to the Company.

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    

    7.3.           Agreements.  The Investor
shall have completed and executed this Agreement, the Escrow Agreement and an
investor questionnaire as provided by the Company, and delivered the same to the
Company.

    

    7.4.           Purchase Price.  The
Investor shall have delivered or caused to be delivered the Purchase Price to
the Escrow Account.

    

    7.5.           Loan Cancellation
Agreement.  The execution of a Loan Cancellation Agreement, in
the form of Exhibit
C hereto, by the Company and the Investor shall occur simultaneous with
the Closing.

    

    
      8.          OTHER
AGREEMENTS

    

    

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

    

    8.2.           Securities Laws Disclosure;
Publicity.  By 9:00 a.m. (New York City time) on the Trading
Day following the Closing Date, the Company shall issue a press release
disclosing the transactions contemplated hereby and the Closing.  By
no later than the fourth Trading Day following the Closing Date the Company will
file a Current Report on Form 8-K disclosing the material terms of this
Agreement and the other Transaction Documents (and attach as exhibits thereto
the Transaction Documents) and the Closing.  In addition, the Company
will make such other filings and notices in the manner and time required by the
SEC and the Trading Market on which the Common Stock is
listed.  Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
filing with the SEC (other than the Registration Statement and any exhibits to
filings made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or Trading Market,
without the prior written consent of the Investor Representative, except to the
extent such disclosure is required by law or Trading Market
regulations.

    

    8.3.           Limitation on Issuance of Future
Priced Securities.  During the six months following the Closing
Date, the Company shall not issue any “Future Priced Securities” as such term is
described by the rules and regulations of FINRA.

    

    8.4.           Reservation of
Shares.  The Company shall maintain a reserve from its duly
authorized shares of Common Stock to comply with its obligations to issue the
shares of Common Stock upon conversion of the Shares and the Warrant Shares upon
exercise of the Warrants.

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    8.5.          Certificate of
Designations.  The Company shall file with the Secretary of
State of the State of Nevada, at the Closing, a certificate of designations, in
the form of Exhibit
D hereto, establishing
the relative rights, preferences and other features of the Shares.

    

    9.           FURTHER
ASSURANCES.  The Company will, and will cause all of its
Subsidiaries to, and their management to, use their best efforts to satisfy all
of the closing conditions under Section 7, and will not take any action which
could frustrate or delay the satisfaction of such conditions.  In
addition, either prior to or following the Closing, the Company will, and will
cause each of its Subsidiaries to, and its and their management to, perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

    

    10.         MISCELLANEOUS.

    

    10.1.      Notices. All notices,
requests, demands and other communications provided in connection with this
Agreement shall be in writing and shall be deemed to have been duly given at the
time when hand delivered, delivered by express courier, or sent by facsimile
(with receipt confirmed by the sender’s transmitting device) in
accordance with the contact information provided below or such other
contact information as the parties may have duly provided by
notice.

    

    
      	
              (a) 

            	
              The
    Company:

            

    

    

    c/o China
Broadband Inc.

    1900
Ninth Street, 3rd Floor

    Boulder,
Colorado 80302

    Attention:  Marc
Urbach

    Fax
Number: (303) 449.7799

    

    With
a copy to:

    

    Pillsbury
Winthrop Shaw Pittman LLP

    2300 N
Street, N.W.

    Washington,
DC  20037

    Attention:
Louis A. Bevilacqua, Esq.

    Fax
Number: (202) 663.8007

    

    
      	
              (b) 

            	
              The Investor:

            

    

    

    As per
the contact information provided on the signature page hereof.

    

    10.2.       Amendments;
Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Investor or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought.  No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such
right.

    
      
         

      

      
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    10.3.         Construction.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

    

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

    

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

    

    10.6.         Governing Law, Consent to
Jurisdiction, etc.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, New York for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of the any
of the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.  EACH PARTY
HERETO (INCLUDING ITS AFFILIATES, AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES)
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    10.7.         Survival.  The
representations, warranties, agreements and covenants contained herein shall
survive for two (2) years after the Closing of the transactions contemplated by
this Agreement.

    

    10.8.         Indemnification.

    

     
(a)         The Company agrees to
indemnify and hold harmless the Investor and its Affiliates and their respective
directors, officers, employees and agents from and against any and all losses,
claims, damages, liabilities and expenses (including without limitation
reasonable attorney fees and disbursements and other expenses incurred in
connection with investigating, preparing or defending any action, claim or
proceeding, pending or threatened and the costs of enforcement thereof)
(collectively, “Losses”)
to which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed on
the part of the Company under the Transaction Documents, and will reimburse any
such Person for all such amounts as they are incurred by such
Person.

    

     
(b)         Promptly after receipt
by any Person (the “Indemnified
Person”) of notice of any demand, claim or circumstances which would or
might give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to this
Section 10.9, such Indemnified Person shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person, and
shall assume the payment of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the Company is materially
prejudiced by such failure to notify.  In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company and the Indemnified Person shall have mutually agreed to
the retention of such counsel; or (ii) in the reasonable judgment of counsel to
such Indemnified Person representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between
them.  The Company shall not be liable for any settlement of any
proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment.  Without the prior
written consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Person from all liability arising out of such
proceeding.

    

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

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

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

    

    10.14.       Irrevocable
Offer.  The Investor agrees that this Agreement constitutes an
irrevocable offer to purchase the Securities of the Company and that Investor
cannot cancel, terminate or revoke this Agreement or any agreement of Investor
made hereunder.  This Agreement shall survive the death or legal
disability of Investor and shall be binding upon Investor’s heirs, executors,
administrators and successors.

    

    [Signature
Pages Follow]

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

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

    

    
      
        
          	 
      	
                  COMPANY:

                
	 
      	 
      
	 
      	
                  CHINA
      BROADBAND INC.

                
	 
      	 
      	 
      
	 
      	
                  By: 

                	 
      
	 
      	 
      	
                  Name:

                
	 
      	 
      	
                  Title:

                
	 
      	 
      	 
      
	 
      	
                  INVESTOR:

                

        

      

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  	
                                          Name
      and Address, Fax No. and Social Security No. of Investor:

                                        
	   
      
	   
      
	  
      
	 
	
                                          Fax No.:
      _________________________________________

                                        
	 
      
	
                                          Soc.
      Sec. No.:
_________________________________

                                        

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    
      
        
          
            
              
                	_____________________________
	
                        Signature

                      
	 
	
                        Total Purchase Price:
      _________________________

                      
	 
	
                        Number of Units:
      ___________________________

                      
	 
	
                        Number of Warrants:
      ______________________

                      

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    
 

    Exhibit
A

    

    Form
of Warrant

    

    [attached
hereto]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Exhibit
B

    

    Registration
Rights Agreement

    

    [attached
hereto]

    
      
         

      

      
         

        
          

        

      

      
         

      

    
 

    Exhibit
C

    

    Loan
Cancellation Agreement

    

    [attached
hereto]

    
      
         

      

      
         

        
          

        

      

      
         

      

    
 

    Exhibit
D

    

    Certificate
of Designations of Series B Preferred Stock

    

    [attached
hereto]

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