6-K 1 h00872e6vk.htm CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For November 30, 2006
Commission File No. 000-29008
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
(Formerly known as Tramford International Limited)
Room 2413-18, Shui On Centre,
6-8 Harbour Road, Wanchai, Hong Kong
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F þ       Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):            
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):            
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No þ
If “Yes” marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-           
 
 

 


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China Technology Announces Proposed Annual Meeting of Shareholders and Proposed Fundraising and New Substantial Shareholders
     HONG KONG, November 30, 2006 – China Technology Development Group Corporation (Nasdaq: CTDC) ( “CTDC” or the “Company”) today announced that, on November 27, 2006, the Company’s Board of Directors (the “Board”) convened a meeting attended by all members. The Board reviewed and unanimously agreed that the 2006 Annual General Meeting of the shareholders (the “Annual Meeting”) will be held on December 22, 2006 and the close of business on November 28, 2006, New York time, has been fixed as the record date for the Annual Meeting. The Board also reviewed, approved and proposed for submission to the shareholders during the Annual Meeting, transactions involving the change of substantial shareholders through the sale of outstanding shares (“Sale Shares”) by existing substantial shareholders, and the issuance of new shares (“Subscription Shares”) and warrants (“Warrants”) for the purchase of new shares, by the Company to new investors (the “Proposed Transactions”) as summarized below. All agreements relating to the Proposed Transactions were executed on November 27, 2006 in Hong Kong, by the relevant parties to the Proposed Transactions. The Board expects to despatch printed copies of the notice of Annual Meeting, proxy and shareholders’ circular setting out important and material information relating to the Proposed Transactions, in addition to other matters requiring the approval of the shareholders, to the shareholders of the Company as at the record date, on or about November 30, 2006.
     A full version of the notice of the Annual Meeting and the shareholders’ circular are attached to this Form 6-K together with copies of the executed agreements in connection with the Proposed Transactions. Unless otherwise specified, all capitalized terms shall have the same meaning as defined in the attached shareholders’ circular.
Proposed Transactions
     Subscription of New Shares and Warrants
     The following is a summary of the material terms of the proposed issuance of Subscription Shares and Warrants for the purchase of additional Shares by the Company for subscription by China Biotech Holdings Limited (“China Biotech”), Eastern Ceremony Group Limited (“Eastern Ceremony”) and Harvest Smart (“Harvest Smart”) (each a “Subscriber”, and collectively, the “Subscribers”) and the material provisions of the subscription agreements with the Subscribers (each a “Subscription Agreement” and collectively, the “Subscription Agreements”), the Warrants and registration rights agreements with China Biotech, Eastern Ceremony, Harvest Smart and Beijing Holdings for the registration of certain registrable securities (each a “Registration Rights Agreement” and collectively, the “Registration Rights Agreements”)(collectively, the “Subscription Transaction Documents”). The number of Subscription Shares to be offered is 2,500,000; the subscription price per Share will be US$2.50 per Share; the Warrants will be exercisable for a maximum of up to 3,000,000 Shares; and the Warrant exercise price will be US$5.00 per Share. Assuming full exercise of the Warrants, the number of Subscription Shares and Warrant Shares will constitute approximately 33% of the enlarged share capital of the Company. The Subscribers will be entitled to cause the Company to register the Subscription Shares and Warrant Shares pursuant to separate Registration Rights Agreements with the Company.
     The offer and sale of Subscription Securities by the Company has not been and will not be registered under the Securities Act of 1933, as amended (“Securities Act”). The Subscription Securities will be offered and sold to non — U.S. persons outside of the United States in offshore transactions in reliance upon Regulation S under the

 


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Securities Act. None of the Subscription Securities may be offered or sold in the United States except pursuant to an effective registration or an available exemption from registration under the Securities Act and any applicable state statutes.
     Subscription Transactions
     The Company has entered into separate agreements with each of China Biotech, Eastern Ceremony and Harvest Smart, pursuant to which, subject to approval by shareholders and satisfaction of the other conditions set out therein, the Company will issue a total of 2,500,000 Subscription Shares for cash consideration of US$2.50 per share (“Share Subscription Price”), to China Biotech, Eastern Ceremony and Harvest Smart. China Biotech, Eastern Ceremony and Harvest Smart will subscribe and purchase 1,500,000, 500,000 and 500,000 Subscription Shares, respectively. In addition, each of China Biotech, Eastern Ceremony and Harvest Smart will subscribe for warrants to purchase shares in the amounts of 2,000,000, 500,000 and 500,000 shares, respectively, issuable upon the exercise of the Warrants at an exercise price of US$5.00 per share (“Warrant Shares”). The premium for the Warrants is US$0.01 per Warrant. The Company will receive total cash consideration of US$6,280,000 upon the completion of the Subscription Transactions, of which US$6,250,000 and US$30,000 are proceeds from the subscription of Subscription Shares and Warrants, respectively. The Company will receive a further US$15,000,000 from the Subscribers upon the full exercise of the Warrants.
     In connection with the subscription of the Subscription Shares and Warrants, the Company, China Biotech, Eastern Ceremony and Harvest Smart entered into separate registration rights agreements following the execution of the share sale and purchase agreement, the Placing Agency Agreement and the respective Subscription Agreements. In addition, Beijing Holdings also entered into a separate Registration Rights Agreement with the Company.
     The Share Sale and Purchase Agreement, the Placing Agency Agreement and the Subscription Agreements between the Company and each of Eastern Ceremony and Harvest Smart will be completed concurrently within ten (10) business days following the 2006 Annual Meeting of the shareholders of the Company. Subject to satisfaction of the conditions precedent, the Subscription Agreement between the Company and China Biotech will be completed within sixty (60) days from the completion of the Share Sale and Purchase Agreement, the Placing Agency Agreement and the Subscription Agreements between the Company and each of Eastern Ceremony and Harvest Smart.
     The obligations of Eastern Ceremony and Harvest Smart to complete the transactions under their respective Subscription Agreements are subject to the concurrent completion of the other party’s Subscription Agreement. In addition, the obligations of Eastern Ceremony and Harvest Smart to complete the transactions under their respective Subscription Agreements are also subject to the concurrent completion of the Share Sale and Purchase Agreement and the Placing Agency Agreement (as discussed in Proposal 3 of the Shareholders’ Circular attached below).
     At the recommendation of the Board of Directors, a special committee consisting entirely of independent directors (“Special Committee”), and acting on behalf of the Company and the unaffiliated Shareholders, reviewed the proposed terms of the Subscription Transactions and the Subscription Agreements with the assistance of its own independent financial advisor, Altus Capital Limited (“Altus” or “Independent Financial Advisor”).
     The Special Committee is of the view that: i) the terms of the Subscription Agreements and the issue of the Subscription Shares and Warrants, (ii) the Subscription Price per Share of US$2.50, and (iii) the Warrant exercise price of US$5.00 per Warrant Share, each as reflected in the Subscription Agreements and the Warrant Certificates, are fair and reasonable to the Company and the unaffiliated Shareholders; and entering into the Subscription

 


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Agreements and the Subscription Transactions contemplated therein is in the best interests of the Company and the unaffiliated Shareholders. The Special Committee therefore resolved to recommend to the Board of Directors and the shareholders that the Subscription Agreements and the Subscription Transactions contemplated in the shareholders’ circular should be approved. The Special Committee’s recommendation is supported by a fairness opinion issued by Independent Financial Advisor. A copy of the fairness opinion is included in the attached shareholders’ circular.
     Sale of Shares by Certain Shareholders
     Beijing Holdings, China Internet, CMEC and Perfect Capital (collectively, “Vendors”), all of which are current shareholders of the Company, have entered into a sale and purchase agreement (“Share Sale and Purchase Agreement”) and a placing agency agreement (“Placing Agency Agreement”) with China Biotech and China Merchants Securities, respectively, for the sale of outstanding Shares. The sale of Sale Shares will be conducted pursuant to two separate agreements. Beijing Holdings entered into a Share Sale and Purchase Agreement with China Biotech on November 27, 2006, for the sale and purchase of 2,000,000 Shares of the Company (“SPA Sale Shares”). Beijing Holdings, China Internet, CMEC and Perfect Capital entered into a Placing Agency Agreement with China Merchants Securities (HK) Co. Ltd. (“China Merchants Securities”) on November 27, 2006, appointing China Merchants Securities as the placing agent to assist in the placing of 4,250,000 Shares of the Company (“Placing Sale Shares”) by way of private placement to certain investors (SPA Sale Shares and Placing Sale Shares, collectively, “Sale Shares”).
     The Sale Shares will be sold in offshore transactions that have not been and will not be registered under the Securities Act. The Sale Shares will be sold to non — U.S. persons outside of the United States in offshore transactions in reliance upon Regulation S under the Securities Act. None of the Sale Shares may be offered or sold in the United States absent an effective registration or under available exemptions from registration under the Securities Act and any applicable state statutes.
     Share Sale and Purchase Transaction
     Beijing Holdings and China Biotech entered into a Share Sale and Purchase Agreement on November 27, 2006 pursuant to which Beijing Holdings will sell and China Biotech will purchase for cash a total of 2,000,000 Shares of the issued and outstanding Shares of the Company from Beijing Holdings at a price per Share of US$2.50. Beijing Holdings will receive cash consideration of US$5,000,000 upon the completion of the Share Sale and Purchase Agreement. The completion of the Share Sale and Purchase Agreement will occur not later than 10 business days following the 2006 Annual Meeting of the Shareholders of the Company (or such other date as may be agreed in writing between the Beijing Holdings and China Biotech), and satisfaction of all other conditions precedent, which are further summarized in Proposal 3 of the Shareholders’ Circular attached below.
     Placing Transaction
     In addition to the Share Sale and Purchase Agreement, Beijing Holdings, together with China Internet, CMEC and Perfect Capital (each individually, a “Vendor”, and collectively, “Vendors”) entered into a Placing Agency Agreement with China Merchants Securities on November 27, 2006, appointing China Merchants Securities as the placing agent to assist in the placing of 4,250,000 Shares of the issued and outstanding Shares of the Company by way of private placement to certain investors at a price per Share of US$2.50. Beijing Holdings, China Internet, CMEC and Perfect Capital will collectively receive US$10,625,000 upon the completion of the Placing. The completion of the Placing Agency Agreement will occur not later than 10 business days following the 2006 Annual

 


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Meeting of the Shareholders of the Company (or such other date as may be agreed in writing between the Vendors and China Merchants Securities), and satisfaction of all other conditions precedent, which are further summarized in Proposal 3 of the Shareholders’ Circular attached below. Pursuant to the Placing Agency Agreement, the placing agent will receive 1% of the Placing proceeds in US dollars as placing commission.
     About CTDC:
     CTDC is engaged in information network security and nutraceutical business in the People’s Republic of China. CTDC’s existing major shareholder is Beijing Holdings Limited, a conglomerate with over $3 billion in total assets beneficially owned by the Beijing People’s Municipal Government. For more information, please visit our website at www.chinactdc.com.
Forward-Looking Statement Disclosure
     This press release of the Company, which is a foreign private issuer, on Form 6-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Act of 1934. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predict”, “should”, or “will” or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company’s actual results, level of activity, performance or achievements to be materially different from any future results, level of activity, performance or achievements expressed or implied by these forward-looking statements. The information in this Report on Form 6-K is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, level of activity, performance or achievements. The Company’s expectations are as of the date this Form 6-K is filed, and the Company does not intend to update any of the forward-looking statements after the date this Report on Form 6-K is filed to conform these statements to actual results, unless required by law.

 


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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
             
    China Technology Development Group Corporation    
 
           
 
  By:   /s/ Michael Siu
 
   
 
  Name:   Michael Siu    
 
  Title:   Executive Director, Chief Financial Officer and Company Secretary    
Date: November 30, 2006

 


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CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
Room 2413-18, Shui On Centre, 8 Harbour Road, Hong Kong
November 28, 2006
To the Shareholders of China Technology Development Group Corporation:
     You are cordially invited to attend the 2006 Annual Meeting of Shareholders (the “Annual Meeting”) of China Technology Development Group Corporation (“we”, “CTDC” or the “Company”) to be held at the Company’s offices located at Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong on December 22, 2006 at 10:00 a.m., Hong Kong time. The matters to be acted upon at the Annual Meeting are set forth and described in the Notice of 2006 Annual Meeting and Shareholders’ Circular which are attached hereto. We request you to read all of them carefully.
     We hope that you will attend the Annual Meeting. However, if you are not able to attend the Annual Meeting, we urge you to sign, date and return the enclosed Proxy Card in the enclosed postage prepaid envelope. You may, of course, attend the Annual Meeting and vote in person even if you have signed and returned your Proxy Card to us.
         
 
  Sincerely,    
 
       
 
 
 
Michael Siu
   
 
  Company Secretary    
IT IS IMPORTANT THAT YOU VOTE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD AS SOON AS POSSIBLE

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CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong
NOTICE OF 2006 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 22, 2006
To the Shareholders of China Technology Development Group Corporation:
     NOTICE IS HEREBY GIVEN that the 2006 Annual Meeting of Shareholders (the “Annual Meeting”) of China Technology Development Group Corporation (“we”, “CTDC” or the “Company”) will be held at Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong, December 22, 2006 at 10:00 a.m., Hong Kong time, to consider and act upon the matters set out below. Resolutions of the Shareholders may be approved by either an ordinary resolution (“Ordinary Resolution”) or a special resolution (“Special Resolution”). In the case of an Ordinary Resolution, a simple majority and in the case of a Special Resolution not less than 75% of the votes of the Shares entitled to vote thereon which were present at the Annual Meeting and were voted and not abstained, are required for the approval of the resolutions. The following resolutions numbered 1, 3 and 6 shall be approved by Ordinary Resolutions of the Shareholders, and resolutions numbered 2, 4 and 5 shall be approved by Special Resolutions of the Shareholders:
  1.   To re-elect 11 directors to serve until the end of the next annual meeting of Shareholders and until their respective successors are elected and qualified;
 
  2.   To approve the issuance of 2,500,000 new shares of US$0.01 par value (“Shares”) (“Subscription Shares”) and 3,000,000 warrants (“Warrants”) (collectively, “Subscription Securities”) by the Company for subscription by China Biotech Holdings Limited (“China Biotech”), Eastern Ceremony Group Limited (“Eastern Ceremony”) and Harvest Smart Overseas Limited (“Harvest Smart”) through private placement pursuant and subject to the terms of the subscription agreements attached to the Shareholders’ Circular as Annex 2 accompanying this Notice (“Subscription Agreements”);
 
  3.   To approve the sale of 6,250,000 Shares (“Sale Shares”) by Beijing Holdings Limited (“Beijing Holdings”), China Internet Technology Co. Ltd. (“China Internet”), CMEC Ceramics Holdings Limited (“CMEC”) and Perfect Capital Holdings Limited (“Perfect Capital”), to China Biotech and certain third party investors, pursuant and subject to the terms of the share sale and purchase agreement (“Share Sale and Purchase Agreement”) and the placing agency agreement (“Placing Agency Agreement”), and to ratify, confirm and where appropriate, approve all prospective and past transfers of Shares in accordance with the requirements of the Company’s Memorandum and Articles of Association;
 
  4.   To consider and approve the Amended and Restated Memorandum and Articles of Association as set out in the Shareholders’ Circular accompanying this Notice;
 
  5.   To consider and approve the 2006 Stock Option Plan;

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  6.   To approve the appointment of Friedman LLP as the Independent Registered Public Accounting Firm for the Company for the fiscal year ending December 31, 2006; and
 
  7.   To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
     Information regarding the matters to be considered, and if thought appropriate, acted upon at the Annual Meeting is contained in the accompanying Shareholders’ Circular.
     The close of business on November 28, 2006, New York time, has been fixed as the record date for the determination of Shareholders entitled to receive the notice of and vote at the Annual Meeting or any adjournments thereof.
     All Shareholders are cordially invited to attend the Annual Meeting. Whether or not you expect to attend, you are respectfully requested by the Board of Directors to sign, date and return the enclosed proxy card promptly. Shareholders who execute proxy cards retain the right to revoke them at any time prior to the voting thereof. A return envelope which requires no postage if mailed in the United States is enclosed for your convenience.
         
 
  By Order of the Board of Directors    
 
       
 
 
 
Michael Siu
   
 
  Company Secretary    
November 28, 2006

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TABLE OF CONTENTS
           
        Page No.
    7
         
    9
 
         
  ELECTION OF DIRECTORS     11
 
         
    13
 
         
    17
 
         
    17
    17
    17
    17
    19
    20
    21
    21
 
         
    21
 
         
  APPROVAL OF THE ISSUANCE OF SUBSCRIPTION SHARES AND WARRANTS TO CHINA BIOTECH, EASTERN CEREMONY AND HARVEST SMART THROUGH PRIVATE PLACEMENT     24
 
         
    24
    25
    30
 
         
    36
 
         
    37
 
         
    38

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It is important that your shares be represented at the Annual Meeting. Each Shareholder is urged to sign date and return the enclosed proxy card which is being solicited on behalf of the Board of Directors. An envelope addressed to the Company’s transfer agent is enclosed for that purpose and needs no postage if mailed in the United States.
The Company is a foreign private issuer and is not subject to the proxy rules under Section 14 of the U.S. Securities Exchange Act of 1934, as amended. Accordingly, this Shareholders’ Circular and its content have not been reviewed or approved by the U.S. Securities and Exchange Commission, any state securities regulatory authority or NASDAQ.
 
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong
SHAREHOLDERS’ CIRCULAR
2006 ANNUAL MEETING OF SHAREHOLDERS
     This Shareholders’ Circular (the “Shareholders’ Circular”) is furnished to holders (the “Shareholders”) of the common stock at par value of US$0.01 each ( “Shares”) of China Technology Development Group Corporation (“we”, “CTDC” or the “Company”) in connection with the solicitation by and on behalf of its Board of Directors of proxy cards (“Proxy” or “Proxies”) for use at the 2006 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on December 22, 2006 at 10:00 a.m. (Hong Kong time), at Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong, and at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of 2006 Annual Meeting of Shareholders (the “Notice”). The cost of preparing, assembling and mailing the Notice, this Shareholders’ Circular and Proxies is borne by the Company. The Company will also reimburse brokers who are holders of record of Shares for their expenses in forwarding Proxies and Proxy soliciting materials to the beneficial owners of such Shares. In addition to the use of mails, Proxies may be solicited without extra compensation by directors, officers and employees of the Company by telephone, telecopy, telegraph or personal interview. The approximate mailing date of this Shareholders’ Circular is November 30, 2006.
     Unless otherwise specified, all proxies, in proper form, received before the time of the Annual Meeting will be voted for the re-election of all persons named herein as directors and in favor of each of the proposals set forth in the accompanying Notice as described below.
     A Proxy may be revoked by a Shareholder at any time before its exercise by filing with Michael Siu, the Company Secretary of the Company, at the address set forth above, an instrument of revocation or a duly executed proxy bearing a later date, or by attendance at the Annual Meeting and electing to vote in person. Attendance at the Annual Meeting will not, in and of itself, constitute the revocation of a Proxy.
     The close of business on November 28, 2006, New York time, has been fixed by the Board of Directors as the record date (the “Record Date”) for the determination of Shareholders entitled to receive notice of and to vote at the Annual Meeting and any adjournment thereof.

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VOTING SECURITIES
     Only holders of Shares of record at the close of business on November 28, 2006 are entitled to vote at the Annual Meeting. On the record date, the Company had 11,309,497 outstanding Shares at par value of US$0.01 each, the Company’s only outstanding voting securities. For the purposes of voting at the Annual Meeting, each Share entitles its holder to one vote upon all matters to be acted upon at the Annual Meeting.
     Pursuant to the Company’s existing Memorandum and Articles of Association, an Annual Meeting is duly constituted if, at the commencement of the Meeting, there are present in person or by proxy not less than 33.33% of the votes of the Shares entitled to vote on resolutions of Shareholders to be considered at the Annual Meeting. Resolutions of the Shareholders may be approved by either an ordinary resolution (“Ordinary Resolution”) or a special resolution (“Special Resolution”). In the case of an Ordinary Resolution, a simple majority and in the case of a Special Resolution not less than 75% of the votes of the Shares entitled to vote thereon which were present at the Annual Meeting and were voted and not abstained, are required for the approval of the resolutions.
     We set out below the approval requirements for each of the proposed resolutions:
  1.   The election of directors requires the approval of the Shareholders by an Ordinary Resolution;
 
  2.   The issuance of the Subscription Securities by the Company for subscription by China Biotech, Eastern Ceremony and Harvest Smart through private placement pursuant and subject to the terms of the Subscription Agreements requires the approval of the Shareholders by a Special Resolution;
 
  3.   The sale of Sale Shares by Beijing Holdings, China Internet, CMEC and Perfect Capital, to China Biotech and certain other investors, pursuant and subject to the terms of the Share Sale and Purchase Agreement and the Placing Agency Agreement, and the ratification, confirmation and where appropriate, approval for all prospective and past transfers of Shares require the approval of the Shareholders by an Ordinary Resolution;
 
  4.   The adoption by the Company of the Amended and Restated Memorandum and Articles of Association requires the approval of the Shareholders by a Special Resolution;
 
  5.   The approval and adoption of the 2006 Stock Option Plan requires the approval of the Shareholders by a Special Resolution;

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  6.   The appointment of Friedman LLP, independent certified public accountants, as our Independent Registered Public Accounting Firm for fiscal year ending December 31, 2006 requires the approval of the Shareholders by an Ordinary Resolution.
     Beijing Holdings, China Internet, CMEC and Perfect Capital in their capacities as Shareholders, will be entitled to vote on Proposals 2 and 3 despite being interested parties.
     Abstentions and broker non-votes in respect of any matter are not considered as votes cast and therefore do not have any effect for the purpose of determining whether a proposal has been approved.

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PRINCIPAL SHAREHOLDERS
     The following table sets forth, as of November 28, 2006, certain information concerning the beneficial ownership of the Shares by (i) each Shareholder known by the Company to own beneficially five percent (5%) or more of the outstanding Shares; and (ii) each director and executive officer of the Company, and their percentage ownership and voting power.
                 
    Shares Beneficially     Percent of Shares 
Name and Address of Beneficial Owner (1)   Owned (2)     Beneficially Owned (2) 
Shareholders known by the Company to own beneficially five percent or more of the outstanding Shares:
               
 
               
Beijing Holdings
    5,248,730       46.41 %
Room 4301, Central Plaza, 18 Harbour Road
Wanchai, Hong Kong
               
 
               
China Internet
    1,186,441       10.49 %
Trident Chambers, P.O. Box 146,
Road Town, Tortola, BVI
               
 
               
CMEC
    974,576       8.62 %
Akara Building, 24 Des Castro Street,
Wiekhams Cay I, Road Town, Tortola, BVI
               
 
               
Perfect Capital
    849,576       7.51 %
Offshore Incorporations Limited,
P.O. Box 957,
Offshore Incorporations Centre,
Road Town, Tortola, BVI
               

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    Shares Beneficially     Percent of Shares
Name and Address of Beneficial Owner (1)   Owned (2)     Beneficially Owned (2)
Directors and officers of the Company:
               
 
               
Changshan Zhao (3)
    95,000       * *
Xu Qian (3)
    75,000       * *
Alan Li
    75,000       * *
Michael Siu (3)
    55,000       * *
Ju Zhang
    10,000       * *
Peter Fu
    10,000       * *
L C Wan
    10,000       * *
Meng Wan
    10,000       * *
Weidong Wang
    10,000       * *
Yezhong Ni
    10,000       * *
Xinping Shi
    10,000       * *
Zhenwei Lu
    40,000       * *
 
               
All directors and executive officers of the Company as a group (3)
    410,000       3.63 %
 
**   Less than one percent.
(1)   Unless otherwise indicated, the address of each individual is c/o China Technology Development Group Corporation 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong.
 
(2)   In computing the number of Shares beneficially owned by a person and the percentage ownership of a person, Shares subject to options held by that person that are currently exercisable or exercisable within 60 days are deemed outstanding. Such Shares however, are not deemed outstanding for purposes of computing the percentage ownership of each other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all Shares of which they are the holders.
 
(3)   Mr. Changshan Zhao is the Chairman of the Board of Directors. Mr. Zhao is also the Vice Chairman of the board of directors and General Manager of Beijing Holdings. Mr. Xu Qian is the Chief Executive Officer and executive director of the Company. Mr. Qian is also the Deputy General Manager and the Chief Financial Officer of Beijing Holdings. Mr. Michael Siu is the Chief Financial Officer, Company Secretary and executive director of the Company. Mr. Siu is also the Finance and Audit Manager of Beijing Holdings. Mr. Zhao, Mr. Qian and Mr. Siu hereby disclaim any interest in Shares beneficially owned by Beijing Holdings.

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PROPOSAL 1
Election of Directors
     The Board of Directors nominates the following individuals for election and proposes that such nominees shall be elected to the Board of Directors at this Annual Meeting:

    Changshan Zhao
 
    Xu Qian
 
    Alan Li
 
    Ju Zhang
 
    Michael Siu
    Peter Fu
 
    L C Wan
 
    Meng Wan
 
    Yezhong Ni
 
    Weidong Wang
 
    Xinping Shi


     (each, a “Nominee” and collectively, the “Nominees”)
     Our Board of Directors is currently comprised of eleven (11) members who are not divided into groups. Each director elected at the Annual Meeting will serve until the next annual meeting of Shareholders and until their respective successors are elected and qualified, provided, however, that if the Amended and Restated Memorandum and Articles of Association as set out in Proposal 4 of this Shareholders’ Circular are approved and adopted by the Shareholders at the Annual Meeting, the Board of Directors will be subject to a retirement by rotation scheme, and will for such purpose, be divided into three groups, such that the terms of four directors, four directors and three directors, respectively will end at our annual meetings of Shareholders in 2007, 2008 or 2009, respectively, depending on the groups to which each such director belongs. Thereafter, the term of each director will be three years. Please see the discussion on the Amended and Restated Memorandum and Articles of Association as set out in Proposal 4 of this Shareholders’ Circular for more information about the proposal for retirement by rotation of the Board of Directors.
     The Nominating Committee is responsible for the nomination of candidates to serve on the Board of Directors. The Nominating Committee currently comprises three independent directors, Mr. Meng Wan, Mr. Weidong Wang and Dr. Xinping Shi, all of whom satisfy the independence requirements under Rule 10A-3 under the Securities Exchange Act of 1934, as amended (“Exchange Act”) and Rule 4350 of the NASDAQ Stock Market Marketplace Rules (“Marketplace Rule”).
     The Nominating Committee was established pursuant to a Board resolution adopted on July 28, 2005 granting it the authority to (i) identify qualified individuals to become Board members, consultants and officers of the Company, (ii) recommend to the Board candidates to fill Board vacancies and newly-created director positions, (iii) recommend whether incumbent directors should be nominated for re-election to the Board upon the expiration of their term, and (iv) oversee the evaluation of the Board’s performance. Members of the Nominating Committee have considered the Nominees for the Board of Directors and have resolved by a written resolution to recommend the Nominees identified above for election to the Board of Directors at this Annual Meeting.

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     Unless otherwise directed, the persons named in the Proxy intend to cast all Proxies received for the election of each Nominee to serve as directors upon his nomination at the Annual Meeting. Each Nominee has advised the Company of his willingness to serve on the Board of Directors as a director of the Company if he is re-elected at the Annual Meeting. Should any Nominee become unavailable for election to the Board of Directors for any reason, the persons named in the Proxies shall have discretionary authority to vote the Proxies for one or more alternative Nominees who will be designated by the Board of Directors. The executive officers of the Company appointed by the Board of Directors at the first meeting after each annual meeting of the Company’s Shareholders shall hold office pursuant to their terms of employment subject to the discretion of the Board of Directors.
     Mr. Peter Fu, Mr. L C Wan, Mr. Meng Wan, Mr. Yezhong Ni, Mr. Weidong Wang and Dr. Xinping Shi are independent directors, each of whom satisfies the independence requirements of Marketplace Rule 4350 and Rule 10A-3 under the Exchange Act. If they are re-elected, they will become members of the Audit Committee, Compensation Committee and Nominating Committee of the Company. Mr. L C Wan will also become the financial expert of the Audit Committee.
     The Board of Directors has the power under the Company’s existing Articles of Association to remove or appoint any person to be a director to fill a vacancy on the Board of Directors provided that such appointment shall terminate at the next annual general meeting of Shareholders. Please refer to Proposal 3 “– Summary of Major Terms of the Share Sale and Purchase Agreement – Prospective Changes in Composition of the Board of Directors” for more information on prospective changes of directors.

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Information about Directors and Nominees
     Each director currently serving on the Board of Directors is a Nominee. Set forth below is certain information with respect to each director:
             
Name   Age   Current Positions   Positions Nominated
Changshan Zhao
  41   Chairman of the Board   Chairman of the Board
 
      and executive director   and executive director
 
           
Xu Qian
  43   Chief Executive Officer   Chief Executive Officer
 
      and executive director   and executive director
 
           
Alan Li
  39   Co-Chief Executive Officer   Co-Chief Executive Officer
 
      and executive director   and executive director
 
           
Ju Zhang
  44   Executive director   Executive director
 
           
Michael Siu
  38   Chief Financial Officer,   Chief Financial Officer,
 
      Company Secretary   Company Secretary
 
      and executive director   and executive director
 
           
Peter Fu (a)(b)
  51   Independent director   Independent director
 
           
L C Wan (a)(b)
  45   Independent director   Independent director
 
           
Meng Wan (c)
  42   Independent director   Independent director
 
           
Yezhong Ni (a)(b)
  37   Independent director   Independent director
 
           
Weidong Wang (c)
  40   Independent director   Independent director
 
           
Xinping Shi (c)
  48   Independent director   Independent director
 
(a)   Member of the Audit Committee
 
(b)   Member of the Compensation Committee
 
(c)   Member of the Nominating Committee
     Mr. Changshan Zhao, aged 41, has held the position as the Chairman of the Board since February 8, 2005. He is also the Vice-Chairman and General Manager of Beijing Holdings. Mr. Zhao obtained his masters degree in Business Administration in the Guanghua School of Management of the Peking University. He was appointed the Vice-Chairman and General Manager of Beijing Holdings in November 2003. Prior thereto, he was a senior officer of the Beijing People’s Municipal Government (“BPMG”).

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     Mr. Xu Qian, aged 43, has held the positions of Chief Executive Officer and executive director of the Company since March 29, 2005. Mr. Qian graduated from the Economics and Management School of the Beijing Industrial University with a bachelors degree in Economics in 1986. From 1986 to 1993, he worked as an economic analyst in the Statistics Bureau of the BPMG. From 1993 to 1996, he worked as an independent auditor in Hong Kong and from 1996 to 1998, he worked as the Project Chief Financial Officer of TA Orient Telecommunication Co., Ltd. Since 1998, he worked as the Finance Manager of Beijing Holdings and was promoted to the Chief Financial Officer of Beijing Holdings in March 2005. Mr. Qian has extensive experience in mergers and acquisitions, corporate restructuring and financial management.
     Mr. Alan Li, aged 39, has held the positions of Co-Chief Executive Officer (Greater China) and executive director of the Company since May 24, 2005. Mr. Li obtained his masters degree in Business Administration from Murdoch University, Australia. From 2003 until he joined the Company, Mr. Li was also an Executive Director of Sheung Tai Investment Limited, a company engaged in investment and mergers and acquisitions of hospitals and large pharmaceuticals factories in China. From 2000 to 2002, Mr. Li had been the Executive Director and Vice President of Linchest Technology Ltd. Mr. Li has considerable experience in overseas listing of Chinese companies. Mr. Li is currently responsible for business development, mergers and acquisition and capital market development of the Company in the Greater China Region.
     Mr. Ju Zhang, aged 44, has held the position of executive director of the Company since May 24, 2005. Mr. Zhang obtained his masters degree from the Chinese Academy of Social Sciences in Philosophy and a bachelors degree from Tsinghua University in Energy Engineering. He was the Deputy Chairman and General Manager of China Merchants Technology Holdings Co. Ltd. (“CMTH”), a wholly owned subsidiary of the China Merchant Group, one of the largest state-owned enterprises directly under the administration of the China State Council and have significant business operations across Hong Kong and China in real estate, energy, logistics, technology, ports, highways, and industrial zones. Mr. Zhang was also the Associate Professor of Chinese Academy of Medical Sciences and Peking Union Medical College, the Assistant Director of Department of Research in National Committee of Science and Technology and Department of Research in Chinese Ministry of Science and Technology.
     Mr. Michael Siu, aged 38, has held the position of executive director of the Company since February 8, 2005 and has served as the Chief Financial Officer and Company Secretary of the Company since September 1997. He is also the Finance and Audit Manager of Beijing Holdings. He is currently a fellow member of the Association of Chartered Certified Accountants and associate member of the Hong Kong Institute of Certified Public Accountants.
     Mr. Peter Fu, aged 51, has held the positions of independent director and member of the Company’s Audit Committee since April 5, 2005 and the position of member of the Company’s Compensation Committee since May 24, 2005. Mr. Fu began his career in the finance industry in 1978 after his graduation from Wharton School, University of Pennsylvania. Mr. Fu held senior sales positions in major investment banks including HG Asia, Citicorp Vickers and Barings Securities in Hong Kong. For the ten years between late 1991 and early 2001, Mr. Fu was one of the senior executives of the Peregrine Group in Hong Kong, which operates currently under the name of BNP Paribas Peregrine. From 2003 to 2005, he was the head of the corporate finance team of the Kim Eng Group focusing on Hong Kong and China business. Mr. Fu currently serves as the senior advisor of the Goldbond Group, one of the leading investment banks in Asia.

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     Mr. L C Wan, aged 45, has held the positions of independent director and member and the financial expert of the Audit Committee of the Company since March 24, 2005 and the position of member of the Company’s Compensation Committee since May 24, 2005. Mr. Wan graduated from the Coventry Polytechnic with a master degree in 1988. He is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants. Prior to his service with the Company, he was the General Manager in Finance and Administration of the China Digital satNet Limited and the Project Financial Controller of the C.P. Pokphand Co. Ltd. Mr. Wan has extensive and valuable experience in financial management.
     Mr. Meng Wan, aged 42, has held the position of independent director of the Company since May 24, 2005 and the position of member of the Company’s Nominating Committee since July 28, 2005. Mr. Wan was the Dean of Laws of the Beijing Foreign Studies University, an Arbitrator of the China International Economic and Trade Arbitration Commission and China Maritime Arbitration Commission and a member of The World Jurist Association. Mr. Wan received his doctorate and master of laws degrees from Wuhan University Law School, and he taught as a guest professor at Wuhan University and at Zhongnan University of Economics and Law. He also was a senior research fellow at the London Institute of International Banking and Finance. Mr. Wan specializes in corporate law and is a former President and Chief Justice of the Wuhan Maritime Court and Chief Judge of the Economic Division of the Hubei High Court.
     Mr. Yezhong Ni, aged 37, has held the positions of independent director and a member of the Audit Committee of the Company since April 28, 2005 and the position of member of the Company’s Compensation Committee since May 24, 2005. Mr. Ni was a partner of the Kingson Law Firm, one of the top law firms in China. He graduated from the Law School of the Peking University in 1990 and was experienced in legal services for bankruptcy, derivatives and financial instruments.
     Mr. Weidong Wang, aged 40, has held the positions of independent director and member of the Nominating Committee of the Company since July 28, 2005. Mr. Wang was the Business Representative of Henan Province in Australia from February 1990 to June 1991 and the Business Director of China National Cereals, Oils & Foodstuffs Import & Export Corporation from 1991 to 2000. Since March 2000, Mr. Wang has been the Deputy General Manager of Ceroilfood Enterprises Limited, one of the foreign offices of China Business Bureau, and is in charge of overseas business development and management. Mr. Wang has ample experience in national cereals, oils and foodstuffs import and export industry and has extensive access to global sale channels. He was awarded the qualification of International Business Engineer in China in 1994, and obtained his masters degree in Public Finance from the Tianjin University of Finance & Economics in 1999 and his MBA degree in 2000 from Murdoch University, Australia.

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     Dr. Xinping Shi, aged 48, has held the positions of independent director and member of the Nominating Committee of the Company since July 28, 2005. Dr. Shi was a Director of Logistics Management Research Centre of the Hong Kong Baptist University, Coordinator of the focused research area of Logistics and Supply Chain Management of the School of Business of the University and Associate Professor of the Department of Finance and Decision Sciences of the University. Dr. Shi served as the Independent Director of China Merchants Shekou Holdings Company Limited, a company listed on the Shenzhen Stock Exchange, the Director of Weboptimal International Limited, a management consulting firm, Guest Professor of the College of Logistic, the Beijing Normal University and Advisor of the Chamber of Hong Kong Logistics. Dr. Shi obtained his doctorate degree and masters degree in Business Administration from Middlesex University and Lancaster University, UK respectively and the bachelor of science degree from North-Western Polytechnic University, Xi’an, China.
     THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” OF THE INDIVIDUAL RESOLUTION WITH RESPECT TO THE RE-ELECTION BY ORDINARY RESOLUTION OF EACH OF THE ABOVE NOMINEES.

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THE BOARD OF DIRECTORS
Directors
     The Board of Directors currently consists of 11 directors. See “Information about Directors and Nominees”.
Meetings of the Board
     The Board of Directors met seventeen (17) times during the year ended December 31, 2005, and each incumbent director attended all meetings of our Board of Directors. We do not have a policy with regard to Board members’ attendance at annual meetings of Shareholders.
Communications with the Board of Directors
     The Board of Directors maintains a process whereby Shareholders may communicate with the Board. Shareholders wishing to communicate with the Board or any individual director should mail a communication addressed to the Board or the individual director to the Board of Directors, c/o China Technology Development Group Corporation, Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong, China. Any such communication must state the number of Shares beneficially owned by the Shareholder making the communication. All of such communications will be forwarded to the full Board of Directors or to any individual director or directors to whom the communication is directed unless the communication is clearly of a marketing nature or is unduly hostile, threatening, illegal, or similarly inappropriate, in which case we have the authority to discard the communication or take appropriate legal action regarding the communication.
Board Committees
     The Board of Directors has established a Compensation Committee, a Nominating Committee and an Audit Committee.
     Compensation Committee
     The Compensation Committee makes recommendations to the Board of Directors concerning salaries and incentive compensation for our officers, including our Chief Executive Officer and employees. The Compensation Committee also administers our stock option plans. The Compensation Committee consists of three directors, each of whom meets the independence requirements and standards established by Rule 10A-3 of the Exchange Act as well as the relevant NASDAQ rules. The Compensation Committee was established on May 24, 2005. The Compensation Committee currently consists of Mr. Peter Fu, Mr. L C Wan and Mr. Yezhong Ni.

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     Nominating Committee
     The Nominating Committee was established pursuant to a Board resolution adopted on July 28, 2005 granting it the authority to (i) identify qualified individuals to become Board members, consultants and officers of the Company, (ii) recommend to the Board candidates to fill Board vacancies and newly-created director positions, (iii) recommend whether incumbent directors should be nominated for re-election to the Board upon the expiration of their term, and (iv) oversee the evaluation of the Board’s performance. The Nominating Committee assists the Board of Directors in identifying qualified individuals to become Board members, in determining the composition of the Board of Directors and in overseeing the evaluation of the Board’s performance. The Nominating Committee consists of three directors, each of whom meets the independence requirements and standards established by Rule 10A-3 of the Exchange Act as well as the relevant NASDAQ rules. The Nominating Committee currently consists of Mr. Meng Wan, Mr. Weidong Wang and Dr. Xinping Shi.
     The Nominating Committee will consider director candidates recommended by Shareholders. Potential nominees to the Board of Directors are required to have such experience in business or financial matters as would enable such nominee to contribute to the decision-making process of the Board of Directors and the prudent management of the Company’s affairs and are required to be “independent”, as such term is defined in NASDAQ and SEC rules and regulations. Shareholders wishing to submit the name of a person as a potential nominee to the Board of Directors must send the name, address, and a brief (no more than 500 words) biographical description of such potential nominee to the Nominating Committee at the following address: Nominating Committee of the Board of Directors, c/o China Technology Development Group Corporation, Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong, China. Potential director nominees will be evaluated by personal interview, such interview to be conducted by one or more members of the Nominating Committee, and/or any other method the Nominating Committee deems appropriate. The Nominating Committee may solicit or receive information concerning potential nominees from any source it deems appropriate. The Nominating Committee need not engage in an evaluation process unless (i) there is a vacancy on the Board of Directors, (ii) a director is not standing for re-election, or (iii) the Nominating Committee does not intend to recommend the nomination of a sitting director for re-election. A potential director nominee recommended by a Shareholder will not be evaluated any differently than any other potential nominee.
     Audit Committee
     The Audit Committee consists of three directors, each of whom meets the independence requirements and standards established by Rule 10A-3 of the Exchange Act as well as the relevant NASDAQ rules. In addition, the Board of Directors has determined that Mr. L C Wan is an “audit committee financial expert” and “independent” as defined under Rule 10A-3 of the Exchange Act. The Audit Committee assists the Board by overseeing the performance of the independent registered public accounting firm that performs audit services for the Company and the quality and integrity of the Company’s internal accounting, auditing and financial reporting practices. The Audit Committee is responsible for retaining (subject to Shareholder ratification) and, as necessary, terminating, the independent registered public accounting firm, annually reviews the qualifications, performance and independence of the independent registered public accounting firm and the audit plan, fees and audit results, and pre-approves audit and non-audit services to be performed by the registered public accounting firm and related fees. The Audit Committee operates under a written charter. During the year ended December 31, 2005, the Audit Committee met twice.

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Committee Reports
     Audit Committee Report (1)
     The Audit Committee operates pursuant to its adopted charter. Members of the Audit Committee are independent, within the meaning of the NASDAQ rules and the SEC regulations.
     The Audit Committee oversees the Company’s financial controls and reporting processes on behalf of the Board of Directors. Management is responsible for the financial reporting process including the systems of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States. The independent registered public accounting firm is responsible for planning and performing an audit of the Company’s financial statements in accordance with auditing standards generally accepted in the United States and for auditing management’s assessment of internal controls over financial reporting. The independent registered public accounting firm is also responsible for expressing an opinion on those financial statements and on management’s assessment and the effectiveness of internal control over financial reporting based on their audit.
     In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements in the Annual Report on Form 20-F for the year ended December 31, 2005 with management and the independent registered public accounting firm, including a discussion of the adoption of accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements and those matters required to be discussed under SAS 61, as amended by SAS 90. In addition, the Audit Committee has received the written disclosures and letter from the independent registered public accounting firm as required by Independence Standards Board No. 1, and has discussed with the independent registered public accounting firm their independence from management and the Company including the matters in the written disclosures required by the Independence Standards Board No.1.
     In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 20-F for the year ended December 31, 2005 for filing with the Securities and Exchange Commission. The Audit Committee and the Board have also recommended, subject to Shareholder approval, the selection of Friedman LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2006.
Mr. Peter Fu, Chair
Mr. L C Wan
Mr. Yezhong Ni
 
(1)   The material in the above Audit Committee report is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, as amended, whether made before or after the date of this Shareholders’ Circular and irrespective of any general incorporation language in such filing.

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     Compensation Committee Report on Executive Compensation (1)
     The goal of the Company’s executive compensation policy is to ensure that an appropriate relationship exists between executive compensation and the creation of Shareholder value, while at the same time attracting, motivating and retaining experienced executive officers. The Compensation Committee considers a number of factors in making recommendations to the Board of Directors, which may include:
    providing levels of compensation competitive with companies in comparable industries which are at a similar stage of development and in the Company’s geographic area;
 
    identifying appropriate performance targets for the Company;
 
    integrating the compensation of the executive officers of the Company with the achievement of performance targets;
 
    rewarding above average corporate performance; and
 
    recognizing and providing incentive for individual initiative and achievement.
     None of the executive officers or directors of the Company has entered into service contracts with the Company except Mr. Michael Siu who entered into an employment contract with the Company when he joined on July 1, 1997.
     The Compensation Committee endorses the position that equity ownership by the executive officers of the Company is beneficial in aligning their interests with those of our Shareholders, especially in the enhancement of Shareholder value by providing the executive officers with longer-term incentives.
Mr. Peter Fu, Chair
Mr. L C Wan
Mr. Yezhong Ni
 
(1)   The material in the above Compensation Committee report is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Shareholders’ Circular and irrespective of any general incorporation language in such filing.

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Code of Ethics
     We have adopted a Code of Business Conduct and Ethics that applies to our directors and officers. A written copy of the Code will be provided upon request at no charge by writing to our Company Secretary, China Technology Development Group Corporation, Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong, China.
Section 16(a) Beneficial Ownership Report Compliance Exemption
     As a foreign private issuer, our directors, executive officers and persons who beneficially own more than 10% of our Shares are exempt from the requirements of Section 16(a) of the Exchange Act, which require directors, executive officers and persons who beneficially own more than 10% of a registered class of equity securities of a company to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of that company’s shares and/or other equity securities.
DIRECTOR AND EXECUTIVE COMPENSATION
Director Compensation
     Except Mr. Changshan Zhao who received RMB405,000 for his service as the Chairman of the Board of Directors, we did not pay any compensation to other directors for the year ended December 31, 2005.
Executive Compensation
     Mr. Xu Qian, Mr. Alan Li and Mr. Michael Siu, received cash compensation for their services as executive officers of the Company. The cash compensation paid to the officers for the year ended December 31, 2005 were:
             
Name   Position(s) held   Amount
        (RMB’000)
Xu Qian
  Chief Executive Officer     315  
Alan Li
  Co-Chief Executive Officer     303  
Michael Siu
  Chief Financial Officer and Company Secretary     487  

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     No other executive officers of the Company received any cash compensation for their services for the year ended December 31, 2005.
Stock Option Grants
     The Company has granted stock options to certain directors and officers. The names and titles of our directors and executive officers to whom we have granted options which are outstanding as of August 31, 2006 and the number of Shares subject to such options are set forth in the following table:
                         
        Number of   Exercise per    
Name   Title/Office   options   option (US$)   Expiration Date
Changshan Zhao
  Chairman of the Board     50,000       1.15     December 28, 2009 (1)
 
  and executive director     45,000       1.85     September 20, 2016 (2)
 
                       
Xu Qian
  Chief Executive Officer     50,000       1.15     December 28, 2009 (1)
 
  and executive director     25,000       1.85     September 20, 2016 (2)
 
                       
Alan Li
  Co-Chief Executive Officer     75,000       1.85     September 20, 2016 (2)
 
  and executive director                    
 
                       
Michael Siu
  Chief Financial Officer,     40,000       1.15     December 28, 2009 (1)
 
  Company Secretary and     15,000       1.85     September 20, 2016 (2)
 
  executive director                    
 
                       
Ju Zhang
  Executive director     10,000       1.85     December 28, 2009 (2)
 
                       
Peter Fu
  Independent director     10,000       1.85     September 20, 2016 (2)
 
                       
L C Wan
  Independent director     10,000       1.85     September 20, 2016 (2)
 
                       
Meng Wan
  Independent director     10,000       1.85     September 20, 2016 (2)
 
                       
Yezhong Ni
  Independent director     10,000       1.85     September 20, 2016 (2)
 
                       
Weidong Wang
  Independent director     10,000       1.85     September 20, 2016 (2)
 
                       
Xinping Shi
  Independent director     10,000       1.85     September 20, 2016 (2)
 
                       
Zhenwei Lu
  Chief Investment Officer     40,000       1.85     September 20, 2016 (2)

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(1)   These options were granted under the Company’s 1996 Stock Option Plan pursuant to a board resolution passed on December 29, 1999 (the “Resolution”) and are fully vested as of December 31, 2005. Pursuant to the Resolution, the persons holding the position of Chairman and Chief Executive Officer were each granted 50,000 options. Unless the options were exercised during their service period with the Company, the remaining unexercised options may be succeeded by the newly appointed persons holding these positions without affecting their fully-vested status. Mr. Xiaohong Li and Mr. Xinhao Jiang resigned on February 8, 2005 and March 9, 2005 respectively without exercising any of the above options. Accordingly, Mr. Changshan Zhao and Mr. Qian, respectively the newly appointed Chairman and Chief Executive Officer, succeeded to all granted and vested options of their respective positions.
 
(2)   These options were granted under the Company’s 2000 Stock Option Plan pursuant to a board resolution passed on September 21, 2005 and are fully vested as of December 31, 2005.
     The following table sets forth information concerning the exercise of options and option holdings for the year ended December 31, 2005 with respect to the named directors and executive officers.
                                                 
    Shares           Number of Securities   Value of Unexercised
    Acquired           Underlying Unexercised   In-The-Money Options
    on   Value   Options at FY-End 2005   at FY-End 2005 (1)
Name   Exercise   Realized   Exercisable   Unexercisable   Exercisable   Unexercisable
Changshan Zhao
    0     U$$ 0       95,000       0     US$ 62,550     U$$ 0  
Xu Qian
    0     US$ 0       75,000       0     US$ 56,750     US$ 0  
Alan Li
    0     US$ 0       75,000       0     US$ 21,750     US$ 0  
Michael Siu
    0     US$ 0       55,000       0     US$ 43,950     US$ 0  
Ju Zhang
    0     US$ 0       10,000       0     US$ 2,900     US$ 0  
Peter Fu
    0     US$ 0       10,000       0     US$ 2,900     US$ 0  
L C Wan
    0     US$ 0       10,000       0     US$ 2,900     US$ 0  
Meng Wan
    0     US$ 0       10,000       0     US$ 2,900     US$ 0  
Yezhong Ni
    0     US$ 0       10,000       0     US$ 2,900     US$ 0  
Weidong Wang
    0     US$ 0       10,000       0     US$ 2,900     US$ 0  
Xinping Shi
    0     US$ 0       10,000       0     US$ 2,900     US$ 0  
Zhenwei Lu
    0     US$ 0       40,000       0     US$ 11,600     US$ 0  
 
(1)   Based on the fair market value of our Shares at year-end, US$2.14 per Share, less the exercise price payable for such Shares.

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PROPOSAL 2
Approval of the Issuance of Subscription Shares
and Warrants to China Biotech,
Eastern Ceremony and Harvest Smart through Private Placement
     The following is a summary of the material terms of the proposed issuance of Subscription Shares and Warrants for the purchase of additional Shares by the Company for subscription by China Biotech, Eastern Ceremony and Harvest Smart (each a “Subscriber”, and collectively, the “Subscribers”) and the material provisions of the Subscription Agreements with the Subscribers (each a “Subscription Agreement”, and collectively, the “Subscription Agreements”), the Warrants and Registration Rights Agreements with China Biotech, Eastern Ceremony, Harvest Smart and Beijing Holdings (collectively, the “Subscription Transaction Documents”). The number of Subscription Shares to be offered is 2,500,000; the subscription price per Share will be US$2.50 per Share; the Warrants will be exercisable for a maximum of up to 3,000,000 Shares; and the Warrant exercise price will be US$5.00 per Share. Assuming full exercise of the Warrants, the number of Subscription Shares and Warrant Shares will constitute approximately 33% of the enlarged share capital of the Company. The Subscribers will be entitled to cause the Company to register the Subscription Shares and Warrant Shares pursuant to separate registration rights agreements (“Registration Rights Agreements”) with the Company. The offer and sale of Subscription Securities by the Company (“Subscription Transactions”) has not been and will not be registered under the Securities Act of 1933, as amended (“Securities Act”). The Subscription Securities will be offered and sold to non – U.S. persons outside of the United States in offshore transactions in reliance upon Regulation S under the Securities Act. None of the Subscription Securities may be offered or sold in the United States except pursuant to an effective registration or an available exemption from registration under the Securities Act and any applicable state statutes.
     This summary of the terms of the Subscription Transaction Documents is intended to provide you with basic information concerning the Subscription Transactions. It is not a substitute for reviewing the Subscription Transaction Documents appended to this Shareholders’ Circular as appendices. You should read this summary in conjunction with the Subscription Transaction Documents appended hereto.
Subscription Transactions
     The Company from time to time evaluates opportunities to raise funds on advantageous terms in order to achieve corporate objectives as established by the Board of Directors and to maximize return on equity for the Shareholders. After due and careful consideration, the Board of Directors has determined that it is in the best interest of the Company and all of its Shareholders to expand the Company’s existing capital and investor base to include Shareholders with experience in venture capital investment to assist the Company to expand and further develop its business operations and other stable, long-term investors.

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     In furtherance of these objectives, the Board of Directors has identified China Biotech, Eastern Ceremony and Harvest Smart as potential new Shareholders of the Company. In particular, the Board of Directors believes that China Biotech’s experience in venture capital investment in the information technology industry in China will assist the Company in further enhancing its management efficiency, executing its strategic business plan and achieving corporate objectives.
     Accordingly, we have entered into separate Subscription Agreements with China Biotech, Eastern Ceremony and Harvest Smart, pursuant to which, subject to approval by Shareholders and satisfaction of the other conditions set out therein, the Company will issue a total of 2,500,000 Subscription Shares for cash consideration of US$2.50 per Share (“Share Subscription Price”), to China Biotech, Eastern Ceremony and Harvest Smart. China Biotech, Eastern Ceremony and Harvest Smart will subscribe and purchase 1,500,000, 500,000 and 500,000 Subscription Shares, respectively. In addition, each of China Biotech, Eastern Ceremony and Harvest Smart will subscribe for Warrants to purchase Shares in the amounts of 2,000,000, 500,000 and 500,000 Warrant Shares, respectively, issuable upon the exercise of the Warrants at an exercise price of US$5.00 per Share. The premium for the Warrants is US$0.01 per Warrant. The Company will receive total cash consideration of US$6,280,000 upon the completion of the Subscription Transactions (“Subscription Proceeds”), of which US$6,250,000 and US$30,000 are proceeds from the subscription of Subscription Shares and Warrants, respectively. The Company will receive a further US$15,000,000 from the Subscribers upon the full exercise of the Warrants.
Recommendation of the Special Committee and Fairness Opinion
     At the recommendation of the Board of Directors, a special committee consisting entirely of independent directors (“Special Committee”), and acting on behalf of the Company and the unaffiliated Shareholders, reviewed the proposed terms of the Subscription Transactions and the Subscription Agreements with the assistance of its own independent financial advisor, Altus Capital Limited (“Altus” or “Independent Financial Advisor”).

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     In making its decision to recommend the Subscription Transactions to the Board of Directors and the Shareholders, the Special Committee considered a number of factors, including the Company’s:
    historical business and financial performance;
 
    potential sources of funding;
 
    future prospects of its business lines as currently constituted; and
 
    financial position and historical trading prices of the Shares;
     as well as the fairness opinion of the Independent Financial Advisor retained by the Special Committee to evaluate the fairness of the proposed price per Share, attached as Annex 1.
     Historical Business and Financial Performance
     The Special Committee considered the fact that the Company’s business has undergone several evolutions since 2000. After exiting the sanitary wares and ceramic tiles business in 2000, the Company has pursued the information technology business, first as a systems integrator and subsequently as a network security service provider (“IT Business”). Since 2005, the Company has also engaged in the health and dietary supplement business, having begun to produce products utilizing the bio-active ingredients of bamboo (“Nutraceutical Business”).
     The financial results achieved by the Company throughout the years 2003 through 2005, and the first half of 2006, consisting of operating losses and net losses recorded in each period, have not been satisfactory to Shareholders or the Board of Directors. Operating losses for the years 2003, 2004 and 2005, and the first half of 2006 were US$548,000, US$1,348,000 US$2,237,000 and US$851,000, respectively. For the same periods, losses attributable to Shareholders were US$164,000, US$1,297,000, US$2,407,000 and US$736,000, respectively.
     The Special Committee attributes these results in part to the fact that the Company is a relatively new entrant in each of its business segments. This in turn creates challenges for future growth and development.
     Future Prospects of the Company’s Current Business Lines
     The Special Committee recognizes that the Company’s chosen industry segments show significant potential for growth in the future. IDC recently forecast that the network security market in China would maintain steady growth in the coming five years, with a projected compound annual growth rate of 20.9%. The forecast total market size in China in 2010 is estimated to be US$976 million. According to management, the Company’s hardware and software products are recognized as the leading network solutions in China, and the Company’s products have achieved acceptance among a number of large enterprises and government agencies.

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     In the case of the health and dietary supplements market in China, management estimates that the market will grow by approximately 20% per year, as the general public becomes more health conscious and affluent. Management believes that in the future demand will increase for scientifically-formulated products manufactured according to high standards of purity and quality control.
     However, the Company faces significant challenges in its attempt to capitalize on these trends. These include, among others:
    Competition. There is significant competition from other companies in both the IT Business and the Nutraceutical Business. Many of these companies have a larger scale of production; more resources dedicated to research and development of new products; higher levels of brand recognition; access to substantially greater sources of funding; established distribution networks and relationships; and other competitive advantages compared to the Company.
 
    Business Strategy. The Company’s Board of Directors and management must be able to articulate and execute a consistent, long-term strategy for growth. The Board of Directors and management must be able to identify and evaluate value-creating opportunities for expansion.
 
    Research and Development. In light of the Company’s chosen industries, significant expenditures must be devoted to research and development, in order to maintain an advantage in product development. Research and development is also important in relation to regulatory compliance. However, investments in intellectual property can be a high-risk activity.
 
    Brand Recognition, Customer Base and Distribution Network. Management must continue its efforts to build brand recognition for the Company’s products in both segments, expand the customer base to avoid risk concentration and extend the distribution network for its products. This is particularly true in the Nutraceutical Business, in light of the Company’s recent entrance to this business.
     In order to meet these challenges, the Special Committee recognizes that, among other things, the Company must expand its capital base and investigate potential new sources of funding.
     Potential Sources of Funding
     The Board of Directors and management have made various efforts to raise funds for the Company. These efforts have not been successful to date, largely due to a lack of demand for the Shares and volatility in their trading price. As set out above, the Special Committee recognizes that exploring new channels of fund raising will be critical for the Company to be successful in taking advantage of the projected growth in its product markets.

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     The Special Committee acknowledges that China Biotech has extensive experience in venture capital investments in China. Consequently, admitting China Biotech as a Shareholder of the Company may be advantageous in assisting the Company in further developing its businesses in China.
     Financial Position and Historical Share Price
     The Special Committee notes that the net asset value per Share, based on 11,309,497 Shares in issue, is US$1.03. The Special Committee further notes that, excluding goodwill and intangible assets, the net tangible asset value per Share is US$0.19.
     The Special Committee is aware that there has been significant volatility in the trading prices of the Shares during 2004, 2005 and 2006 year-to-date. Management has confirmed that, apart from negotiations relating to the transactions contemplated in the Subscription Agreements, the Placing Agency Agreement and the Sale and Purchase Agreement as further discussed in Proposal 3 below, which have all been subject to confidentiality obligations, there is not any matter that could cause fluctuations in trading price or volume.
     Accordingly, having taken into account the Company’s financial performance and position as well as its business prospects, the Special Committee believes that the net asset value per Share and net tangible asset value per Share more accurately reflect the value of the Shares than the current market price of US$8.68 per Share as of November 24, 2006.
     Fairness Opinion of Independent Financial Advisor
     The Special Committee solicited recommendations from the management of the Company in selecting an independent financial advisor. The management of the Company recommended Altus to the Special Committee based on the recommendation of China Merchants Securities. The Special Committee, after considering the experience of Altus, its independence from the Company, the Company’s major shareholders, directors and management and the proposed fee arrangement, determined that Altus is suitable for the role of the independent financial advisor and formally engaged the service of Altus on October 10, 2006. None of the Company’s directors, officers, or employees is a related party to the Independent Financial Advisor.
     The Independent Financial Advisor provided a fairness opinion, dated November 14, 2006, to the Special Committee. The fairness opinion provided that as of such date and based on and subject to various considerations and assumptions, the Subscription Price per Share of US$2.50, as reflected in the Subscription Agreements is within the fair and reasonable price range of US$2.25 to 2.75 per Share and therefore, fair to the Company and the existing Shareholders of the Company. In addition, the Independent Financial Advisor opined that the Warrant exercise price of US$5.00 per Warrant Share, as reflected in the Subscription Agreement and the Warrants, is also fair and reasonable to the Company and the existing Shareholders of the Company.

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     In arriving at its fairness opinion, the Independent Financial Adviser identified and considered a number of factors that it believed to be the most important considerations under the circumstances including:
    the historical financial performance of the Company;
 
    business prospects of the Company’s two core business segments;
 
    the financial position of the Company;
 
    historical trading history of the Shares; and
 
    past fundraising activities of the Company.
     Conclusion of the Independent Financial Advisor
     Based on its own review and information provided by the directors and representatives of the Company, and taking into consideration the Company’s past performance and uncertainty with respect to the Company’s ability to successfully compete in its two core businesses, the Independent Financial Advisor is of the view that the Subscription Price per Share of US$2.50, as reflected in the Subscription Agreements is within the fair and reasonable price range of US$2.25 to 2.75 per Share and represents a significant premium to the net asset value and net tangible asset value per Share of US$1.03 and US$0.19 respectively and therefore, fair to the Company and the other Shareholders of the Company.
     In addition, the Independent Financial Advisor has opined that the Warrant exercise price of US$5.00 per Warrant Share, as reflected in the Subscription Agreements and the Warrant certificates, is also fair and reasonable to the Company and the other Shareholders of the Company. The Independent Financial Advisor therefore recommended that the Board of Directors and the Shareholders approve the Subscription Transactions and the terms of the Subscription Agreements.
     Conclusion
     Having taken the foregoing factors into consideration, the Special Committee finds that:
    (i) the terms of the Subscription Agreements and the issue of the Subscription Shares and Warrants, (ii) the Subscription Price per Share of US$2.50, and (iii) the Warrant exercise price of US$5.00 per Warrant Share, each as reflected in the Subscription Agreements and the Warrant Certificates, are fair and reasonable to the Company and the unaffiliated Shareholders; and
 
    entering into the Subscription Agreements and the Subscription Transactions contemplated therein is in the best interests of the Company and the unaffiliated Shareholders;

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     and recommends to the Board of Directors and the Shareholders that the Subscription Agreements and the Subscription Transactions contemplated therein should be approved.
     Approval of Shareholders for the transactions contemplated in the Subscription Agreements, including the issue of Subscription Shares and Warrants, is required pursuant to our Memorandum and Articles of Association and pursuant to NASDAQ’s listing rules. Our Memorandum and Articles of Association require a Special Resolution of Shareholders which requires not less than 75% of the votes of the Shares entitled to vote which were present at the Annual Meeting and were voted and not abstained to approve the issuance of new Shares. NASDAQ’s listing rules require shareholder approval for the issuance by a listed company of shares (or the right to purchase shares) equal to or greater than 20% of the issuer’s shares outstanding before the transaction. As noted above, the issue of the Subscription Shares and Warrants will equal 49% of Shares outstanding prior to such issuance, and so Shareholder approval is required.
Summary of Major Terms of the Subscription Transaction Documents
     Subscription Agreements
     The Company, China Biotech, Eastern Ceremony and Harvest Smart, entered into separate Subscription Agreements pursuant to which the Company will issue a total of 2,500,000 Subscription Shares, with Share Subscription Price of US$2.50 per Share, to China Biotech, Eastern Ceremony and Harvest Smart. China Biotech, Eastern Ceremony and Harvest Smart will subscribe and purchase 1,500,000, 500,000 and 500,000 Subscription Shares, respectively. In addition, each of China Biotech, Eastern Ceremony and Harvest Smart will subscribe for Warrants for the purchase of Shares in the amounts of 2,000,000, 500,000 and 500,000 Warrant Shares respectively, issuable upon the exercise of the Warrants, at an exercise price of US$5.00 per Share. The premium for the Warrants is US$0.01 per Warrant. The Company will receive subscription proceeds of US$6,280,000 upon the completion of the Subscription, of which US$6,250,000 and US$30,000 are proceeds from the subscription of Subscription Shares and Warrants, respectively. The Company will receive a further US$15,000,000 from the Subscribers upon the full exercise of the Warrants. Upon the completion of the Subscription Transactions, assuming full exercise of Warrants, the Subscription Shares and the Shares issued under the Warrants will together constitute approximately 33% of the enlarged share capital of the Company.
     The sale of Subscription Securities by the Company has not been and will not be registered under the Securities Act. The Subscription Securities will be sold to non – U.S. persons outside of the United States in offshore transactions in reliance upon Regulation S under the Securities Act. None of the Subscription Securities may be offered or sold in the United States except pursuant to an effective registration or an available exemption from registration under the Securities Act and any applicable state statutes. The Subscription Securities will be subject to transfer restrictions and bear restrictive legends to the foregoing effect.

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     The terms and conditions of the Subscription Agreements for China Biotech, Eastern Ceremony and Harvest Smart are largely identical except that the Subscription Agreement between the Company and China Biotech (“China Biotech Subscription Agreement”) contains additional conditions precedent requiring the completion of certain changes to the composition of the Board of Directors and a change of existing banking documents and authorizations for the operation of the Company’s bank accounts having been revised by adding person or persons designated by the Board of Directors and satisfactory to China Biotech, as joint signatories for the operation of such bank accounts. For more information on the prospective changes in composition of the Board of Directors, please see Proposal 3 “– Summary of the Major Terms of the Share Sale and Purchase Agreement – Prospective Changes in Composition of the Board of Directors” for more information.
     The Subscription Agreements are appended to this Shareholders’ Circular as Annex 2.
     Representations and Warranties
     The Subscription Agreements contain representations and warranties relating to among other things, our due incorporation; capitalization; authorization and enforceability of the Subscription Agreements; authorization for the issuance and reservation of the Subscription Securities; our filings and compliance with the SEC rules; continued NASDAQ listing of our Shares; legal and regulatory compliance with all applicable securities laws and regulations including but not limited to those relating to internal controls and audit committee; the absence of material adverse changes in our business, operations, financial condition or results of operations; litigation; and other matters common in transactions of this kind.

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     Conditions Precedent
     The obligation of the Company to issue and allot the Subscription Securities, and the obligations of China Biotech, Eastern Ceremony and Harvest Smart to subscribe for and purchase the Subscription Securities, are subject to the satisfaction of certain conditions precedent requiring among other things, validity of all representations and warranties given under the Subscription Agreements; performance of all obligations by all parties prior to the completion of the Subscription Agreements; continued NASDAQ listing of our Shares; NASDAQ’s approval of the supplemental listing application for listing of the Subscription Shares and the Warrants Shares; concurrent execution and completion of the Share Sale and Purchase Agreement, the Placing Agency Agreement, the Subscription Agreements and the Registration Rights Agreements between the Company and each of Eastern Ceremony and Harvest Smart and the execution of an escrow agreement to facilitate the sale and placing of the Sale Shares; issuance of a favorable fairness opinion by a licensed independent financial advisor in relation to the Subscription Transactions, including the pricing of the Subscription Securities; approval of the shareholders of the Issuer in respect of the Subscription Transactions and all resolutions as set out in this Shareholders’ Circular; and other conditions precedent common in transactions of this kind. In addition, the China Biotech Subscription Agreement contains two additional conditions precedent which require the completion of certain changes to the composition of the Board of Directors and a change of existing banking documents and authorizations for the operation of the Company’s bank accounts having been revised by adding person or persons designated by the Board of Directors and satisfactory to China Biotech, as joint signatories for the operation of such bank accounts.
     Under the China Biotech Subscription Agreement, China Biotech’s obligation to complete is conditional upon the concurrent execution and completion of all transaction documents, including the Subscription Agreements by and between the Company and each of Eastern Ceremony and Harvest Smart, the Registration Rights Agreements by and between the Company and each of Eastern Ceremony and Harvest Smart, the Share Sale and Purchase Agreement and the Placing Agency Agreement for the sale and placing of Sale Shares by Beijing Holdings, China Internet, CMEC and Perfect Capital, to China Biotech, Eastern Ceremony, Harvest Smart and certain other investors as discussed in Proposal 3 below. Provided that the conditions precedent as set out in its Subscription Agreement are fulfilled, China Biotech would be obligated to complete its Subscription Agreement within 60 days from the completion of various transaction documents discussed above. The execution and completion of the various transaction documents however, are not conditional upon the concurrent execution and completion of the China Biotech Subscription Agreement.
     The obligations of Eastern Ceremony and Harvest Smart to complete the transactions under their respective Subscription Agreements are subject to the concurrent completion of the other party’s Subscription Agreement and of the sale and placing of Sale Shares (as discussed below in Proposal 3). The due execution and completion of the Share Sale and Purchase Agreement and the Placing Agency Agreement are conditions precedent to the completion of the Subscription Agreements for Eastern Ceremony and Harvest Smart. Further, the Subscription Agreements for Eastern Ceremony and Harvest Smart must be completed concurrently with the Share Sale and Purchase Agreement and the Placing Agency Agreement.

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     Other Covenants
     We are required under the Subscription Agreements to indemnify each Subscriber, its directors, officers, agents, shareholders and employees, from and against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statement, representation, warranty or covenant of the Company contained in the Subscription Agreements. Each Subscriber is required to provide the same indemnification to us under its respective Subscription Agreement.
     Warrants
     Each subscriber of the Warrants will receive a Warrant certificate evidencing the right to purchase from us a specified number of fully paid and non-assessable Shares within twenty-four (24) months from the date of the issuance of the Warrant certificate at an exercise price of US$5.00 per Share. If not exercised prior to the expiration of such period, the Warrants will expire. The total number of Warrant Shares issuable upon exercise of the Warrants is 3,000,000. China Biotech, Eastern Ceremony and Harvest Smart will subscribe for Warrants for the purchase of Shares in the amounts of 2,000,000, 500,000 and 500,000 Warrant Shares respectively, issuable upon the exercise of the Warrants, at an exercise price of US$5.00 per Share. The premium for the Warrants is at US$0.01 per Warrant.
     The Warrants have not been and will not be registered under the Securities Act. The Warrants will be sold to non – U.S. persons outside of the United States in offshore transactions in reliance upon Regulation S under the Securities Act. None of the Warrants may be offered or sold in the United States except pursuant to an effective registration or an available exemption from registration under the Securities Act and any applicable state statutes. The Warrants certificate will be subject to transfer restrictions and bear restrictive legends to the foregoing effect.
     Registration Rights Agreement
     In connection with the subscription of the Subscription Shares and Warrants, the Company, China Biotech, Eastern Ceremony and Harvest Smart entered into separate Registration Rights Agreements following the execution of the Share Sale and Purchase Agreement, the Placing Agency Agreement and the respective Subscription Agreements. In addition, Beijing Holdings also entered into a separate Registration Rights Agreement with the Company.
     The Registration Rights Agreements contain identical terms and conditions. Pursuant to the terms of the Registration Rights Agreements, China Biotech, Eastern Ceremony, Harvest Smart and Beijing Holdings (“Entitled Shareholders”), have the right, subject to certain limitations, to require the Company file a registration statement under the Securities Act to register the Registrable Securities they hold.
     The Registration Rights Agreements are appended to this Shareholders’ Circular as Annex 3.

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     Demand Registration Rights
     At any time after one year from the date of the Registration Rights Agreements, the Entitled Shareholders holding 500,000 Shares or more of the Registrable Securities then outstanding have the right, subject to certain limitations, to demand that we file a registration statement under the Securities Act covering the registration of the entire amount of the Registrable Securities (as defined in the Registration Rights Agreements) held by such Entitled Shareholders. We shall not be required to effect a registration however in any jurisdiction in which we need to execute a general consent to service of process in effecting such registration, unless we are already subject to service in such jurisdiction or except as may be required under the Securities Act. We shall also not be required to effect a registration if we have already effected two registrations under the relevant demand registration rights clause in the Registration Rights Agreement and we may defer the filing of any registration statement for up to 120 days no more than once in any 12-month period if our Chief Executive Officer or the Board of Directors determines that the filing would be detrimental to or have a material adverse effect on any financing, acquisition or other material transactions. The underwriters have the right, subject to certain limitations, to limit the number of Shares included in the registration.
     “Piggyback” Registration Rights
     The Entitled Shareholders will receive piggyback registration rights with respect to the registration under the Securities Act of our Shares. In the event we propose to register any of our Shares or other securities under the Securities Act either for our own account or for the account of other Shareholders, the Entitled Shareholders will be entitled to receive notice of the registration and to request the inclusion of all of the Registrable Securities held by such Entitled Shareholders in any such registration, subject to certain limitations. In the event of any offering involving an underwriting of Shares of the Company’s capital stock, piggyback registration rights will also be subject to the right of the underwriters to limit the number of securities, including the Register able Securities, included in the registration. We may terminate or withdraw any piggyback registration prior to the effectiveness of the registration whether or not any Entitled Shareholder has elected to include securities in the registration.

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     Form F-3 Registration Rights
     We will be eligible to file a registration statement on Form F-3 once we have made the filing with the SEC of our Annual Report on Form 20-F for fiscal year 2006, assuming such filing is made on a timely basis. At any time after we become eligible to file a registration statement on Form F-3, the Entitled Shareholders may, subject to certain terms and conditions, require us to file a registration statement on Form F-3, provided the aggregate offering price to the public in case of sale of Registrable Securities and other securities if any, not including the underwriters’ discounts and commissions, shall not be less than US$1,000,000. However, we are not obligated to effect more than one registration on Form F-3 in any 12-month period, and we may defer the filing of any registration statement on Form F-3 for up to 120 days after the receipt of registration request no more than once in any 12-month period if our Chief Executive Officer or the Board of Directors determines that the filing would be detrimental to or have a material adverse effect on any financing, acquisition or other material transactions.
     Expenses of Registration
     All expenses other than underwriting discounts and commissions incurred in effecting these registrations, including all registration, filing and qualification fees, printers’ and accounting fees, the reasonable fees, expenses of our counsel and expenses of one counsel for the selling Shareholders, will be borne by the Company.
     Termination of Registration Rights
     The Entitled Shareholders shall not be entitled to exercise the registration rights described above, following the time at which all Registrable Securities held by the Entitled Shareholders can be sold in any 3-month period without registration in compliance with Rule 144 of the Securities Act, provided that the Entitled Shareholder owns no more than 5% of our issued and outstanding Shares.
     THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE SPECIAL RESOLUTION IN RESPECT OF THE PROPOSAL TO ISSUE NEW SHARES AND WARRANTS TO CHINA BIOTECH, EASTERN CEREMONY AND HARVEST SMART PURSUANT TO REGULATION S UNDER THE SECURITIES ACT.

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ABOUT CHINA BIOTECH
     China Biotech, a company incorporated under the laws of British Virgins Islands, with a registered corporate address at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands, is primarily engaged in venture capital investments in China.
     As at May 11, 2006, Snow Hill Development Limited, a company incorporated under the laws of the British Virgin Islands, was the largest single shareholder of China Biotech, holding 41.52% shares in China Biotech. Pairing Venture Limited, a nominee company incorporated under the laws of the British Virgin Islands and held by Mr. Alan Li, Co-Chief Executive Officer (Greater China) and executive director of the Company, held 9.44% of the shares in China Biotech. Mr. Zhang Ying, chief research scientist of CTDC, held 14.17% of the shares in China Biotech. Victory Rise Group Limited, a nominee company incorporated under the laws of the British Virgin Islands, held 22.83% of the shares in China Biotech on behalf of certain management personnel of China Biotech. Japan – China Investment No. 1 Limited, a company incorporated under the laws of the Cayman Islands, is an independent investment fund holding 12.04% of the shares in China Biotech.
     Snow Hill Development Limited is wholly owned by China Merchants Technology Holdings Co. Ltd. (“CMTH”), which is a wholly-owned subsidiary of the China Merchants Group. CMTH is the corporate entity under China Merchants Group specializing in venture capital investment in technology industries. As one of the first venture capital companies in China, CMTH currently has assets exceeding HK$1.2 billion with more than 50 investment projects across a wide range of industries, including information technology, software development, semi-conductor, bioengineering, pharmacy and automation.

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RELATIONSHIP BETWEEN CHINA BIOTECH AND
THE CHINA MERCHANTS GROUP
     The China Merchants Group was founded on December 26, 1872 and commenced operation in Shanghai on January 17, 1873. The China Merchants Group is a major Chinese national industrial and commercial enterprise, with more than 130 years of operating history.
     The China Merchants Group, headquartered in Hong Kong, is a diversified conglomerate with major businesses located in various jurisdictions across Hong Kong, mainland China and the Southeast Asia. As at the end of fiscal year 2005, China Merchants Group had approximately RMB79 billion in total assets.
     The China Merchants Group has a depth of operational and market expertise in diverse business sectors including transportation infrastructure (ports and toll roads), finance (banking, securities, funds and insurance), property and related utility services (property development and development zone projects) and energy transportation and logistics (oil tankers, LPG transportation and third party logistics). In 1992, China Merchants Group listed its flagship subsidiary, China Merchants Holdings (International) Company Limited (“CMHI”), on the Stock Exchange of Hong Kong (Stock code: 0144). CMHI was the first red chip company to publicly float in Hong Kong. Currently, CMHI is one of the 33 constituent stocks of the Hang Seng Index.

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CTDC’S DEVELOPMENT STRATEGY
     The Company’s business has undergone several evolutions since 2000. Initially engaged in the production of the sanitary wares and ceramic tiles, the Company transitioned itself to become a systems integrator in 2000, and subsequently as a network security service provider in 2002. With the acquisition of 100% of the equity interest in China Natures Technology (“CNT”), a nutraceutical company in China, from our single largest Shareholder, Beijing Holdings, in 2005, the Company broadened its existing business scope to include the development of nutraceutical products utilizing bio-active components of bamboo extracts.
     Network Security Business
     The Company’s network security business focuses on the development and supply of network security applications. This business has developed products and technology that are certified by the Chinese government. It has established over the years a valuable customer base in China, including banks, business conglomerates, government agencies, and information technology companies. The Company will continue to strengthen its marketing efforts to increase market share by developing more industry specific applications. The Company also intends to strengthen its network security service business by providing packaged network security solutions to customers. However, there can be no assurance that the Company can successfully achieve the above strategies due to significant competition in the Chinese market.
     Nutraceutical Business
     The Company’s nutraceutical business focuses on the development and supply of nutraceutical products based on bamboo extracts. According to the statistics from the Market Research Committee of the Association of Health Care of China, the health dietary supplement market in China is approximately RMB60 billion and is continuing to grow at approximately 20% per annum. There are approximately 2,025 dietary supplement companies in China, most of which are small with limited production capabilities. The Company believes that the nutraceutical business in China will continue to grow with the rise in general health awareness and the increase in disposable income. The Company believes that through its newly-acquired subsidiary, CNT, which currently holds 10 patents of bamboo extractives in nutraceutical and healthy food fields, it is well positioned to capitalize on the growing business opportunities in the nutraceutical industry in China.
     Management intends to focus its business on emerging industries, including network security and nutraceutical and related biotechnology industries. The Company will carry out an investment and acquisition strategy in its two businesses by continuing to seek companies with ownership of intellectual properties, proven products, unique value proposition in the marketplace, profitable, strong management team, and a growing customer base. However, there can be no assurance that the Company can or will find a suitable company to acquire within such industries, or that any such acquisition can be consummated on terms acceptable to us.

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PROPOSAL 3
Approval of the Sale of Shares by Beijing Holdings, China Internet, CMEC and
Perfect Capital to China Biotech
and Certain Other Investors, and of Prospective and Past Transfers
of Shares in Accordance with
the Requirements of the Company’s Memorandum and Articles of Association
     The following is a summary of the material aspects of the proposed sale of Sale Shares by Beijing Holdings, China Internet, CMEC and Perfect Capital, to China Biotech and certain third party investors (“Other Investors”). The sale of Sale Shares will be conducted pursuant to two separate agreements. Beijing Holdings entered into a Share Sale and Purchase Agreement with China Biotech on November 27, 2006, for the sale and purchase of 2,000,000 Shares of the Company (“SPA Sale Shares”). Beijing Holdings, China Internet, CMEC and Perfect Capital entered into a Placing Agency Agreement with China Merchants Securities (HK) Co. Ltd. (“China Merchants Securities”) on November 27, 2006, appointing China Merchants Securities as the placing agent to assist in the placing of 4,250,000 Shares of the Company (“Placing Sale Shares”) by way of private placement to Eastern Ceremony, Harvest Smart and Other Investors (SPA Sale Shares and Placing Sale Shares, collectively, “Sale Shares”). The Sale Shares will be sold in offshore transactions that have not been and will not be registered under the Securities Act. The Sale Shares will be sold to non – U.S. persons outside of the United States in offshore transactions in reliance upon Regulation S under the Securities Act. None of the Sale Shares may be offered or sold in the United States absent an effective registration or under available exemptions from registration under the Securities Act and any applicable state statutes.
     The summary provided below is intended to provide you with basic information concerning the transactions set out in Proposal 3. It is not a substitute for reviewing the Share Sale and Purchase Agreement, the Placing Agency Agreement or any other document or agreement appended to this Shareholders’ Circular. You should read this summary in conjunction with the Share Sale and Purchase Agreement, Placing Agency Agreement and other documents and agreements appended hereto.
Share Sale and Purchase Transaction
     Beijing Holdings and China Biotech entered into a Share Sale and Purchase Agreement on November 27, 2006 pursuant to which Beijing Holdings will sell and China Biotech will purchase for cash a total of 2,000,000 Shares of the issued and outstanding Shares of the Company from Beijing Holdings at a price per Share of US$2.50 (“SPA Sale Share Price”). Beijing Holdings will receive cash consideration of US$5,000,000 upon the completion of the Share Sale and Purchase Agreement.

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Placing Transaction
     In addition to the Share Sale and Purchase Agreement, Beijing Holdings, together with China Internet, CMEC and Perfect Capital entered into a Placing Agency Agreement with China Merchants Securities on November 27, 2006, appointing China Merchants Securities as the placing agent to assist in the placing of 4,250,000 Shares of the issued and outstanding Shares of the Company by way of private placement to Other Investors at a price per Share of US$2.50 (“Placing Sale Share Price”). Beijing Holdings, China Internet, CMEC and Perfect Capital will collectively receive US$10,625,000 upon the completion of the Placing.
     Approval of Shareholders for the transactions contemplated in the Share Sale and Purchase Agreement and the Placing Agency Agreement is required pursuant to our Memorandum and Articles of Association. Clause 14 of the Memorandum of Association of the Company provides among other things that registered Shares of the Company may be transferred, subject to the prior or subsequent approval of the Company as evidenced by an Ordinary Resolution of the Shareholders. To satisfy the requirements of its constitutional documents, the Company is hereby seeking the approval of the Shareholders by an Ordinary Resolution regarding:
    the proposed sale and purchase of the SPA Sale Shares;
 
    the placing of the Placing Sale Shares; and
 
    all other prospective and all past transfers of Shares in the Company. The passing of this resolution will ensure proper compliance with the Company’s constitutional documents and ratify, approve and confirm, the transfer of Shares of the Company which are listed and have been or will be traded on NASDAQ.
Summary of Major Terms of the Share Sale and Purchase Agreement
     The following summary of the provisions of the Share Sale and Purchase Agreement is qualified in its entirety by the full text of the Share Sale and Purchase Agreement appended hereto as Annex 4.
     Pursuant to the Share Sale and Purchase Agreement, Beijing Holdings agrees to sell and China Biotech agrees to purchase 2,000,000 outstanding Shares of the Company at a price per Share of US$2.50. Beijing Holdings will receive cash consideration of US$5,000,000 upon the completion of the Share Sale and Purchase Agreement. The completion of the Share Sale and Purchase Agreement will occur not later than 10 business days following this Annual Meeting of the Shareholders of the Company (or such other date as may be agreed in writing between the Beijing Holdings and China Biotech), and satisfaction of all other conditions precedent, which are further summarized below.

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     Representations and Warranties
     Under the Share Sale and Purchase Agreement, Beijing Holdings has made customary representations, warranties and undertakings to China Biotech relating to among other things, its organization; capitalization; authorization and enforceability of the Share Sale and Purchase Agreement; truthful, accurate and full disclosure of material information; the valid issuance of the Sale Shares being sold; continued NASDAQ listing of the Shares; legal and regulatory compliance with all applicable securities laws and regulations including applicable transfer and selling restrictions under the Securities Act; proper accounting and financial reporting practices; compliance and relevant tax laws and filing of all necessary tax filings and tax returns; and other matters common in transactions of this kind. Beijing Holdings is also required to make representations, warranties and undertakings to China Biotech that there has not been any material adverse change in the Company’s business, operations, financial condition or results of operations from the date of the Share Sale and Purchase Agreement to the Completion. All the representations, warranties and undertakings are deemed to be repeated at Completion of the Share Sale and Purchase Agreement.
     Conditions Precedent
     Beijing Holdings’ obligation to sell, and China Biotech’s obligation to purchase the SPA Sale Shares under the Share Sale and Purchase Agreement, are subject to the satisfaction of certain conditions precedent requiring among other things, the continued NASDAQ listing of the Shares; NASDAQ’s approval for the listing of the Subscription Shares and Warrant Shares currently issuable upon the exercise of the Warrants; approval of the Shareholders of the Company in respect of the sale and purchase of Sale Shares and all other resolutions set out in this Shareholders’ Circular; the preparation and concurrent execution and completion of all necessary transaction documents, including the Placing Agency Agreement, the Subscription Agreements and Registration Rights Agreements for each of Eastern Ceremony and Harvest Smart; the execution of an escrow agreement for the appointment of an escrow agent to facilitate the completion of the sale and purchase and the placing of the Sale Shares; the submission to the escrow agent an executed resignation letter from Mr. Michael Siu as executive director, Chief Financial Officer and Company Secretary, and an executed resignation letter from each of Mr. L C Wan and Mr. Peter Fu as independent directors, effective upon presentation to the Board of Directors of the Company; a certified copy of minutes of a meeting of the Board of Directors approving the registration of China Biotech as a Shareholder of our Company and certain changes to the composition of the Board of Directors; and other conditions precedent common in transactions of this kind.
     Prospective Changes in Composition of the Board of Directors
     As a condition precedent to the completion of the Share Sale and Purchase Agreement, Beijing Holdings must procure an executed resignation letter from Mr. Michael Siu as executive director, Chief Financial Officer and Company Secretary of the Company, and an executed resignation letter from each of Mr. L C Wan and Mr. Peter Fu as independent directors of the Company. The resignation letters shall become effective upon presentation to the Board of Directors.

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     Beijing Holdings must provide a certified meeting minutes of the Board of Directors acknowledging the resignation of Mr. Michael Siu and approving the appointment of Mr. Zhenwei Lu as executive director and Mr. Yibing Zhang as Chief Financial Officer and Company Secretary of the Company, effective immediately upon the presentation of Mr. Michael Siu’s resignation letter. The Board of Directors shall also acknowledge as evidenced by the certified meeting minutes, resignation of Mr. L C Wan and Mr. Peter Fu and approve the appointment of Mr. Loong Cheong Chang and Mr. Xiaoping Wang as independent directors of the Company. The completion of the changes in the composition of the Board of Directors is a condition precedent to the completion of the Subscription Agreement between the Company and China Biotech.
     Covenants
     Under the Share Sale and Purchase Agreement, Beijing Holdings will be responsible for all expenses incurred in connection with the Share Sale and Purchase Transaction, and bear the applicable stamp duty. Beijing Holding has agreed to indemnify China Biotech against all liabilities, losses, damages, claims, costs and expenses incurred by China Biotech and arising whether directly or indirectly as a consequence of any breach by Beijing Holdings of any of its obligations, commitments, undertakings, agreements, representations, warranties and indemnities under or pursuant to the Share Sale and Purchase Agreement, subject to a cap of US$5,000,000. China Biotech will indemnify and hold harmless the Company, its controlling persons, their respective directors, officers, agents, shareholders and employees, from and against any and all liabilities resulting from or attributable to the breach of representations, warranties and covenants of China Biotech under the Share Sale and Purchase Agreement. China Biotech has agreed to resell the Sale Shares only in accordance with the provisions of Regulations S, pursuant to an effective registration statement under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act, including the exemption from registration provided by Rule 144 under the Securities Act.
Summary of Major Terms of the Placing Agency Agreement
     The following summary of the provisions of the Placing Agency Agreement is qualified in its entirety by the full text of the Placing Agency Agreement appended hereto as Annex 5.
     Beijing Holdings, together with China Internet, CMEC and Perfect Capital (each individually, a “Vendor”, and collectively, “Vendors”) entered into a Placing Agency Agreement with China Merchants Securities, appointing China Merchants Securities as the placing agent to assist in the placing of 4,250,000 Shares of the issued and outstanding Shares of the Company by way of private placement to Other Investors at a Placing Sale Share Price of US$2.50 per Share. The Vendors will collectively receive cash consideration of US$10,625,000 upon the completion of the Placing. The completion of the Placing Agency Agreement will occur not later than 10 business days following the Annual Meeting of the Shareholders of the Company (or such other date as may be agreed in writing between the Vendors and China Merchants Securities), and satisfaction of all other conditions precedent, which are further summarized below. Pursuant to the Placing Agency Agreement, the placing agent will receive 1% of the Placing proceeds in US dollars as placing commission. The placing commission is inclusive of all transaction levies, fees costs, charges and expenses of or incidental to the Placing. The placing agent is entitled to keep any brokerage commissions from the placees.

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     Representations, Warranties and Undertakings
     Under the Placing Agency Agreement, each Vendor makes customary representations, warranties and undertakings to the Placing Agent that generally relate to its organization; the authorization, binding effect and enforceability of the Placing Agency Agreement; the valid issuance of the Shares being sold; continued NASDAQ listing of the Shares; legal and regulatory compliance with all applicable securities laws and regulations including applicable transfer and selling restrictions under the Securities Act; litigation; and other matters common in transactions of this kind. The Vendors are also required to make representations, warranties and undertakings to the Placing Agent that to the best of their knowledge, there has not been any material adverse changes in the Company’s business, operations, financial condition or results of operations from the date of the Placing Agency Agreement to the Completion. All the representations, warranties and undertakings are deemed to be repeated at Completion of the Placing.
     The Placing Agent has the obligation to ensure that the placees under the Placing are not affiliates of our Company, are not U.S. Persons and are acquiring the Placing Sale Shares solely for investment purposes.
     Conditions Precedent
     The obligations of the Vendors to sell the Placing Sale Shares under the Placing Agency Agreement, and the obligations of the placing agent and the placees to place and purchase the Placing Sale Shares, are subject to the satisfaction of certain conditions precedent requiring among other things, the continued NASDAQ listing of the Shares, including the Placing Sale Shares; NASDAQ’s approval of the supplemental listing application for the listing of the Subscription Shares and Warrant Shares that would be currently issuable upon the exercise of the Warrants; approval of the Shareholders of the Company in respect of the Placing of Sale Shares, the sale and purchase of Sale Shares, the issuance of Subscription Securities and all other resolutions as set out in this Shareholders’ Circular; board resolutions of each of the Vendors, approving the entering into and performance of the Placing Agency Agreement, transfer of the Placing Sale Shares and the execution of all other documents contemplated thereunder; shareholders’ resolutions of each of the Vendors (except Beijing Holdings) approving the entering into and performance of the Placing Agency Agreement and transfer of the Placing Sale Shares; concurrent execution and completion of all necessary transaction documents, including the Share Sale and Purchase Agreement, the Subscription Agreements and Registration Rights Agreements for each of Eastern Ceremony and Harvest Smart; the execution of an escrow agreement for the appointment of an escrow agent to facilitate the completion of the Placing and the sale and purchase of the Sale Shares; and other conditions precedent common in transactions of this kind.

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     Other Covenants
     The Placing Agent undertakes to each Vendor that it will comply and cause any and all of its sub-agents to comply with the selling restrictions as set out in Schedule 2 of the Placing Agency Agreement. In addition, each Vendor, severally, and not jointly or jointly and severally, undertakes to indemnify the Placing Agent in full for any investigation, action, claim against the Placing Agent in connection with the placing of the Placing Sale Shares, or any material breach of Vendor’s representations, undertakings, and warranties under or pursuant to the Placing Agency Agreement.
     THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ORDINARY RESOLUTION WITH RESPECT TO THE PROPOSAL FOR THE SALE AND PLACING OF SALE SHARES BY BEIJING HOLDINGS, CHINA INTERNET, CMEC AND PERFECT CAPITAL TO CHINA BIOTECH AND OTHER INVESTORS AND WITH RESPECT TO ALL PROSPECTIVE AND PAST TRANSFERS OF SHARES.

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BENEFICIAL OWNERSHIP OF SHARES OF CTDC BEFORE AND
AFTER THE COMPLETION OF THE SUBSCRIPTION OF SUBSCRIPTION
SECURITIES AND THE SALE OF SALE SHARES
     The following table shows the changes of the share capital of the Company before and after the completion of the subscription of the Subscription Securities and the sale and placing of Sale Shares:
(a)   Current Shareholdings
                 
SHAREHOLDERS   SHARES   PERCENTAGE
Beijing Holdings
    5,248,730       46.41 %
China Internet
    1,186,441       10.49 %
CMEC
    974,576       8.62 %
Perfect Capital
    849,576       7.51 %
CAS (Great Legend)
    508,474       4.50 %
Public
    2,541,700       22.47 %
 
               
 
               
Total
    11,309,497       100.00 %
 
               
(b)   Completion of the Subscription of the Subscription Securities and the Sale and Placing of Sale Shares (before Exercise of Warrants)
                 
SHAREHOLDERS   SHARES   PERCENTAGE
China Biotech
    3,500,000       25.34 %
Beijing Holdings
    2,009,323       14.55 %
Eastern Ceremony
    1,000,000       7.24 %
Harvest Smart
    1,000,000       7.24 %
CAS (Great Legend)
    508,474       3.68 %
Public
    5,791,700       41.94 %
 
               
 
               
Total
    13,809,497       100.00 %
 
               
(c)   After Full Exercise of Warrants
                 
SHAREHOLDERS   SHARES   PERCENTAGE
China Biotech
    5,500,000       32.72 %
Beijing Holdings
    2,009,323       11.95 %
Eastern Ceremony
    1,500,000       8.92 %
Harvest Smart
    1,500,000       8.92 %
CAS (Great Legend)
    508,474       3.02 %
Public
    5,791,700       34.45 %
 
               
 
               
Total
    16,809,497       100.00 %
 
               

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PROPOSAL 4
Approval of Amended and Restated Memorandum
and Articles of Association
     We propose making a number of significant amendments to our Memorandum and Articles of Association, as set out in the attached Amended and Restated Memorandum and Articles of Association. The main purposes for these amendments are:
    To implement international best practices of corporate governance.
     The Amended and Restated Articles of Association will provide for the establishment and maintenance of committees of the Board of Directors, including an audit committee, a nominating committee and a compensation committee, that meet all relevant standards of independence, including those of the United States Securities and Exchange Commission and NASDAQ listing standards, for so long as our Shares are listed on NASDAQ or another national securities exchange. Although we currently have established audit, nominating and compensation committees, the existing Articles of Association have no specific requirements in this regard. This amendment will bring the Articles of Association in line with our current practice.
    To increase transparency and corporate accountability to Shareholders.
     The Amended and Restated Articles of Association will require us to hold an annual general meeting of shareholders, to prepare financial statements in accordance with generally accepted accounting principles in the United States (“US GAAP”) and to have such financial statements audited by independent auditors. Although we currently hold an annual general meeting of Shareholders, prepare financial statements in accordance with US GAAP and have such financial statements audited by independent auditors, the existing Articles of Association have no specific requirements in this regard. This amendment will bring the Articles of Association in line with our current practice.
    To provide the Board of Directors with authority in relation to the issuance of Shares and other basic corporate matters, to ensure flexibility of decision-making consistent with our status as a public listed company.
     Under the current Articles of Association, the issuance of Shares and fixing the consideration for such Shares require a Special Resolution of Shareholders. These provisions are unusually restrictive for the constitution of a NASDAQ listed company. For public listed companies, decision-making authority regarding such matters is usually conferred on the board of directors, to ensure that the board has sufficient flexibility to finance the company’s operations and respond to market opportunities. This amendment will permit the Board of Directors to issue new Shares; provided that, for so long as our Shares are listed on NASDAQ or another national securities exchange, the Shareholders must approve any issuance of new Shares in excess of 20% of the Shares outstanding immediately prior to such issuance.

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    To eliminate certain other provisions relating to Special Resolutions of Shareholders that are inconsistent with our status as a public listed company.
     Under the current Articles of Association, all transfers of Shares; issuance or disposal of Shares; combination or division of Shares; increase and reduction of the Company’s capital; listing of the Company’s Shares; entering into new lines of business or making acquisitions of new businesses; substantial change in the primary businesses of the Company or its subsidiaries; liquidation, dissolution, bankruptcy of the Company or its subsidiaries; disposition of all or a substantial part of the assets of the Company and its subsidiaries; all require approval by a Special Resolution of Shareholders. Some of these provisions are unusually restrictive for the articles of association of a public listed company and, in some cases, inconsistent with such status.
     The proposed amendments will either eliminate these provisions or lower the approval requirements in respect of these matters. The result is that some of these actions, such as transfers of Shares, will no longer require any approval provided that the transfers of Shares comply with other relevant procedural requirements set out in the proposed Amended and Restated Memorandum and Articles of Association. The listing of Shares; the issuance or disposal of Shares; the acquisition of assets that are outside the ordinary course of business of the Company or its subsidiaries; the entering into of new lines of business or making acquisitions of new businesses and the substantial change in the primary businesses of the Company or its subsidiaries, will be subject to a resolution of the Board of Directors instead of a Special Resolution of the Shareholders. The merger, consolidation or other business combination affecting the Company or its subsidiaries will, in accordance with the requirements of the laws of the British Virgin Islands, be subject to an Ordinary Resolution instead of a Special Resolution of the Shareholders. Other actions, such as the combination or division of Shares, increase and reduction of the Company’s capital, liquidation, dissolution, bankruptcy of the Company or its subsidiaries, disposition of all or a substantial part of the assets of the Company and its subsidiaries, will be subject to approval by an Ordinary Resolution instead of a Special Resolution of the Shareholders. We believe that these amendments are consistent with our status as a public listed company and market practice.
Summary of Major Amendments in the Amended and Restated Memorandum and Articles of Association
     The following is a general description of the principal changes, deletions, and additional requirements proposed for the Company’s Memorandum and Articles of Association and is qualified by and subject to the full text of the Amended and Restated Memorandum and Articles of Association:
     Memorandum of Association
     Registered Agent
     The name of the registered agent has now been amended to reflect the current name of the registered agent.

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     Objects
     The Memorandum of Association has been amended to encompass the current scope and nature of the business activities of the Company.
     Authorized Capital
     The authorized share capital of the Company has been increased from US$25,000,000 to US$50,000,000 through amendment of the Memorandum of Association to provide for future allotments and issue of Shares in the capital of the Company.
     The Company intends to actively explore potential business opportunities in its core business industries to maximize the return to its Shareholders. As such, the Company may from time to time require additional financing for expansion or acquisitions of assets or businesses. The Board of Directors believes that the proposed increase in the Company’s authorized Share capital will be reasonably sufficient to cover the financing needs of the Company in the near to intermediate future, and will provide the Company with the ability to issue additional shares subject to obtaining the approval of the Board of Directors or Shareholders, as applicable, for financing purposes on a timely basis.
     Transfer of Shares
     Under Clause 14 of the existing Memorandum of Association, and subject to the provisions of Regulation 39 of the Articles of Association, Shares may be transferred, subject to the prior or subsequent approval of the Company as evidenced by a resolution of the Shareholders. The Board of Directors believes that such requirement is burdensome and not appropriate in light of the Company’s status as a listed company on NASDAQ. To subject any transfer of Shares to either prior or subsequent approval of Shareholder would impose unnecessary burdens on the holders of the Shares and would affect the liquidity of the Shares of the Company. As such, the proposed amendments have deleted the requirement to subject any transfer of Shares in the Company to either prior or subsequent approval of the Company as evidenced by a resolution of the Shareholders from the Memorandum of Association. Under the proposed amendments, the Shares of the Company may be transferred without any approval from either the Board of Directors or Shareholders.

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     Amendment of the Memorandum and Articles of Association
     Under the existing Memorandum of Association, the Company may amend its Memorandum and Articles of Association by a Special Resolution of the Shareholders.
     The proposed amendment will lower the Shareholder approval threshold required for amending the Memorandum and Articles of Association from a super majority to a simple majority vote. The proposed amendment if approved, would allow the Company to make necessary changes in its constitutional documents to address the changing needs of the Company in a more efficient manner without unnecessary delay.
     Articles of Association
     Definitions
     Definitions for “Board”, “Directors” and “NASDAQ” have been added, and the existing definition for “the Act” has been amended to extend reference to the BVI Business Companies Act 2004 to which the Company shall become subject on and after 1 January 2007.
     Issuance and Disposal of Shares
     Under the existing Articles of Association, the allotment, issuance or disposal of unissued Shares and treasury Shares of the Company, and the determination of what shall constitute appropriate consideration for the issue of Shares, are matters requiring approval by a Special Resolution of the Shareholders. These provisions are unusually restrictive for the articles of association of a public listed company. For public listed companies, decision-making authority regarding such matters is usually conferred on the Board of Directors, to ensure that the board has sufficient flexibility to finance the company’s operations and respond to market opportunities.
     The proposed amendments of Regulations 11, 13, 14, 16 and 18 of the Articles of Association will provide the Board of Directors the authority and the flexibility to deal with matters involving the allotment, issue or disposal of unissued Shares and treasury Shares of the Company, and the determination of what shall constitute appropriate consideration for the issue of Shares in a timely manner by a resolution of directors rather than by a Special Resolution of the Shareholders. The Board of Directors will be able to issue new Shares provided that, for so long as our Shares are listed on NASDAQ or another national securities exchange, the Shareholders must approve any issuance of new Shares in excess of 20% of the Shares outstanding immediately prior to such issuance. This added flexibility will significantly improve the Company’s ability to act quickly in response to potential business opportunities. However, such Share issuance will also dilute the shareholdings of the existing Shareholders without the need to obtain the approval from the Shareholders.

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     Transfer of Shares
     Specific provision has now been made for a mechanism to deal with the transfer of uncertificated Shares.
     Reduction or Increase in Authorized Share Capital; Division or Combination of Shares
     Under the existing Articles of Association, any proposal to increase or reduce authorized share capital of the Company; to divide or combine shares; and to increase capital through transfer of an amount from surplus to capital require the approval by a Special Resolution of the Shareholders.
     The proposed amendments to Regulations 47, 48 and 49 would lower the approval requirement from a Special Resolution to an Ordinary Resolution of the Shareholders. Accordingly, a proposal to increase or reduce authorized share capital, to combine or divide Shares or to increase capital of the Company by transferring an amount of surplus of the Company to capital will only require a simple majority vote of the Shareholders.
     Meetings
     Under the existing Articles of Association, there is no specific requirement that the Company must hold at least one annual meeting of the Shareholders. Under Regulation 54, the Board of Directors is required to convene a Shareholders’ meeting upon receipt of the written request of Shareholders holding 10% or more of the outstanding voting Shares. In addition, Regulation 55 of the existing Articles of Association only requires the Board of Directors to give not less than 7 days notice to the Shareholders before holding a Shareholders’ meeting.
     The proposed amendments to Regulation 53 will require the Company to hold at least one annual meeting of the Shareholders. In addition, Regulation 54 has been amended to raise the shareholding threshold required for demanding a Shareholders’ meeting from the current 10% to 20% or more of the outstanding voting shares of the Company. The required notice period for the meetings of the Shareholders in Regulation 55 has also been increased from 7 to 21 days to provide the Shareholders of the Company additional time to consider proposals submitted by the Board of Directors and to reflect market practice of a NASDAQ listed company. The quorum for an adjourned meeting of Shareholders of the Company (either in person or by proxy) shall not be less than 33.33 per cent of the votes of the Shares entitled to vote on the resolutions to be considered at the Shareholders’ meeting.

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     Matters requiring Special Resolution
     Regulation 73 of the existing Articles of Association requires a Special Resolution of the Shareholders of the Company to approve the listing of the Company’s Shares other than for quotation on NASDAQ or a stock exchange in the US; any acquisition of assets which is outside the ordinary course of business of the Company or its subsidiaries or any acquisition, merger, consolidation or business combination that affects the Company or its subsidiaries; any substantial changes in the primary businesses of the Company or its subsidiaries; and any liquidation, dissolution, winding up, bankruptcy insolvency, recapitalization of the Company or its subsidiaries, or the sale of assets or other disposition of substantial part of the assets of the Company and its subsidiaries.
     The Board of Directors believes that provisions under existing Regulation 73 are unusually restrictive for the articles of association of a public listed company and may unnecessarily hinder the development of the Company and the Board of Directors’ ability to take advantage of emerging opportunities.
     The proposed Amended and Restated Articles of Association deletes Regulation 73 in its entirety. The result of the deletion of Regulation 73 is that some of these actions, such as the listing of Shares, the acquisition of assets outside the ordinary course of business of the Company or its subsidiaries, substantial change in the primary businesses of the Company or its subsidiaries, will be subject to a resolution of the Board of Directors instead of a Special Resolution of the Shareholders. The merger, consolidation or other business combination affecting the Company or its subsidiaries, will, in accordance with the requirements of the laws of the British Virgin Islands, be subject to an Ordinary Resolution instead of a Special Resolution of the Shareholders. The liquidation, dissolution, bankruptcy of the Company or its subsidiaries, disposition of more than 50% of the assets of the Company and its subsidiaries will also be subject to approval by an Ordinary Resolution instead of a Special Resolution of the Shareholders, in accordance with the requirements of the laws of the British Virgin Islands.
     In addition to the deletion of Regulation 73, we also propose to make other amendments to the Articles of Association which will eliminate or lower the approval requirements in respect of certain other matters. Transfers of Shares for example, will no longer require any Shareholder approval provided that the transfers of Shares comply with other relevant procedural requirements set out in the proposed Amended and Restated Memorandum and Articles of Association. The issuance of Shares up to 20% of the aggregate number of Shares outstanding immediately prior to such issuance and the disposal of Shares will be subject to a resolution of the Board of Directors instead of a Special Resolution of the Shareholders for so long as our Shares are listed on NASDAQ or another national securities exchange. The issuance of new Shares in excess of 20% of the Shares outstanding immediately prior to such issuance will still require the approval of the Shareholders by an Ordinary Resolution. Other actions, such as the combination or division of Shares, increase and reduction of the Company’s capital will be subject to approval by an Ordinary Resolution instead of a Special Resolution of the Shareholders. We believe that these amendments are consistent with our status as a public listed company and market practice.

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     Classification and Rotation of Directors
     Under the proposed Amended and Restated Articles of Association, directors will be divided into three classes, with the term of each class ending at the annual meeting of the Shareholders three years after the annual meeting at which such directors were elected. Initially, the term of directors of the three classes will end at the annual meeting of Shareholders in 2007, 2008 and 2009. The result of these changes is that only approximately one-third of directors will be subject to resignation, and only that number of directors will be subject to election or re-election by Shareholders, at each annual meeting. Retiring directors shall be eligible for re-election. Under the existing Articles of Association, the entire Board of Directors is treated as one class. The terms of all directors expire at each annual meeting of Shareholders, and all directors are subject to election or re-election by Shareholders at each annual meeting. The Board of Directors believes that the proposed amendments will ensure there is a high degree of continuity in the composition of the Board which will enhance the operation efficiency of the Board of Directors. On the other hand, the classification of the Board of Directors may make it more difficult for shareholders of a potential acquiror to change the composition of the Board of Directors.
     Proceedings of Directors
     Under Regulation 53 of the existing Articles of Association, the Company only needs to provide the directors not less than 3 days advance notice before holding a Board of Directors meeting.
     The proposed amendment to Regulation 53 has increased the notice period from 3 to 7 days. The proposed amendment improves corporate governance by ensuring proper notice is given to directors for any board meeting to be held so that the directors may have sufficient time to consider and evaluate the matters to be discussed during the board meeting.
     Nominating Committee, Compensation Committee and Audit Committee
     The proposed Amended and Restated Articles of Association will add Regulations 106A to C, 106D to F and 134A to C to provide for establishment and maintenance of committees of the Board of Directors, including audit committee, nominating committee and compensation committee, that meet all relevant standards of independence, including those of the United States Securities and Exchange Commission and NASDAQ listing standards, for so long as our Shares are listed on NASDAQ or another national securities exchange. Although we currently have established audit, nominating and compensation committees, the existing Articles of Association have no specific requirements in this regard. This amendment will bring our Articles of Association in line with our current practice.

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     Annual Meeting, Accounts and Audit
     The proposed Amended and Restated Articles of Association will add Regulations 126A – B to impose specific requirements requiring us to hold an annual general meeting of shareholders, to prepare financial statements in accordance with generally accepted accounting principles in the United States (“US GAAP”) and to have such financial statements audited by independent auditors. Although we currently hold an annual general meeting of shareholders, prepare financial statements in accordance with US GAAP and have such financial statements audited by independent auditors, the existing Articles of Association have no specific requirements in this regard. This amendment will bring our Articles of Association in line with our current practice.
     The proposed amendments if approved, will require the directors to cause to be prepared annual financial statements in a way that will giving a true and fair view of the results, financial condition, cash flows of the Company as well as changes in shareholders’ equity as of and for the period ended on the balance sheet date. The directors will have the responsibility to ensure that the financial statements of the Company are fairly presented in accordance with generally accepted accounting principles in the United States in effect from time to time for so long as the Shares of the Company are listed on NASDAQ or another national securities exchange. The proposed amendments will also require that the annual financial statements prepared by the Company be audited by independent auditors who shall comply with standards of independence established by the SEC and the Public Company Accounting Oversight Board.
     In summary, the Board of Directors believe that the proposed amendments, if approved, will bring the Memorandum and the Articles of Association of the Company into line with that of the other listed companies and into full compliance with the relevant SEC rules and NASDAQ requirements. The proposed amendments will strengthen and enhance the Company’s corporate governance and internal control procedures, including internal control over financial reporting, and increase transparency and accountability to Shareholders by requiring annual meetings and preparation of audited financial statements.
     As such, on November 27, 2006, the Board of Directors adopted a resolution by unanimous written consent approving a proposal for the Company to adopt the Amended and Restated Memorandum and Articles of Association containing changes outlined above. The approval of the Amended and Restated Memorandum and Articles of Association requires the approval of Shareholders by a Special Resolution and the Amended and Restated Memorandum and Articles of Association incorporating the proposed amendments are set forth in Annex 6 and 6.1, respectively. The Board of Directors has determined that the adoption of the Amended and Restated Memorandum and Articles of Association is advisable and has directed that the proposal for adoption be considered at the Annual Meeting.
     THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE SPECIAL RESOLUTION WITH RESPECT TO THE PROPOSAL TO ADOPT THE AMENDED AND RESTATED MEMORANDUM AND ARTICLES OF ASSOCIATION.

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PROPOSAL 5
Approval of the Company’s 2006 Stock Option Plan
     On November 16, 2006, Members of the Compensation Committee unanimously resolved by a written resolution to recommend to the Board of Directors of the Company to approve the Company’s 2006 Stock Option Plan (the “2006 Stock Option Plan”). The Board of Directors adopted the 2006 Stock Option Plan on November 27, 2006, which covered 1,000,000 Shares and directed that the 2006 Stock Option Plan be submitted to the Company’s Shareholders for approval at the Annual Meeting.
     The Compensation Committee comprises three independent directors, Mr. Peter Fu, Mr. L C Wan and Mr. Yezhong Ni. The committee was established pursuant to a board resolution adopted on July 25, 2005 for the purposes of establishing remuneration standards for our officers, performing such other functions as provided under employee benefit programs and administering the stock option plans.
     2006 Stock Option Plan
     Types of Grants and Eligibility
     The 2006 Stock Option Plan is designed to provide incentives to employees (including key employees such as officers and directors) of the Company and to consultants and directors who are not employees of the Company and its subsidiary companies (the “Group”) and to offer an additional inducement in obtaining the services of such individuals.
     Shares Subject to the 2006 Stock Option Plan
     The aggregate number of Shares for which options may be granted under the 2006 Stock Option Plan may not exceed 1,000,000 shares, such Shares may consist either in whole or in part of authorized but unissued Shares or Shares held in the treasury of the Company. Shares subject to an option which expires, or for any reason is cancelled or is terminated, unexercised, or which ceases for any reason to be exercisable may again become available for the granting of options under the 2006 Stock Option Plan.

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     Administration of the 2006 Stock Option Plan
     The 2006 Stock Option Plan is administered by the Company’s Compensation Committee (the “Committee”).
     Subject to the express provisions of the 2006 Stock Option Plan, the Committee has the authority, in its sole discretion, with respect to options, to determine, among other things: the key employees, consultants and advisors who are to receive options; the times when they may receive options; the number of Shares to be subject to each option; the term of each option; the date each option is to become exercisable; whether an option is to be exercisable in whole, in part or in installments, and, if in installments, the number of Shares to be subject to each installment; whether the installments are to be cumulative; the date each installment is to become exercisable and the term of each installment; whether to accelerate the date of exercise of any installment; whether Shares may be issued on exercise of an option as partly paid, and, if so, the dates when future installments of the exercise price are to become due and the amounts of such installments; the exercise price of each option; the form of payment of the exercise price; whether to restrict the sale or other disposition of the Shares acquired upon the exercise of an option and to waive any such restriction; and whether to subject the exercise of all or any portion of an option to the fulfillment of contingencies as specified in an applicable stock option contract. With respect to all options, the Committee has such discretion to determine the amount, if any, necessary to satisfy the Company’s obligation to withhold taxes; with the consent of the optionee, to cancel or modify an option, provides such option as modified would be permitted to be granted on such date under the terms of the 2006 Stock Option Plan; to prescribe, amend and rescind rules and regulations relating to the 2006 Stock Option Plan; and to make all other determinations necessary or advisable for administering the 2006 Stock Option Plan. The Board of Directors also has the authority described above with respect to the granting of director options.
     Exercise Price
     The exercise price of the Shares under each option is to be determined by the Committee at the time of the grant. The exercise price of the Shares is to be equal to the fair market value of the Shares subject to such option on the date of grant.
     Term
     The term of each option granted pursuant to the 2006 Stock Option Plan is established by the Committee, in its sole discretion, at or before the time such option is granted. Subject to early termination, the option of each non-employee director is exercisable for a term of ten years from the date of grant.

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     Exercise
     An option (or any part or installment thereof), to the extent then exercisable, is to be exercised by giving written notice to the Company at its principal office. Payment in full of the aggregate exercise price may be made (a) in cash or by certified check, or (b) if the applicable stock option contract at the time of grant so permits, with the authorization of the Committee, with previously acquired Shares having an aggregate fair market value, on the date of exercise, equal to the aggregate exercise price of all options being exercised, or (c) with any combination of cash, certified check or Shares.
     The Committee may, in its discretion, permit payment of the exercise price of an option by delivery by the optionee of a properly executed exercise notice, together with a copy of his irrevocable instructions to a broker acceptable to the Committee to deliver promptly to the Company the amount of sale or loan proceeds sufficient to pay such exercise price.
     Termination of Relationship
     Any employee holder of an option whose employment or relationship with the Company (and its parent and subsidiaries) has terminated for any reason other than his death or disability may exercise such option, to the extent exercisable on the date of such termination, at any time within three months after the date of termination, but not thereafter and in no event after the date the option would otherwise have expired; provided, however, that if his employment is terminated either (a) for cause, or (b) without the consent of the Company, said option terminates immediately. Options granted to employees under the 2006 Stock Option Plan are not affected by any change in the status of the holder so long as he or she continues to be a full-time employee of the Company, its parent or any of its subsidiaries (regardless of having been transferred from one corporation to another).
     Death or Disability
     If an optionee dies (a) while he is an employee or consultant to, the Company, its parent or any of its subsidiaries, (b) within three months after the termination of such relationship (unless such termination was for cause or without the consent of the Company), or (c) within one year following the termination of such relationship by reason of disability, an option may be exercised, to be extent exercisable on the date of death, by an executor, administrator or other person at the time entitled by law to the rights of the optionee under such option, at any time within one year after death, but not thereafter and in no event after the date the option would otherwise have expired.
     Any optionee whose relationship has terminated by reason of disability may exercise his option, to the extent exercisable upon the effective date of such termination, at any time within one year after such date, but not thereafter and in no event after the date the option would otherwise have expired.

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     Adjustments Upon Changes in Shares
     Notwithstanding any other provisions of the 2006 Stock Option Plan, in the event of any change in the outstanding Shares by reason of a share dividend, recapitalization, merger or consolidation in which the Company is the surviving corporation, split-up, combination or exchange of Shares or the like, the aggregate number and kind of Shares subject to the 2006 Stock Option Plan, the aggregate number and kind of Shares subject to each outstanding option and the exercise price thereof will be appropriately adjusted by the Board of Directors, whose determination will be conclusive.
     In the event of (a) the liquidation or dissolution of the Company or (b) a merger or consolidation in which the Company is not the surviving corporation, any outstanding options will terminate, unless other provision is made therefore in the transaction.
     Amendments and Termination of the 2006 Stock Option Plan
     No option may be granted under the 2006 Stock Option Plan after December 2016. The Board of Directors, without further approval of the Company’s Shareholders, may at any time suspend or terminate the 2006 Stock Option Plan, in whole or in part, or amend it from time to time in such respects as it may deem advisable, including, without limitation, to comply with the provisions of certain rules and regulations promulgated by the Securities and Exchange Commission, among other things; provided, however, that no amendment may be effective without the requisite prior or subsequent Shareholder approval which would (a) except as required for anti-dilution adjustments, increase the maximum number of Shares for which options may be granted under the 2006 Stock Option Plan, (b) materially increase the benefits to participants under the 2006 Stock Option Plan, or (c) change the eligibility requirements for individuals entitled to receive options under the 2006 Stock Option Plan.
     Non-Transferability of Options
     No option granted under the 2006 Stock Option Plan may be transferable otherwise than by will or the laws of descent and distribution, and options may be exercised, during the lifetime of the holder thereof, only by such holder or such holder’s legal representatives. Except to the extent provided above, options may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and may not be subject to execution, attachment or similar process.
     THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE SPECIAL RESOLUTION WITH RESPECT TO THE PROPOSAL TO APPROVE THE 2006 STOCK OPTION PLAN.

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PROPOSAL 6
Approval of Appointment of Independent Registered Public
Accounting Firm
     The Audit Committee assists the Board of Directors by overseeing the performance of the independent registered public accounting firm that performs audit services for the Company and is responsible for retaining (subject to Shareholder ratification) and, as necessary, terminating, the independent registered public accounting firm. On November 27, 2006, the Audit Committee of the Board of Directors resolved to appoint Friedman LLP to be the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2006. The term of the Company’s current independent registered public accounting firm, PriceWaterhouseCoopers (“PwC”), which has served as the Company’s independent registered public accounting firm since the Company’s initial public offering in 1996, will expire on December 22, 2006.
     Before selecting Friedman LLP, the Audit Committee carefully considered Friedman LLP’s qualifications as independent accountants for the Company. This included a review of its professional experience, its reputation for integrity and competence in the fields of accounting and auditing. The Audit Committee has expressed its satisfaction with Friedman LLP in all of these respects. The Board of Directors and the Company’s Audit Committee believe that it is appropriate to submit for approval by its Shareholders its appointment of Friedman LLP as the Company’s independent registered public accounting Firm for the fiscal year ending December 31, 2006.
     A representative of Friedman LLP is expected to be present at the Annual Meeting. That representative will have an opportunity to make a statement and will be available to respond to questions regarding this and any other appropriate matters. A brief introduction on Friedman LLP is attached to this Shareholders’ Circular as Annex 7.
     THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ORDINARY RESOLUTION IN RELATION TO THE PROPOSAL TO APPROVE THE APPOINTMENT OF FRIEDMAN LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2006.

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MISCELLANEOUS
Forward-looking Statements
     The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements made in our disclosures to the public. There is certain information contained herein, in our press releases and in oral statements made by authorized officers of the company which are forward-looking statements, as defined by such Act. When used herein, in our press releases and in such oral statements, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” “plans,” and similar expressions are intended to identify forward-looking statements.
GENERAL
     Management does not know of any matters other than those stated in this Shareholders’ Circular that are to be presented for action at the meeting. If any other matters should properly come before the meeting, it is intended that proxies in the accompanying form will be voted on any such other matters in accordance with the judgment of the persons voting such proxies. Discretionary authority to vote on such matters is conferred by such proxies upon the persons voting them.
     The Company will bear the cost of preparing, printing, assembling and mailing the proxy, the Shareholders’ Circular and other material which may be sent to Shareholders in connection with this solicitation. It is contemplated that brokerage houses will forward the proxy materials to beneficial owners at our request. In addition to the solicitation of proxies by use of the mails, officers and regular employees of the Company may solicit proxies without additional compensation, by telephone or telegraph. We have engaged American Stock Transfer & Trust Company, to assist in the distribution of proxy solicitation materials and the solicitation of votes. Other than reimbursement of certain out-of-pocket expenses, there is no additional fee for its service to distribute proxy solicitation materials and the solicitation of votes. We may reimburse brokers or other persons holding stock in their names or the names of their nominees for the expenses of forwarding soliciting material to their principals and obtaining their proxies.
     The Company will provide without charge to each person being solicited by this Shareholders’ Circular, on the written request of any such person, a copy of our Annual Report on Form 20-F for the year ended December 31, 2005 (as filed with the SEC) including the financial statements thereto. All such requests should be directed to the Company Secretary, Room 2413-18, Shui On Centre, 8 Harbour Road, Wanchai, Hong Kong, China.

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WHERE YOU CAN FIND MORE INFORMATION
     CTDC files annual reports on Form 20-F and reports on Form 6-K and other documents with the SEC under the Exchange Act. The Company’s SEC filings made electronically through the SEC’s EDGAR system are available to the public at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information on the operation of the public reference room.
     We “incorporate by reference” information that we file with the SEC in other documents into this Shareholders’ Circular. This means that the Company can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this Shareholders’ Circular. The information that the Company files with the SEC in the future and incorporates by reference in this Shareholders’ Circular automatically updates and supersedes previously filed information. Such updated and superseded information will not, except as so modified or superseded, constitute part of this Shareholders’ Circular.
     The Company incorporates by reference into this Shareholders’ Circular each document we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Shareholders’ Circular and prior to the Annual Meeting. We also incorporate by reference into this Shareholders’ Circular the following documents that we filed with the SEC under the Exchange Act:
    Our Annual Report on Form 20-F for the fiscal year ended December 31, 2005, filed on September 19, 2006;
 
    The Form 6-K on announcement of regaining compliance with NASDAQ continued listing requirements, filed on September 22, 2006; and
 
    The Form 6-K on financial results announcement for the six months ended June 30, 2006, filed on October 6, 2006.

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SHAREHOLDER PROPOSALS
     The Annual Meeting of Shareholders for the fiscal year ending December 31, 2007 is expected to be held in October 2007. Any Shareholder proposal intended to be included in the Company’s Shareholders’ Circular and form of proxy for presentation at the 2007 Annual Meeting of Shareholders (the “2007 Meeting”) pursuant to Rule 14a-8 (“Rule 14a-8”), as promulgated under the Securities Exchange Act of 1934, as amended, must be received by the Company not later than April 30, 2007. As to any proposals submitted for presentation at the 2007 Meeting outside the processes of Rule 14a-8, the proxies named in the form of proxy for the 2007 Meeting will be entitled to exercise discretionary authority on that proposal unless the Company receives notice of the matter on or before April 30, 2007.
         
 
  By Order of the Board of Directors    
 
       
 
 
 
Michael Siu
   
 
  Company Secretary    
November 28, 2006

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Annex 1
Altus Capital Limited
8/F Hong Kong Diamond Exchange Building
8 Duddell Street, Central
Hong Kong
14 November 2006
The Special Committee
China Technology Development Group Corporation
Room 2413-18, 24/F Shui On Centre
8 Harbour Road
Wanchai
Hong Kong
Dear Sir/Madam,
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
(THE “COMPANY”)
SUBSCRIPTION OF NEW SHARES AND WARRANTS TO BE ISSUED BY THE COMPANY
BY A NUMBER OF NEW INVESTORS
INTRODUCTION
We refer to our appointment as independent financial adviser to advise the Special Committee, which comprises Messrs. Xinping Shi, LC Wan and Weidong Wang, in relation to, in particular, the fairness and reasonableness on the pricing of the proposed subscription of new shares of the Company (“New Shares”) and warrants (“Warrants”) to be issued by the Company, by a number of new investors (collectively, the “Transactions”).
For the avoidance of doubt, this Letter is addressed only to the Special Committee and not to the shareholders of the Company. The purpose of this Letter is to assist the Special Committee in forming an opinion on the fairness and reasonableness of the prices for the Transactions.
BASIS OF OUR OPINION AND RECOMMENDATION
In formulating our opinion with regard to the Transactions, we have relied to a considerable extent on the information, statements, opinions and representations contained in filings of the Company to the regulators, including the United States Securities and Exchange Commission and the information, opinions and representations provided or made to us by the Directors and representatives of the Company. We assume that all such information, statements, opinions and representations, for which the Directors and representatives of the Company are solely and wholly responsible, are true and

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Annex 1
accurate at the time when they were made and continue to be so at the date hereof. We have assumed that all statements of belief, opinion and intention of the Directors were reasonably made after due and careful inquiry. We have also sought and obtained confirmation from the Company that no material facts have been omitted from the information provided and referred to. We have also relied on certain publicly available information and we have assumed such information to be accurate and reliable, and we have not carried out any independent verification on the accuracy of such information.
The Directors confirmed that they have provided us with all currently available information and documents which are available under present circumstances to enable us to reach an informed view, and we have relied on the relevant information so as to provide a reasonable basis for our opinion. We have no reason to suspect that any material facts or information (which is known to the Company, its representatives and the Directors) have been omitted or withheld from the information supplied or opinions expressed nor to doubt the truth, accuracy and completeness of the information, facts, and representation provided, or the reasonableness of the opinions expressed by the Company, its representatives and the Directors. We have not carried out any independent verification on the information provided to us by the Company, its representatives and the Directors, nor have we conducted any form of independent in-depth investigation into the business and affairs, assets and liabilities of the Company, and the prospects of the Group.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In forming our opinion and recommendation, we have taken into consideration the following principal factors and reasons:
1.   BACKGROUND OF THE TRANSACTION
The Company has appointed China Merchants Securities (HK) Co., Ltd. as placing agent for the placing of an aggregate of 2,500,000 New Shares, with the Warrants to purchase an additional 3,000,000 New Shares. The New Shares represent: (i) approximately 22.11% of the existing issued share capital of the Company; and (ii) approximately 18.10% of the issued share capital as enlarged by the placing of New Shares (before full exercise of the Warrants).
The New Shares will be placed at the range of US$2.25 to 2.75 per New Share and the Company will also allot and issue the Warrants to the placees of the New Shares. The Warrants will be issued in units of US$0.01 each for a total of US$30,000 in Warrant premium which entitle the holder thereof to subscribe for shares of the Company (“Shares”). According to the Company, China Biotech Holdings Limited (“CBH”) intends to subscribe for 1,500,000 New Shares. Mr. Alan Li, Mr. Zhenwei Lu and Mr. Yibing Zhang, respectively the Director, Chief Investment Officer and Senior Vice-President of the Company, are also directors of CBH.

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Gross proceeds from the placing of New Shares and the Warrants are estimated to be between US$5,655,000 and US$6,905,000 and the Company intends to use the net proceeds: (i) to fund the existing business operations of the Group; (ii) to expand the businesses of the Group including the construction of a factory in Fujian etc.; and (iii) for general working capital of the Group.
Based on the 11,309,497 Shares in issue as at the date hereof, the price range of US$2.25 to 2.75 per New Share values the Company at between US$25.45 million and US$31.10 million.
2.   FINANCIAL PERFORMANCE OF THE GROUP
The Company and its subsidiaries (collectively, the “Group”) were originally engaged in the sanitary wares and ceramic tiles manufacturing business. This business was subsequently disposed of and the Group ventured into internet-related business in June 2000, focusing on system integration services. In 2001, the Group began to phase out the system integration business due to intense competition and in turn, repositioned itself as a network security service and related software developer (“IT Business”). It further ventured into the nutraceutical business in October 2005, which involves the development of nutraceutical products utilising bio-active components of bamboo (“Nutraceutical Business”).
Set out below is an extract of information on the continuing operations of the Group based on its audited consolidated results for the three financial years ended 31 December (“FY”) 2005 and its unaudited consolidated results for the six months ended 30 June 2005 (“HY2005”) and 30 June 2006 (“HY2006”):
                                         
US$’000 (Note 1)   FY2003     FY2004     FY2005     HY2005     HY2006  
Continuing operations
                                       
Revenue
    1,051       340       939       416       581  
Cost of sales
    (553 )     (174 )     (412 )     (211 )     (307 )
 
                             
 
                                       
Gross profit
    498       166       527       205       274  
 
                             
 
                                       
Operating loss
    (548 )     (1,348 )     (2,237 )     (293 )     (851 )
Loss attributable to shareholders
    (164 )     (1,297 )     (2,407 )     (254 )     (736 )
 
                                       
Gross profit margin
    47.4 %     48.8 %     56.1 %     49.3 %     47.2 %
Selling, general and administrative expenses (“SG&A”)
    (1,046 )     (972 )     (2,748 )     (498 )     (1,125 )

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Note 1:   The functional currency of the Company is Renminbi (“Rmb”), the lawful currency of the People’s Republic of China. For the convenience of readers, translation of amounts from Rmb into United States Dollars (“US$”) has been made at the noon buying rate in New York City for cable transfer in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York City on June 30, 2006 of Rmb 7.9943 = US$1.00 for the operating results of FY2003, FY2004, FY2005, HY2005 and HY2006. No representation is made that the Rmb amounts could have been, or could be, converted into US$ at that rate or at any other certain rate.
FY2004 vs. FY2003
Revenues decreased by more than two-thirds in FY2004 compared to the previous year as the restructuring exercise at the Group’s largest customer of the IT Business resulted in cessation of orders from the Group for two quarters. Consequently, gross profit also decreased accordingly although gross profit margin has been maintained.
As SG&A were only marginally lower despite the large decline in revenue, loss attributable to shareholders increased sharply to US$1.30 million in FY2004 compared with US$0.16 million in FY2003.
FY2005 vs. FY2004
Revenues increased substantially in FY2005 due to (i) the resumption of orders from the Company’s largest customer and increase orders from new customers; and (ii) additional contribution from the Nutraceutical Business from October 2005 onwards. Gross profit margins improved as there is a higher proportion of sales of self-developed products for which the Group has more effective control on material costs.
Despite an increase in gross profit, loss attributable to shareholders increased to US$2.4 million following significant increase in SG&A, which was due mainly to increases in (i) headcount at both corporate office level and the IT Business; and (ii) legal and professional fees incurred for acquisition of the Nutraceutical Business and advisory services.
HY2006 vs HY2005
Compared with HY2005, revenue increased in HY2006 due to additional contribution from the Nutraceutical Business. This is despite a decline in revenue of IT Business. With gross profit margin being maintained at similar levels, gross profit improved to US$0.27 million.
Notwithstanding, SG&A was substantially higher due to higher product development headcount for the IT Business as well as expenses relating to the expansion of corporate office. Consequently, loss attributable to shareholders increased by about 190% to US$0.74 million.

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In summary, the business track record of the Group has not been satisfactory in the past few years. While gross profit margins were maintained, there has been significant fluctuation in revenue between FY2003 and FY2005 due to reliance on certain customers. The Group has continued to incur losses during the period under review as SG&A increased following headcount increases at the corporate office and IT Business and the acquisition of the Nutraceutical Business.
3.   BUSINESS PROSPECTS
Since its inception, the Group’s businesses have undergone several transformations. The Group exited from the sanitary wares and ceramic tiles business in year 2000 as this business segment suffered significant losses where profit margins were eroded as a result of competitions. The Group also terminated its system integration services due to market competitions and repositioned itself as a network security service provider.
IT Business
IDC recently forecast that the performance of the network security market of the People’s Republic of China (“PRC”) would maintain a steady growth rate with compounded annual growth rate (CAGR) of about 20.9% in the coming five years. Total sales in 2010 are estimated to reach US$976 million. According to the management, the Group’s hardware and software products are recognized as the leading network solutions in the PRC and targets large enterprises and government bureaus. The Group is progressively shifting towards marketing its self-developed products, which command higher profit margins.
While the network security market is poised to grow, it is also highly competitive and requires intensive capital investment in research and development (“R&D”) capabilities. We believe the Group’s success in this business segment may be dependent on the management’s ability in setting and executing sound business strategies. These include its ability to successfully market its self-developed products under its own brand name, develop its sales network and maintain competitiveness in terms of R&D capabilities. Also, efforts may need to be made to further diversify the Group’s customer base to avoid over reliance.
Nutraceutical Business
The health dietary supplement market in the PRC has a growth rate of 20% and is expected to continue to grow, as the general public becomes more health conscious and affluent. While the current market is highly fragmented and based mainly on traditional Chinese medicinal and manufacturing processes, going forward, products are likely to be more scientifically based. This will benefit the Group’s products.
The Nutraceutical Business of the Group is at an early stage of development as the products are still being marketed. Being newly acquired, it may take time to fully integrate the Nutraceutical Business.

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In summary, there are no clear indications that the business and financial performance of the Group will significantly turnaround in the near term although in the longer term, both the IT Business and Nutraceutical Business appear to have vast potential, capitalizing on the general growth of the PRC market.
Given the Group’s relatively limited track record in the IT Business and Nutraceutical Business, we believe their success will be dependent on the management’s strategy going forward in the areas of brand-name building, margin enhancement, sales network development and continued capital investment in R&D.
4.   FINANCIAL POSITION OF THE GROUP
Set out below is an extract of information of the Group based on its audited consolidated balance sheet as at 31 December 2005 and its unaudited consolidated balance sheet as at 30 June 2006:
                 
    As at 31     As at 30  
US$’000 (Note 1)   December, 2005     June, 2006  
Assets
               
Current assets
               
Cash and cash equivalents
    2,292       878  
Inventories
    323       380  
Due from related parties
    1,057       1,106  
Others
    342       384  
 
               
Non-current assets
               
Property, plant, equipment and land
    1,213       1,123  
Intangible asset
    818       737  
Goodwill
    8,697       8,697  
Total assets
    14,742       13,305  
 
               
Liabilities
               
Accrued professional fees
    484       313  
Due to a related party
    446       62  
Others
    775       707  
Total liabilities
    1,705       1,082  
Minority interests
    690       619  
 
               
Shareholders’ equity
    12,347       11,604  

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Note 1:   The functional currency of the Company is Renminbi (“Rmb”), the lawful currency of the People’s Republic of China. For the convenience of readers, translation of amounts from Rmb into United States Dollars (“US$”) has been made at the noon buying rate in New York City for cable transfer in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York City on June 30, 2006 of Rmb 7.9943 = US$1.00 for the financial position as of December 31, 2005 and June 30, 2006. No representation is made that the Rmb amounts could have been, or could be, converted into US$ at that rate or at any other certain rate.
Due to continued losses during the six months ended 30 June 2006, shareholders’ equity deteriorated to US$11.6 million as at 30 June 2006.
It is noted that a large proportion of the Group’s assets of US$13.3 million as at 30 June 2006 consisted of goodwill and intangible asset, which in aggregate amounted to US$9.4 million. Compared with 31 December 2005, cash and cash equivalent have decreased to US$0.9 million as cash was deployed for business expansions. The reduction was also due to repayment to a related party and payments of professional fees. Meanwhile, liabilities have reduced following the aforesaid repayments.
Based on the 11,309,497 Shares in issue as at the date hereof, the net asset value per Share is US$1.03. Excluding the goodwill and intangible asset, the net tangible asset value per Share is US$0.19.
5.   SHARE TRADING HISTORY
The chart below depicts the historical prices of Shares and trading volume since late 2001.
(LINE GRAPH)

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Historically, there have been significant fluctuations in the prices of Shares and trading volume, particularly since year 2005. In 2005, it traded at a high of US$8.80 and a low of US$1.53 per Share. For year 2006 to-date, Shares traded between a large range of US$1.20 and US$14.50 per Share. During the period, the Company has made several public announcements, amongst others:
  (i)   The Company announced on 6 January 2006 that it completed the acquisition of the remaining 49% equity interest in CNT under its Nutraceutical Business;
 
  (ii)   The Company announced on 6 January 2006 its intent on changing its corporate name to China Technology Development Group Corporation;
 
  (iii)   The Company reported on 3 February 2006 that Beijing Holdings has appointed a placing agent to dispose of part of its holding of 1,100,000 Shares at a price of US$2.15 per Share and the reason for the sale was to bring in strategic partners to enhance the Company’s future development;
 
  (iv)   The Company announced on 21 July 2006 that it received a delisting notification from Nasdaq due to failure to file its annual report with the authorities; and
 
  (v)   The Company announced on 22 September 2006 that it has regained compliance with Nasdaq’s continued listing requirement.
The management has confirmed that there are currently no negotiations or agreements relating to intended acquisitions or realisations by the Company and has also confirmed that they are not aware of any matter that is or may be of a market-sensitive nature. We are of the view that the fluctuations in the prices and trading volume of Shares may be due to speculative activities based on the corporate development of the Company as described above.
Having taken into account the Group’s financial performance and position as well as its business prospects, we believe there is no fundamental basis supporting the current price level of approximately US$7.76 per Share as at the date hereof.
6.   PAST FUND RAISING EFFORTS
The Group has made various fund raising efforts in the past year. The Company entered into an agreement with Ivory Capital Asia Pte Ltd in July 2005 for the provision of financial advisory services and to raise a minimum of US$20 million in new capital for the Group.
According to the management, such efforts have however not been successful due to lack of demand for the Shares and Share price volatility.

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RECOMMENDATION
In summary,
  (i)   the Group has undergone several business transformation and has been loss-making in the past few financial years;
 
  (ii)   while there is immense market potential, the Group’s current IT Business and Nutraceutical Business are still at development stage and there is no clear signs of a significant turnaround in the Group’s financial performance in the near term. Given the Group’s limited track record, their future successes are dependent on the management’s ability to formulate and execute sound business strategies;
 
  (iii)   the price range of US$2.25 to 2.75 per New Share represents a significant premium to the net asset value and net tangible asset value per Share of US$1.03 and US$0.19 respectively;
 
  (iv)   there has been significant fluctuations in the prices and trading volume of the Shares. There appears no fundamental basis supporting the current high price level of the Shares; and
 
  (v)   the Company’s previous fund raising efforts have not been successful and the price range of US$2.25 to 2.75 per New Share is based on arm’s length negotiations with the placees,
Based on the above and from the point of view of minority shareholders of the Company, we believe the price range of US$2.25 to 2.75 per New Share is a fair and reasonable price. The exercise price of the Warrants of US$5.00 is also fair and reasonable.
Yours faithfully,
For and on behalf of
Altus Capital Limited
Sean Pey, Chang
Executive Director

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Subscription Agreements
Dated November 27, 2006
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
and
CHINA BIOTECH HOLDINGS LTD.
 

Subscription Agreement
 
Baker & McKenzie
14/F, Hutchison House
10 Harcourt Road
Hong Kong Special Administrative Region, China

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CONTENTS
             
        Page
ARTICLE 1
  Definitions And Interpretation     74  
 
           
ARTICLE 2
  Agreement to Subscribe     80  
 
           
ARTICLE 3
  Completion     81  
 
           
ARTICLE 4
  Agreements of the Subscriber     83  
 
           
ARTICLE 5
  Representations and Warranties of Subscriber     86  
 
           
ARTICLE 6
  Agreements of the Issuer     90  
 
           
ARTICLE 7
  Representations and Warranties of the Issuer     92  
 
           
ARTICLE 8
  Conditions Precedent     98  
 
           
ARTICLE 9
  Indemnification     101  
 
           
ARTICLE 10
  Miscellaneous Provisions     101  
 
           
EXECUTION
        105  
 
           
EXHIBIT A
  Form of Warrant Certificate     106  
 
           
EXHIBIT B
  Form of Notice of Exercise     115  
 
           
SCHEDULE A
  Issuer’s Receiving Bank Account Information     118  

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SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of November 27, 2006, by and among China Technology Development Group Corporation, a company incorporated under the laws of the British Virgin Islands with its registered address at P.O. Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands (the “Issuer”) and China Biotech Holdings Limited, a company incorporated under the laws of the British Virgin Islands with its registered address at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands (the “Subscriber”).
WHEREAS, the Shares of the Issuer are listed for trading on NASDAQ.
WHEREAS, subject to the terms and conditions set out in this Agreement, the Issuer wishes to issue Subscription Shares and Warrants to the Subscriber, and the Subscriber wishes to subscribe for such Shares and Warrants.
WHEREAS, concurrently with the execution of this Agreement, the Subscriber will enter into a Share Sale and Purchase Agreement, pursuant to which agreement it will acquire a total of 2,000,000 Shares of the Issuer that are currently issued and outstanding.
WHEREAS, the Completion (as defined hereinafter) of the sale and purchase of the SPA Sale Shares pursuant to the Share Sale and Purchase Agreement, and the completion of the placing of the Placing Sale Shares pursuant to the Placing Agency Agreement are conditions precedent to the Completion of the subscription for the Subscription Shares and Warrants pursuant to this Agreement.
WHEREAS, simultaneously with the execution of this Agreement the Issuer is entering into a Registration Rights Agreement with the Subscriber covering the Subscription Shares, the Warrant Shares and the SPA Sale Shares.
WHEREAS, the Issuer and the Subscriber note that upon the completion of this Agreement, the Subscriber may be deemed to be an affiliate of the Issuer.

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NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement, and other good and valuable consideration receipt of which is hereby acknowledged, the Issuer and the Subscriber hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1   Definitions.        The following terms will have the following meanings for all purposes of this Agreement:
  (a)   Accredited Investor – shall have the following meaning as defined in Rule 501 of Regulation D:
  i.   a bank, insurance company, registered investment company, business development company, or small business investment company;
 
  ii.   an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
 
  iii.   a charitable organization, corporation, or partnership with assets exceeding $5 million;
 
  iv.   a director, executive officer, or general partner of the company selling the securities;
 
  v.   a business in which all the equity owners are accredited investors;
 
  vi.   a natural person who has individual net worth, or joint net worth with the person spouse, that exceeds $1 million at the time of the purchase;
 
  vii.   a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
 
  viii.   a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

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  (b)   “affiliates” means the persons that directly, or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the person specified as defined in Rule 405 under the Securities Act.
 
  (c)   “Aggregate Share Subscription Price” is as defined in Article 2, Section 2.1(a).
 
  (d)   “Aggregate Subscription Price” is as defined in Article 2, Section 2.1(b).
 
  (e)   “Aggregate Warrant Subscription Price” is as defined in Article 2, Section 2.1(b).
 
  (f)   “Business Days” means any day, excluding Saturdays, on which banks in Hong Kong are generally open for business.
 
  (g)   “change in internal controls over financial reporting” as defined in Item 308(c) of Regulation S-K, means the disclosure of any change in the registrant’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the registrant’s last fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
 
  (h)   “Completion” means the completion of the Transaction.
 
  (i)   “Completion Date” is as defined in Article 3, Section 3.1.
 
  (j)   “Common Stock” means the shares of the Issuer, par value US$0.01 per share.
 
  (k)   “directed selling efforts” means any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the securities being offered in reliance on Regulation S, as defined in Rule 902 of Regulation S.
 
  (l)   “distribution compliance period” means a period that begins when the securities were first offered to persons other than distributors in reliance upon this Regulation S or the date of Completion of the offering, whichever is later, and continues until the end of the period of time specified in the relevant provision of Rule 903 of Regulation S, except for certain transactions as set out in Rule 902 of Regulation S.

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  (m)   “Escrow Agreement” means the escrow agreement dated November 27, 2006, by and among Arculli Fong & Ng, the escrow agent, the Subscriber, Beijing Holdings Limited (“Beijing Holdings”), China Internet Technology Co. Ltd (“China Internet”), CMEC Ceramics Holdings Limited (“CMEC”) and Perfect Capital Holdings Limited (“Perfect Capital”), pursuant to the requirements under the Share Sale and Purchase Agreement and the Placing Agency Agreement;
 
  (n)   “foreign issuer” means any issuer which is a foreign government, a national of any foreign country or a corporation or other organization incorporated or organized under the laws of any foreign country, as defined in Rule 405 under the Securities Act.
 
  (o)   “foreign private issuer” as defined in Rule 405 under the Securities Act, means any foreign issuer other than a foreign government except an issuer meeting the following conditions:
  i.   More than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States; and
 
  ii.   Any of the following:
    The majority of the executive officers or directors are United States citizens or residents;
 
    More than 50 percent of the assets of the issuer are located in the United States; or
 
    The business of the issuer is administered principally in the United States.
  (p)   “Hong Kong SAR” means the Hong Kong Special Administrative Region, the People’s Republic of China.
 
  (q)   “Issuer” means China Technology Development Group Corporation, a company incorporated under the laws of the British Virgin Islands.

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  (r)   “Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any of this Agreement, the Warrants and any other documents executed or delivered with this Agreement or in connection herewith, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Issuer and the subsidiaries, taken as a whole, or (iii) an impairment to the Issuer’s ability to perform on a timely basis its obligations under any Transaction Document.
 
  (s)   “NASDAQ” means The Nasdaq Stock Market, Inc.
 
  (t)   “Placing Agency Agreement” means the placing agency agreement, dated November 27, 2006, by and among Beijing Holdings, China Internet, CMEC and Perfect Capital as vendors of 4,250,000 Shares (“Placing Sale Shares”), and China Merchants Securities (HK) Co. Ltd. (“Placing Agent”), in respect of the placing of the Placing Sale Shares.
 
  (u)   “Registration Rights Agreement(s)” means the agreements by and between the Issuer and each of the Subscriber, Eastern Ceremony Group Limited (“Eastern Ceremony”), Harvest Smart Overseas Limited (“Harvest Smart”) and Beijing Holdings, which governs the rights of the Subscriber, Eastern Ceremony, Harvest Smart and Beijing Holdings, to cause the Issuer to register the Registrable Securities as defined therein.
 
  (v)   “Reports” means the Annual Reports of the Issuer on Form 20-F filed with the SEC.
 
  (w)   “restricted securities” means for purpose of this Agreement securities acquired directly or indirectly from the issuer, or from an affiliate of the issuer, in a transaction or chain of transactions not involving any public offering.
 
  (x)   “SEC” means the United States Securities and Exchange Commission.
 
  (y)   “Securities” means the Subscription Shares, the Warrants and the Warrant Shares.
 
  (z)   “Securities Act” means the United States Securities Act of 1933, as amended.
 
  (aa)   “Shares” means the shares of the Issuer, par value US$0.01 per share, which are listed for trading on NASDAQ.

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  (ab)   “Share Sale and Purchase Agreement” means the agreement, dated November 27, 2006, by and between Beijing Holdings Limited and the Subscriber for the sale and purchase of 2,000,000 Shares of the Issuer (“SPA Sale Shares”).
 
  (ac)   “Share Transfer Agent” means American Stock Transfer and Trust Company.
 
  (ad)   “Shareholders’ Circular” means the shareholders’ circular attached to the proxy and the notice of the Shareholders’ Meeting, to be dated on or about November 28, 2006, of the Issuer.
 
  (ae)   “Shareholders’ Meeting” means the shareholders’ 2006 annual meeting of the Issuer, to be held on December 22, 2006, convened by the Board of Directors of the Issuer.
 
  (af)   “Subscriber” means China Biotech Holdings Ltd., a company incorporated under the laws of British Virgin Islands, as identified on the signature page hereof.
 
  (ag)   “Subscription Agreement(s)” means this Agreement and the agreements by and between the Issuer and each of Eastern Ceremony and Harvest Smart, for the subscription of the Subscription Securities as defined therein.
 
  (ah)   “Subscription Securities” means, in relation to the Subscriber, the Subscription Shares and Warrants subscribed for by the Subscriber pursuant to this Agreement.
 
  (ai)   “Subscription Shares” means 1,500,000 newly issued Shares of the Issuer.
 
  (aj)   “Transaction” means, for purpose of this Agreement, the subscription of the Subscription Securities by the Subscriber for the Aggregate Subscription Price.
 
  (ak)   “Transaction Documents” shall mean this Agreement (including the Warrants), the Registration Rights Agreement between the Issuer and the Subscriber, the Share Sale and Purchase Agreement, the Placing Agency Agreement, and the Subscription Agreements and the Registration Rights Agreements for each of Eastern Ceremony and Harvest Smart.

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  (al)   A “U. S. Person” means any person who is:
  (i)   any natural person resident in the United States;
 
  (ii)   any partnership or corporation organized or incorporated under the laws of the United States;
 
  (iii)   any estate of which any executor or administrator is a U.S. person;
 
  (iv)   any trust of which any trustee is a U S person;
 
  (v)   any agency or branch of a foreign entity located in the United States;
 
  (vi)   any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and
 
  (vii)   any partnership or corporation if
  (A)   organized or incorporated under the laws of any foreign jurisdiction; and
 
  (B)   formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors who are not natural persons, estates or trusts.
  (am)   “Warrants” means 2,000,000 warrants for the purchase of 2,000,000 newly issued Shares of the Issuer.
 
  (an)   “Warrant Shares” means the Shares currently issuable pursuant to exercise of the Warrants.

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ARTICLE 2
AGREEMENT TO SUBSCRIBE
             
2.1   Subscription.   Subject to the terms and conditions of this Agreement, the Issuer agrees to issue and allot, and the Subscriber agrees to subscribe for and purchase:
 
           
 
  (a)   Subscription Shares.   The number of Subscription Shares specified on the signature page hereto at the Subscription Price per Share (the product of such number of Subscription Shares and the Subscription Price per Share is the Subscriber’s “Aggregate Share Subscription Price”).
 
           
 
  (b)   Warrants.   The number of Warrants specified on the signature page hereto at the Subscription Price per Warrant (the product of such number of Warrants and the Subscription Price per Warrant is the Subscriber’s “Aggregate Warrant Subscription Price”; the sum of the Subscriber’s Aggregate Share Subscription Price and Aggregate Warrant Subscription Price is the Subscriber’s “Aggregate Subscription Price”). The Subscription Shares and Warrants to be subscribed by the Subscriber are the “Subscription Securities”.
 
           
2.2   Acceptance by the Issuer.   The Issuer will not accept subscriptions from any person who:
 
           
 
  (a)   Delivery of Agreement.   Fails to deliver this Agreement duly executed, containing representations, warranties and acknowledgements as to, among other things, such person’s qualification as an institutional “accredited investor”, as such term is defined in Rule 501 of Regulation D under the Securities Act; its identity as not being a “U.S. person” as such term is defined in Regulation S under the Securities Act, and others.
 
           
 
  (b)   Compliance with Laws.   Fails to comply with all securities laws and other applicable laws of the jurisdiction in which the Subscriber is resident, or fails to deliver such certificates, representations, warranties or other documents as counsel for the Issuer may reasonably require to verify compliance with such laws.

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Any subscriptions received by the Issuer from persons who do not comply with this Section 2.2 will be returned to such person without interest.
 
           
2.3   Warrants.   The certificates evidencing the Warrants shall be substantially in the form set out as Exhibit A to this Agreement.
 
           
2.4
  Placing Agent.   The Issuer and the Subscriber hereby agree in respect of the Subscription Securities to appoint China Merchants Securities (HK) Co. Ltd. as the placing agent (“Placing Agent”), and the Placing Agent hereby agrees to act as the sole placing agent for the Issuer in respect of the Subscription Securities on terms and subject to conditions set out in this Agreement. For avoidance of doubt, the Placing Agent has agreed not to charge the Issuer or the Subscriber any commissions, fees or transactional charges of any kind in connection with this Agreement.
ARTICLE 3
COMPLETION
         
3.1
  Completion Date.   Subject to the satisfaction of the conditions set out in Article 8, the Completion of the sale and purchase of the Subscription Securities contemplated in this Agreement shall take place on the day agreed by the parties that is not later than sixty (60) days following the concurrent completion of the Share Sale and Purchase Agreement, the Placing Agency Agreement, the Subscription Agreements and the Registration Rights Agreements between the Issuer and each of Eastern Ceremony and Harvest Smart, and the execution of the Escrow Agreement, or such other date as the parties may agree.
 
       
3.2
  Completion Transactions.   On the Completion Date, subject to fulfillment of the Conditions Precedent as set out in Clause 8, Completion shall take place at 8:30 a.m. on the Completion Date in the offices of Baker & McKenzie, legal advisor to the Issuer in the following manner: –
  (a)   On the Completion Date, the Subscriber shall have transferred through the Clearing House Automatic Transfer System (“CHATS”) in immediately available funds the sum in US dollars equal to the Subscriber’s Aggregate Subscription Price to an account opened with the Placing Agent;

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  (b)   subject to the satisfaction of Clause 8 and other terms and conditions of this Agreement, including but not limited to the presentation of all required board approvals, shareholders’ approvals, certifications and other requested documentation, on the Completion Date, the Subscriber shall instruct the Placing Agent to transfer the Aggregate Subscription Price from its account with the Placing Agent to an Issuer’s account (information set out in Schedule A attached hereto) opened with the Placing Agent that is jointly operated by persons designated by the board of directors of the Issuer and satisfactory to the Subscriber;
 
  (c)   subject to the satisfaction of Clause 8 and other terms and conditions of this Agreement, the Issuer, upon receipt of the applicable amount of the Aggregate Subscription Price shall issue a confirmation to the Subscriber and the Placing Agent; the Issuer shall also deliver the newly issued share certificates representing the Subscription Shares and Warrants to the Subscriber on the Completion Date and concurrently provide certified copies of the same to the Placing Agent; and
 
  (d)   subject to the satisfaction of Clauses 3, 8, and other terms and conditions of this Agreement, on the Completion Date, the Issuer shall issue a written instruction to the Share Transfer Agent authorizing and requesting the Share Transfer Agent to enter and record the name of the Subscriber in the register of members of the Issuer as registered shareholder of the Issuer. The Issuer shall take necessary steps to update the copy of the register of members maintained at the registered office of the Issuer in the British Virgin Islands in accordance with the relevant laws and regulations.

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ARTICLE 4
AGREEMENTS OF THE SUBSCRIBER
         
4.1
  Exemption from Registration.   The Subscriber acknowledges and agrees that the Securities will be offered and sold to the Subscriber without such offers and sales being registered under the Securities Act and will be issued to the Subscriber in an offshore transaction outside of the United States in accordance with a safe harbour from the registration requirements of the Securities Act, in reliance provided by Rule 903 of Regulation S of the Securities Act based on the representations and warranties of the Subscriber in this Agreement.
 
       
4.2
  Resales of Securities.   The Subscriber acknowledges that after giving effect to the Transaction contemplated by this Agreement and the Sale and Purchase Agreement, it may be deemed to be an “affiliate” of the Issuer, as such term is defined in Rule 405 under the Securities Act. The Subscriber may not offer, sell, resell, pledge or otherwise transfer (any such action being referred to hereinafter as “reselling”, or “resale”) the Securities except pursuant to an available exemption from registration under the Securities Act or pursuant to an effective registration statement under the Securities Act and in compliance with all applicable state securities laws and the laws of any other jurisdiction. Accordingly, the Subscriber agrees to resell the Securities only in accordance with the provisions of Rule 903 or 904 of Regulation S of the Securities Act, pursuant to an effective registration statement under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act, including the exemption from registration provided by Rule 144 under the Securities Act. In particular, the Subscriber agrees that it will not offer, sell, resell, pledge or otherwise transfer (including to a nominee) the Subscription Securities except (a) during the period of one year commencing on the Completion Date, (i) in compliance with Rule 903 of Regulation S under the Securities Act, or (ii) pursuant to an effective registration statement; and (b) after one year from the Completion Date, (i) pursuant to either of clause (a)(i) or (a)(ii) above, or (ii) pursuant to the exemption provided by Rule 144 under the Securities Act, if available. The Subscriber acknowledges that the Issuer makes no representations regarding the availability of the exemption provided by Rule 144 at any time. The Subscriber agrees

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      that the Issuer will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act or pursuant to an available exemption from registration. The Subscriber agrees that the Issuer may require an opinion of legal counsel reasonably acceptable to the Issuer in the event of any resale of any of the Securities by the Subscriber pursuant to an exemption from registration under the Securities Act.
 
       
4.3
  Hedging Transactions.   The Subscriber agrees not to engage in or enter into any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic consequences of ownership of the Securities may be transferred to any person, including any U.S. person.
 
       
4.4
  Share Certificates.   The Subscriber acknowledges and agrees that all certificates representing the Subscription Shares and the Warrant Shares (if issued in certificated form) will be endorsed with the following legend, or such similar legend as deemed advisable by legal counsel for the Issuer, to ensure compliance with Regulation S of the Securities Act and to reflect the status of the Subscription Shares and Warrant Shares as securities held by affiliates of the Issuer:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
         
4.5
  Warrant Certificates.   The Subscriber acknowledges and agrees that all certificates representing the Warrants will be endorsed with the following legend, or such similar legend as deemed advisable by legal counsel for the Issuer, to ensure compliance with Regulation S of the Securities Act and to reflect the status of the Warrants as securities held by affiliates of the Issuer:

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THE WARRANT AND THE UNDERLYING SHARES AND WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY RELEVANT STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN THEM BY REGULATION S UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
         
4.6
 
Notice of Transfer Restrictions to Subsequent Transferees.
  The Subscriber will advise any subsequent transferee of the Subscription Securities of the foregoing restrictions on transfer, and will procure that any such transferee shall deliver to the Issuer an undertaking to observe and be bound by such restrictions.
         
4.7
  Removal of Legends.   Upon application by the Subscriber and the transferee, the Issuer may instruct the share registrar to reissue share certificates that do not bear such legends (i) in the case of a resale by a non-affiliated Subscriber pursuant to Rule 904 of Regulation S, after the expiration of the 40-day distribution compliance period, (ii) in the case of a resale of such securities pursuant to an effective registration under the Securities Act or (iii) where certified by an opinion of counsel recognized as being experienced in matters of United States securities laws in form and content reasonably satisfactory to the Issuer to the effect that the securities proposed to be disposed of may be lawfully so disposed of without registration, qualification or legend. In the case of an application under (iii) above, the Issuer may require appropriate certifications, acknowledgements, representations and warranties of the Subscriber and the transferee, and an opinion of legal counsel reasonably acceptable to the Issuer.

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4.8
  Lock-Up.   The Subscriber agrees that during the period beginning from the Completion Date and continuing to and including the date that is 12 months after the Completion Date, it will not (i) offer, sell, contract to sell, pledge or otherwise dispose of, or permit any person acting on its behalf to offer, sell, contract to sell, pledge or otherwise dispose of, any Subscription Shares, Warrants or Warrant Shares, or (ii) engage in or enter into any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic consequences of ownership of the Subscription Shares, Warrants or Warrant Shares may be transferred to any person.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER
         
5.1
  Representations and Warranties.   The Subscriber hereby represents and warrants to the Issuer, and agrees with the Issuer, that:
 
       
 
  (a) No Registration.   It understands that the Securities have not been and will not be registered under the Securities Act and, if in the future the Subscriber decides to resell the Securities, it may do so only in accordance with the restrictions set out in Section 4.2. No United States federal or state agency or similar agency of any other country, or any securities exchange has approved, passed upon or made any recommendation with respect to the Securities.
 
       
 
  (b) Not a U.S. Person.   It is not a “U.S. person” as defined in Rule 902 of Regulation S; it is not organized or incorporated under the laws of any United States jurisdiction; and it was not formed for the purpose of investing in securities not registered under the Securities Act. It is purchasing the Subscription Securities for its own account. The Subscriber’s principal place of business is located outside of the United States, and at the time of entering into this Agreement and at the Completion Date, the Subscriber was located outside the United States.

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  (c) Accredited Investor.   It is an “accredited investor” within the meaning of Rule 501(a)(3) under the Securities Act. The Subscriber has such knowledge, sophistication and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities; it has evaluated such merits and risks and has determined that it is able to bear the economic risk of an investment in the Securities for an indefinite period of time, in view of the restrictions on transfer set out in Section 4.2.
 
       
 
  (d) Investment Intent.   It is subscribing for and purchasing the Securities solely for investment purposes, for its own account and not for the account or benefit of any other person, including any U.S. person, and not with a view or intent to the distribution or transfer thereof. The Subscriber has not entered into, and there does not exist, any agreement, arrangement or understanding with any other party for the sale, resale, pledge, transfer or assignment of all or any of the Securities or any interest therein, including without limitation any such agreement, arrangement or understanding relating to any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic benefits and obligations of ownership of the Securities may be transferred to any other party.
 
       
 
  (e) Independent Investigation.   In making the decision to subscribe for and purchase the Securities, it has relied upon its independent investigation of the Issuer and its affairs, and has not relied upon any information or representations made by any third party or upon any oral or written representations or assurances from the Issuer, its officers, directors or employees or any other representatives or agents of the Issuer, other than as set forth in this Agreement. The Subscriber is familiar with the business, operations, properties, financial condition and prospects of the Issuer, has reviewed the Issuer’s publicly-available information filed with and submitted to the SEC, and has had an opportunity to ask questions of, and receive answers from, the Issuer’s officers and directors concerning the Issuer, its affairs and the terms and conditions of the issue and sale of the Securities.

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  (f) No Advice from Issuer.   It has had the opportunity to review this Agreement and the transactions contemplated hereby with the Subscriber’s own professional advisors. Except for any representations, warranties or statements made by the Issuer in this Agreement, the Subscriber is relying solely on its own counsel and advisors and not on any representations, warranties or statements of the Issuer or any of its representatives or agents for legal, tax or investment advice with respect to the subscription and purchase of the Subscription Securities or the securities or other laws of any jurisdiction.
 
       
 
  (g) Due Incorporation and Good Standing.   It is a corporation duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands.
 
       
 
  (h) Power and Authorization.   It has the requisite power and authority to enter into and perform its obligations under this Agreement, and to subscribe for and purchase the Subscription Securities to be acquired by it. The execution, delivery and performance of this Agreement by the Subscriber and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Subscriber or its board of directors, members or others is required.
 
       
 
  (i) No Conflicts.   Assuming that the representations and warranties of the Issuer in Article 7 are true and correct, the execution, delivery and performance of this Agreement, and the subscription and purchase of the Subscription Securities by the Subscriber do not and will not:
 
       
 
     
(1) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would constitute a default) under (i) the memorandum and articles of association of the Subscriber; (ii) to the Subscriber’s knowledge, any decree, judgment, order, law, treaty, rule or regulation (“Applicable Laws”) applicable to the Subscriber of any court, governmental agency or body, or arbitrator having jurisdiction over the Subscriber or its property; or (iii) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, indenture, lease, mortgage, deed of trust or other instrument to which the Subscriber is a party or by which it or any of its properties is bound; or

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(2) result in the creation or imposition of any lien, charge or encumbrance upon the assets of the Subscriber;
except for such conflicts, violations and breaches as would not, individually or in the aggregate, have a Material Adverse Effect on the Subscriber.
         
 
  (j) No Consents.   It is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to subscribe for and purchase the Subscription Securities to be acquired by it; provided that for purposes of the representations made in this sentence, the Subscriber is assuming and relying upon the accuracy of the relevant representations made by the Issuer herein.
 
       
 
  (k) Enforceability.   This Agreement has been duly authorized and executed by the Subscriber and, when delivered by the Subscriber, will become the Subscriber’s valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.
 
       
5.2
  Accuracy of Representations.   The representations, warranties and agreements of the Subscriber are true and correct as of the date of this Agreement, and (unless the Subscriber otherwise notifies the Issuer prior to the Completion Date) shall be true and correct as of the Completion Date. The Subscriber acknowledges and agrees that the Issuer, in making the offer, issue and allotment of the Subscription Securities, and determining the availability of the applicable exemption from the registration requirement of the Securities Act, has relied on and will rely on the accuracy of the Subscriber’s representations and warranties set out herein.
 
       
5.3
  Notification of Breach.   The Subscriber agrees promptly to notify the Issuer of any matter or event which becomes known to it prior to Completion of the transactions contemplated by this Agreement which would or would reasonably be considered to render or have rendered any representation or warranty given by it to be or to have been untrue, inaccurate or misleading in any material respect.

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5.4
  Survival.   The foregoing representations and warranties of the Subscriber shall survive the Completion Date and the Completion of the transactions contemplated by this Agreement.
ARTICLE 6
AGREEMENTS OF THE ISSUER
The Issuer hereby agrees with the Subscriber that:
         
6.1
  NASDAQ Listing.   It will comply with the listing rules for, and maintain the listing of the Shares on NASDAQ. It will apply for and obtain approval for the listing of the Subscription Shares and the number of Warrant Shares that would currently be issuable upon exercise of the Warrants. If the number of Warrant Shares issuable upon exercise of the Warrants increases as a result of the operation of any of the adjustment provisions under the Warrants, the Issuer will apply for and obtain approval for the listing of such increased number of Warrant Shares.
 
       
6.2
  SEC Reporting and Compliance.   The Issuer will take all actions necessary to ensure that the Shares will continue to be registered under Section 12(b) or Section 12(g) of the Exchange Act. It will timely file all reports required pursuant to the Securities Exchange Act, including without limitation those required pursuant to Section 13 or 15(d) thereof and the rules and regulations thereunder. It will comply with all provisions of the Securities Act and the Securities Exchange Act and the rules and regulations thereunder relating to corporate governance, FCPA, record keeping and controls and procedures and other similar provisions, including without limitation those required pursuant to Securities Exchange Act Sections 10A, 13, 15(d), 30A, Form 20-F and the respective rules and regulations thereunder.
 
       
6.3
  Warrant Shares.   The number of Warrant Shares that would currently be issuable upon exercise of the Warrants has been duly authorized and validly reserved for issuance. If the number of Warrant Shares issuable upon exercise of the Warrants increase as a result of the operation of any of the adjustment provisions under the Warrants, the Issuer will ensure that such increased number of Warrant Shares is at all times duly authorized and validly reserved for issuance pursuant to the exercise of the Warrants.

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6.4
  Transaction Documents.   It will prepare and obtain the effectiveness of the Transaction Documents and the Shareholders’ Circular in a form reasonably acceptable to the Subscriber.
 
       
6.5
  Non-Public Information.   The Issuer agrees that neither it nor any other person acting on its behalf will provide the Subscriber or its agents or counsel with any information that the Issuer believes constitutes material non-public information, unless prior thereto the Subscriber shall have agreed in writing to receive such information. The Issuer understands and confirms that the Subscriber shall be relying on the foregoing representation in effecting transactions in the Securities.
 
       
6.6
  Announcement.   The Issuer will prepare and release a Shareholders’ Circular and an announcement relating to the Transactions in compliance with the securities laws of the United States and applicable NASDAQ listing rules. Such announcement will be filed with the SEC under cover of Form 6-K, and released through the NASDAQ press release web page. In addition, each party hereby agrees that the Issuer may issue an announcement upon the execution of the Transaction Documents. Except as set out in this Clause 6.6, each party hereby undertakes that no public announcement or communication in relation to the Transactions shall be made or despatched by the Subscriber. In addition, each party hereby agrees that all announcement and communication in relation to the Transaction shall only be made through the company secretary of the Issuer.
 
       
6.7
  Further Assurances.   Subject to the terms and conditions set out herein, the Issuer agrees to take all other actions reasonably necessary or appropriate and to cooperate with the Subscriber to carry the transactions contemplated in this Agreement into effect, including without limitation in relation to Section 4.7.

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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
7.1   Representations and Warranties of the Issuer. The Issuer represents and warrants to the Subscriber and agrees with the Subscriber, that:
         
 
  (a) Due Incorporation and Good Standing.   The Issuer is a company with limited liability duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands.
 
       
 
  (b) Power and Authorization.   The Issuer has the requisite corporate power and authority (1) to enter into and perform its obligations under this Agreement, and to issue and sell the Subscription Securities and (2) to own its properties and to carry on its business as disclosed in the Reports and the Shareholders’ Circular. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Issuer or its board of directors, shareholders, members or others is required.
 
       
 
  (c) Foreign Issuer.   The Issuer is a “foreign private issuer” as defined in Rule 405 under the Securities Act, and a “foreign issuer” as defined in Rule 902(e) of Regulation S under the Securities Act.
 
       
 
  (d) Authorized and Outstanding Share Capital.   The authorized share capital of the Issuer is US$25,000,000 and subject to the approval and adoption by the shareholders of the Issuer of the proposed Amended and Restated Memorandum and Articles of Association at its Shareholders’ Meeting, shall be increased to US$50,000,000. At the date of this Agreement, the Issuer has a total of 11,309,497 Shares issued and outstanding. All such issued and outstanding Shares have been duly authorized and validly issued and are fully-paid and non-assessable.
After giving effect to the issue and sale of the Subscription Securities (and assuming the exercise of all Warrants), a total of 16,809,497 Shares will be issued and outstanding.

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  (e) No Conflicts.   Assuming that the representations and warranties of the Subscriber in Article 5 are true and correct, the execution, delivery and performance of this Agreement, and the issue and sale of the Subscription Securities by the Issuer do not and will not:
 
       
 
     
(1) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would constitute a default) under (i) the memorandum and articles of association of the Issuer; (ii) to the Issuer’s knowledge, any Applicable Laws of any court, governmental agency or body, or arbitrator having jurisdiction over the Issuer or its property; or (iii) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries or any of their respective properties is bound;
 
       
 
     
(2) result in the creation or imposition of any lien, charge or encumbrance upon the Subscription Securities or the assets of the Issuer or its subsidiaries; or
 
       
 
     
(3) result in the activation of any anti-dilution rights or a reset or repricing of any debt instrument of any other creditor or equity holder of the Issuer, nor result in the acceleration of the due date of any obligation of the Issuer.

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  (f) No Consents.   Other than (1) the approval of the Issuer’s shareholders for the Transaction and (2) the confirmations of NASDAQ (i) relating to the continued listing of the Shares and (ii) that the Issuer will not be required, as a result of the Transactions, to file an original listing application for the Shares, which approval and confirmations have been duly obtained and are in full force and effect, the Issuer is not required to obtain any additional consent, authorization or order of, or make any filing or registration with, any court, governmental agency, securities exchange or of the Issuer’s shareholders, in order for it to execute, deliver or perform any of its obligations under this Agreement or to issue and sell the Subscription Securities; provided that for the purposes of the representations made in this sentence, the Issuer is assuming and relying upon the accuracy of the relevant representations made by the Subscriber herein.
 
       
 
  (g) Enforceability.   This Agreement has been duly authorized and executed by the Issuer and, when delivered will become the Issuer’s valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.
 
       
 
  (h) Litigation or Investigation.   There is no material pending or, to the best knowledge of the Issuer, threatened action, suit, proceeding or investigation before any court, governmental agency or body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries that would affect the execution, delivery and performance by the Issuer of this Agreement or the consummation of the transactions contemplated hereby. Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Issuer, threatened action, suit, proceeding or investigation before any court, governmental agency or body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries which, if adversely determined, would have a Material Adverse Effect on the Issuer.

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  (i) Reporting Company.   The Issuer is subject to the reporting requirements of Section 13 of the Securities Exchange Act, and has a class of common shares registered pursuant to Section 12(b) of the Securities Exchange Act. The Issuer has filed with the SEC all reports and other materials required to be filed thereunder during the preceding 12 months. Notwithstanding the foregoing, the Issuer did not file its Annual Report on Form 20-F for 2005 on a timely basis.
 
       
 
  (j) Information Concerning the Issuer.   The Subscriber has not been provided with any material non-public information concerning the Issuer, except as the terms and conditions of the transactions contemplated by this Agreement may constitute such information. The Reports and the Shareholders’ Circular contain all material information relating to the Issuer and its operations and financial condition as of their respective dates which is required to be disclosed therein. Since the date of the financial statements included in the Reports, there has been no event or occurrence that may have or result in a Material Adverse Effect relating to the Issuer’s business, operations, financial condition, property or prospects. Neither the Reports, the Shareholders’ Circular nor any information disclosed to the Subscriber contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Issuer’s representations and warranties set forth herein are true and correct. The Issuer understands and confirms that the Subscriber will rely on such representations and warranties in effecting transactions in the Securities.

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  (k) Internal Controls.   Save as otherwise disclosed in the Issuer’s most recently filed Annual Report on Form 20-F and other reports, the Issuer and its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (1) transactions are executed in accordance with management’s general or specific authorization; (2) transactions are recorded as necessary to permit the financial statements to be fairly presented in accordance with US GAAP and to maintain accountability for assets; (3) access to assets is permitted only in accordance with management’s general or specific authorization; and (4) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to differences.
 
       
 
  (l) No Integrated Offering.   Neither the Issuer, its affiliates nor any person acting on its or their behalf has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the issue and sale or the Subscription Securities pursuant to this Agreement to be integrated with prior offerings by the Issuer for purposes of the Securities Act or the NASDAQ listing rules. The Issuer and its affiliates will not take any action that would cause the issue and sale of the Subscription Securities to be integrated with other offerings, nor conduct any other offering that would be integrated with the issue and sale of the Subscription Securities.
 
       
 
  (m) No Registration Required.   Neither the Issuer nor any of its affiliates nor any person acting on its or their behalf (1) has, directly or indirectly, made offers or sales of any security, or solicited offers to buy, or will do so, or otherwise negotiated in respect of, any security, under circumstances that would require the registration of the Subscription Securities under the Securities Act or (2) has engaged, or will engage, in any form of general solicitation or general advertising (within the meaning of the Securities Act) in connection with any offer or sale of the Subscription Securities.
 
       
 
  (n) Listing of Shares.   The Shares are listed for trading on NASDAQ.

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  (o) Warrant Shares.   The Warrant Shares have been duly authorized and validly reserved for issuance, and when issued upon exercise of the Warrant in accordance with the terms thereof (and upon payment of the exercise price therefor), will be validly issued, fully paid and non-assessable Shares. The shareholders of the Issuer have no preemptive or similar rights over the Warrant Shares.
 
       
 
  (p) No Directed Selling Efforts.   Neither the Issuer nor any of its affiliates nor any person acting on its or their behalf has engaged, or will engage, in any directed selling efforts (within the meaning of Regulation S) with respect to the Subscription Securities and the Issuer and all of its affiliates and any person acting on its or their behalf have complied and will continue to comply with the offering restrictions requirement of Regulation S.
 
       
7.2
  Accuracy of Representations.   The representations, warranties and agreements of the Issuer are true and correct as of the date of this Agreement, and (unless the Issuer otherwise notifies the Subscriber prior to the Completion Date) shall be true and correct as of the Completion Date.
 
       
7.3
  Notification of Breach.   The Issuer agrees promptly to notify the Subscriber of any matter or event which becomes known to it prior to the Completion of the transactions contemplated by this Agreement which would or would reasonably be considered to render or have rendered any representation or warranty given by it to be or to have been untrue, inaccurate or misleading in any material respect.
 
       
7.4
  Survival.   The foregoing representations and warranties of the Issuer shall survive the Completion Date and the Completion of the transactions contemplated by this Agreement.

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ARTICLE 8
CONDITIONS PRECEDENT
The obligations of the Issuer to issue and sell the Subscription Securities, and the obligations of the Subscriber to subscribe for and purchase the Subscription Securities, are subject to the satisfaction of the following conditions precedent:
         
8.1
  Representations and Warranties.   The representations and warranties of each of the Issuer and the Subscriber are true and correct as of the date hereof, and shall be true and correct as of the Completion Date, and there shall be no breach of such representations and warranties by any party.
 
       
8.2
  Performance of Obligations.   Each of the Issuer and the Subscriber shall have duly performed all obligations to be performed by them hereunder on or prior to the Completion Date.
 
       
8.3
  NASDAQ Listing Status.   The Shares shall be listed for trading on the NASDAQ, the supplemental listing application for listing of the Subscription Shares and the Warrant Shares that would currently be issuable upon exercise of the Warrants shall have been filed and approved by NASDAQ, and the Issuer shall have provided to the Subscriber evidence reasonably satisfactory to them that (i) the delisting procedures in relation to the Issuer’s Shares shall have been satisfactorily resolved, NASDAQ does not propose to take any further action regarding delisting of the Shares and that the continued listing of the Shares has been confirmed and (ii) NASDAQ has confirmed that the Issuer will not be required, as a result of the Transactions, to file an original listing application.
 
       
8.4
  Execution of Agreements.   Each of the parties shall have duly executed and delivered this Agreement, and the Issuer shall have executed the Warrant Certificates and the Registration Rights Agreement. Each party hereby acknowledges and agrees that the completion and effectiveness of this Agreement and the Warrants are subject to the satisfaction of the conditions precedent as set out in this Article 8 and to the concurrent execution and completion of the Share Sale and Purchase Agreement, the Placing Agency Agreement, the Subscription Agreements and Registration Rights Agreements between the Issuer and each of Eastern Ceremony and Harvest Smart, and the execution of the Escrow Agreement.

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8.5
  Preparation of Transaction Documents.   The Issuer shall have prepared the Transaction Documents and the Shareholders’ Circular in a form reasonably acceptable to the Subscriber, and the conditions precedent contained in the various Transaction Documents shall have been satisfied.
 
       
8.6
  Fairness Opinion; Independent Directors’ Approval.   The Issuer shall have received a favorable fairness opinion from a licensed independent financial advisor in relation to the Transaction, including the pricing thereof. The committee of independent directors of the Issuer shall have approved the Transaction and recommended the same for the approval of shareholders.
 
       
8.7
  Resignation of Directors and Officers.   The Issuer shall have delivered to the escrow agent under the Escrow Agreement (i) the duly executed resignation letter from Mr. Michael Siu resigning from the positions of executive director, Chief Financial Officer and Company Secretary of the Issuer, effective upon the presentation of such resignation letter to the board of directors of the Issuer; and (ii) a duly executed resignation letter from each of Mr. Peter Fu and Mr. L C Wan, as independent directors of the Issuer, effective upon the presentation of such resignation letters to the board of directors of the Issuer. Such resignation letters shall contain a confirmation under seal that each of the resigning directors and officers has no claim (and in so far there is any, unconditionally waive any such claim against the Issuer) whatsoever against the Issuer for loss or termination of office.
 
       
8.8
  Appointment of New Directors and Officers.   The Issuer shall have delivered to the Subscriber a certified true copy of the minutes of a meeting of the board of directors of the Issuer approving (i) the appointment of Mr. Zhenwei Lu as an executive director of the Issuer with effect immediately upon the presentation of Mr. Michael Siu’s resignation; and (ii) the appointment of Mr. Yibang Zhang as Chief Financial Officer and Company Secretary of the Issuer with effect immediately upon the presentation of Mr. Michael Siu’s resignation.
 
       
8.9
  Change of Records.   The Issuer shall have furnished to the Subscriber certified copies of the Register of Directors of the Issuer and other relevant business records of the Issuer reflecting the changes of directorship and officers of the Issuer under Sections 8.7 and 8.8.

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8.10
  Bank Accounts.   All existing banking documents and authorization for the operation of bank accounts of the Issuer having been revised by adding person or persons designated by the board of directors of the Issuer and satisfactory to the Subscriber, as joint signatories for the operation of such bank accounts (as evidenced by written confirmation by the relevant banks).
 
       
8.11
  Shareholders’ Approval.   The shareholders of the Issuer shall have approved the Transaction and all resolutions as set out in the Shareholders’ Circular including but not limited to the sale of Placing Sale Shares, the sale of SPA Sale Shares, the issuance and subscription of Subscription Securities and the adoption of the Amended and Restated Memorandum and Articles of Association in the form and substance satisfactory to the Subscriber at a general meeting of shareholders duly convened in accordance with the Issuer’s articles of association.
 
       
8.12
  Share Certificates.   Seven (7) Business Days before the Completion of the Agreement, the Issuer shall prepare or cause the Share Transfer Agent to prepare share certificates representing the number of Subscription Shares and the Warrant certificates to be allotted to the Subscriber bearing the appropriate Securities Act legend, duly executed in favor of the Subscriber. The newly issued share certificates shall be delivered by the Share Transfer Agent and received by the Issuer one (1) Business Day before the Completion Date.
 
       
8.13
  Officer’s Certificate.   The Issuer shall have furnished to the Subscriber an officer’s certificate confirming the matters set out above and such other matters as the Subscriber may reasonably request.

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ARTICLE 9
INDEMNIFICATION
         
9.1
  Indemnification by the Issuer.   The Issuer agrees to indemnify, defend and hold the Subscriber (which term shall, for the purposes of this Section 9.1, include the Subscriber and its shareholders, managers, partners, directors, officers, members, employees, direct or indirect Subscriber, agents and affiliates and assignees and the stockholders, partners, directors, members, managers, officers, employees direct or indirect Subscriber and agents of such affiliates and assignees) harmless against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statement, representation, warranty or covenant of the Issuer contained in this Agreement.
 
       
9.2
  Indemnification by the Subscriber.   The Subscriber agrees to indemnify and hold harmless the Issuer, its controlling persons (within the meaning of Section 15 of the Securities Act and Section 20 of the Securities Exchange Act) and their respective directors, officers, agents, shareholders and employees, from and against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statement, representation, warranty or covenant of the Subscriber contained in this Agreement.
ARTICLE 10
MISCELLANEOUS PROVISIONS
         
10.1
  Effectiveness of Representations; Survival.   Each party is entitled to rely on the representations, warranties and agreements of each of the other parties and all such representations, warranties and agreements will be effective regardless of any investigation that any party has undertaken or failed to undertake. The representation, warranties and agreements will survive the Completion and continue in full force and effect until the date that is one year after the Completion Date.

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10.2
  Further Assurances.   Each of the parties hereto will cooperate with the others and execute and deliver to the other parties hereto such other instruments and documents and take such other actions as may be reasonably requested from time to time by any other party hereto as necessary to carry out, evidence, and confirm the intended purposes of this Agreement.
 
       
10.3
  Amendment.   This Agreement may not be amended except by an instrument in writing signed by each of the parties.
 
       
10.4
  Expenses.   Each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel, and accountants. The Subscriber shall not deduct the expenses from the Aggregate Subscription Price to be released the Issuer.
 
       
10.5
  Entire Agreement.   This Agreement, the exhibits, schedules attached hereto and the other Transaction Documents contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior arrangements and understandings, both written and oral, expressed or implied, with respect thereto.
 
       
10.6
  Severability.   If one or more provisions of this Agreement is held to be unenforceable under applicable law, such provision will be excluded from the Agreement and the balance of this Agreement will be enforceable in accordance with its terms.
 
       
10.7
  Notices.   All notices and other communications required or permitted under this Agreement must be in writing and will be deemed given if sent by personal delivery, faxed with electronic confirmation of delivery, internationally-recognized express courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as will be specified by like notice):

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If to the Subscriber:
Mr. Zhenwei Lu
China Biotech Holdings Ltd.

5F, B&H Plaza, 27 Industry Ave.
Shekou, Shenzhen, Guangdong Province, 518067, China
If to the Issuer:
Mr. Qian Xu
China Technology Development Group Corporation

Room 2413-18, Shui On Centre
8 Harbour Road
Hong Kong Special Administrative Region, China

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All such notices and other communications will be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a fax, when the party sending such fax has received electronic confirmation of its delivery, (c) in the case of delivery by internationally-recognized express courier, on the business day following dispatch and (d) in the case of mailing, if given or made by letter within Hong Kong, two (2) business days after mailing; if given or made by letter outside Hong Kong, seven (7) business days after mailing. Any notice received on a day which is not a business day shall be deemed to be received on the next business day.
         
10.8
  Headings.   The headings contained in this Agreement are for convenience purposes only and will not affect in any way the meaning or interpretation of this Agreement.
 
       
10.9
  Benefits.   This Agreement is and will only be construed as for the benefit of or enforceable by those persons party to this Agreement.
 
       
10.10
  Assignment.   This Agreement may not be assigned (except by operation of law) by any party without the consent of the other parties.
 
       
10.11
  Governing Law.   This Agreement will be governed by and construed in accordance with the laws of the Hong Kong SAR, China, applicable to contracts made and to be performed therein.
 
       
10.12
  Counterparts.   This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.
 
       
10.13
  Schedules and Exhibits.   The schedules and exhibits are attached to this Agreement and incorporated herein.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first written above.

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Signature page
SIGNED by
for and on behalf of
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
in the presence of:
     
Witness’ signature
  :
 
   
Witness’ name
  :
 
   
Witness’ occupation
  :
 
   
Witness’ address
  :
SIGNED by
for and on behalf of
CHINA BIOTECH HOLDINGS LTD.
in the presence of:
     
Witness’ signature
  :
 
   
Witness’ name
  :
 
   
Witness’ occupation
  :
 
   
Witness’ address
  :

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EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY RELEVANT STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN THEM BY REGULATION S UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
China Technology Development Group Corporation (the “Issuer”)
Room 2413-18, Shui On Centre
8 Harbour Road
Hong Kong Special Administrative Region, China
         
Warrant Certificate No.
       
 
       
 
       
Name of Holder:   China Biotech Holdings Limited
 
       
Address of Holder:   Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands
 
       
Number of Shares:   2,000,000 Shares
 
       
Date of Issuance:
       
 
       
 
       
Exercise Price:
  US$5.00 per Share    
 
       
Expiry Date:
      (24 months from date of issuance)
 
 
 
   

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THIS WARRANT CERTIFIES THAT, for value received, the above named holder or its registered assigns (the “Holder”), shall have the right to purchase from the Issuer the above referenced number of fully paid and non-assessable shares of par value US$0.01 per Share (the “Shares”) of the Issuer at an exercise price equal to the exercise price set forth above (the “Exercise Price”), subject to further adjustment as set forth in this Certificate, at any time from the date hereof until 5:00 P.M., Hong Kong time, on the expiry date set forth above (the “Expiry Date”). This Warrant is issued pursuant to the Subscription Agreement between the Issuer and Holder (the “Agreement”) pursuant to which the Holder subscribed for and purchased Subscription Shares and Warrants of the Issuer. The exercise of this Warrant shall be subject to the provisions, limitations and restrictions contained herein.
         
1.
  Exercise.    
 
       
 
  1.1 Procedure for Exercise of Warrant.   The Holder may exercise this Warrant by delivering the following to the principal office of the Issuer in accordance with Section 5.1 hereof:
 
       
 
     
(a) a duly executed Notice of Exercise in substantially the form attached as Exhibit B;
 
       
 
     
(b) either (i) a written certification that the Holder is not in the United States or a U.S. person, and that the Warrant is not being exercised in the United States on behalf of a U.S. person, which written certificate may be contained in the Notice of Exercise delivered pursuant to sub-paragraph (a) above; or (ii) a written opinion of counsel to the effect that the Warrant and the Shares have been registered under the Securities Act or are exempt from registration thereunder;
 
       
 
     
(c) payment of the Exercise Price then in effect for each of the Shares being purchased, as designated in the Notice of Exercise; and
 
       
 
     
(d) this Warrant.
Payment of the Exercise Price may be in cash, certified or official bank check payable to the order of the Issuer, or wire transfer of funds to the Issuer’s account (or any combination of any of the foregoing) in the amount of the Exercise Price for each Share being purchased.

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  1.2 Delivery of Certificate and New Warrant.   In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Shares so purchased, registered in the name of the Holder, together with any other securities or other property which the Holder is entitled to receive upon exercise of this Warrant, shall be delivered to the Holder hereof, at the Issuer’s expense, within a reasonable time, not exceeding fifteen (15) calendar days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of Shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder hereof within such time. The person in whose name any certificate for Shares is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Warrant was surrendered and payment of the Exercise Price was received by the Issuer, irrespective of the date of delivery of such certificate.
 
       
 
  1.3 Transfer Restrictions and Restrictive Legend.   This Warrant and the Shares have not been registered under the Securities Act and the Warrants have been and the Shares, upon exercise of the Warrants, will be issued pursuant to exemptions from the registration requirements of the Securities Act. Neither this Warrant nor any of the Shares or any other security issued or issuable upon exercise of this Warrant may be offered, resold, pledged or otherwise transferred except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the Act relating to such security or pursuant to an available exemption from the registration under the Securities Act. Each certificate for the Warrant, the Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Issuer, setting forth the restrictions on transfer contained in this Section. The initial Holder understands that this Warrant constitutes and the Shares upon issuance will constitute “affiliate securities” under the Securities Act, subject to the restrictions on transfer set out in Section 4.2 of the Agreement. The Holder acknowledges and agrees that all certificates representing the Shares will be endorsed with the following legend:

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
         
 
  1.4 Fractional Shares.   No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Issuer shall eliminate such fractional share interest by paying to Holder an amount computed by multiplying the fractional interest by the current market price of a full Share.
2.
  Covenants of the Issuer.    
 
       
 
  2.1 Authorized Shares.   The Issuer covenants and agrees that the Issuer will at all times have authorized and reserved, free from preemptive rights, a sufficient number of Shares to provide for the exercise in full of the rights represented by this Warrant.
 
       
 
  2.2 Issuance of Shares.   The Issuer covenants and agrees that all Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and free from all transfer taxes, liens and charges with respect to the issue thereof.

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3.   Transfer and Replacement.
  (a)   Subject to compliance with any applicable securities laws and the conditions set forth herein, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Issuer, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Issuer shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Shares without having a new warrant issued.
 
  (b)   The Issuer agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.
 
  (c)   If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Issuer may require, as a condition of allowing such transfer that (i) the Holder or transferee of this Warrant, as the case may be, furnish to the Issuer a written opinion of counsel to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) that the holder or transferee execute and deliver to the Issuer such documentation as is necessary to establish that the Warrants Shares are being transferred pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws or in an offshore transaction pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S of the Securities Act.
 
  (d)   The Issuer covenants that upon receipt by the Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any share certificate relating to the Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or share certificate, if mutilated, the Issuer will make and deliver a new Warrant or share certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or share certificate.

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4.   Adjustments of Exercise Price and/or Number of Shares.
             
   
4.1
  Subdivision or Combination of Shares.   The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Issuer shall (i) pay a dividend in Shares or make a distribution in Shares to holders of its outstanding Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue any Shares of its capital stock in a reclassification of the Shares, then the number of Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Shares or other securities of the Issuer which it would have owned or have been entitled to receive had such Warrant been exercised prior to the occurrence of such event. Upon each such adjustment of the kind and number of Shares or other securities of the Issuer which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Shares or other securities of the Issuer resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
   
 
       
   
4.2
  Reorganization, Reclassification, Consolidation, Merger or Sale.   If any recapitalization, reclassification or reorganization of the share capital of the Issuer, or any consolidation or merger of the Issuer with another company, or the sale of all or substantially all of its Shares and/or assets or other transaction (including, without limitation, a sale of substantially all of its assets followed by a liquidation) shall be effected in such a way that holders of Shares shall be entitled to receive Shares, securities or other assets or property, then, as a condition of such recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales, lawful and adequate provisions shall be made by the Issuer whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Shares or other

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      securities of the Issuer immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such Shares, securities or other assets or property as may be issued or payable with respect to or in exchange for the number of outstanding Shares which such Holder would have been entitled to receive had such Holder exercised this Warrant immediately prior to the consummation of such recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales. The Issuer or its successor shall promptly issue to the Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to give effect to the adjustments provided for in this Section 4 including, without limitation, adjustments to the Exercise Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 4.2 shall similarly apply to successive recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales.
   
 
       
   
4.3
  Notice of Adjustment.   Whenever the number of Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Issuer shall give notice thereof to the Holder, which notice shall state the number of Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

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5.   Miscellaneous Provisions.
             
   
5.1
  Notices.   Any notice or other document required or permitted to be given or delivered to the Holder shall be delivered or forwarded to the Holder at the address for the Holder provide on the first page of this Warrant or to such other address or number as shall have been furnished to the Issuer in writing by the Holder. Any notice or other document required or permitted to be given or delivered to the Issuer shall be delivered or forwarded to the Issuer at the address set forth above, Attention: Chief Executive Officer or Company Secretary. All notices, requests and approvals required by this Warrant shall be in writing and shall be conclusively deemed to be given (a) when hand-delivered to the other party, (b) when received if sent by facsimile at the address and number set forth above; provided that notices given by facsimile shall not be effective, unless either (i) a duplicate copy of such facsimile notice is promptly given by depositing the same in the mail, postage prepaid and addressed to the party as set forth below or (ii) the receiving party delivers a written confirmation of receipt for such notice by any other method permitted under this paragraph; and further provided that any notice given by facsimile received after 5:00 p.m. (recipient’s time) or on a non-business day shall be deemed received on the next business day; (c) five (5) business days after deposit in the United States mail, certified, return receipt requested, postage prepaid, and addressed to the party as set forth below; or (d) the next business day after deposit with an international overnight delivery service, postage prepaid, addressed to the party as set forth below with next business day delivery guaranteed; provided that the sending party receives confirmation of delivery from the delivery service provider.
   
 
       
   
5.2
  Limitation of Liability.   No provision hereof, in the absence of affirmative action by the Holder to purchase Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price hereunder or as a shareholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer.
   
 
       
   
5.3
  No Rights as Shareholder.   This Warrant shall not entitle the Holder to any of the rights of a shareholder of the Issuer except upon exercise in accordance with the terms hereof and the subsequent issue of Shares of the Issuer registered in the name of the Holder.

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5.4
  Governing Law.   This warrant shall be governed by and construed in accordance with the laws of Hong Kong Special Administrative Region, China, applicable to agreements made and to be performed herein.
   
 
       
   
5.5
  Waiver, Amendments and Headings.   This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by both parties (either generally or in a particular instance and either retroactively or prospectively). The headings in this Warrant are for purposes of reference only and shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be signed by its duly authorized officer effective as of the
                                              day of                                           , 2006.
China Technology Development Group Corporation
         
Signature of Authorized Signatory: By:
 
 
   
 
       
Name of Authorized Signatory:
 
 
   
 
       
Position of Authorized Signatory:
 
 
   

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EXHIBIT B
FORM OF NOTICE OF EXERCISE
TO: China Technology Development Group Corporation
The undersigned hereby exercises the right to purchase the number of shares of China Technology Development Group Corporation (the “Issuer”) set forth below (the “Shares”) pursuant to the Warrant to Purchase Shares issued by the Issuer and dated November 27, 2006. In accordance with the provisions of the Warrant, the undersigned hereby tenders the following concurrently with the delivery of this Notice of Exercise (i) payment of the Exercise Price payable by the undersigned for the Shares (the “Purchase Price”) in effect for each of the Shares being purchased, and (ii) the original Warrant.
                 
Number of Shares Purchased:
          Shares    
             
 
               
Aggregate Purchase Price:
  US$            
             
The undersigned represents and warrants to and agrees with the Issuer that:
1.   It is an “accredited investor” within the meaning of Rule 501(a)(3) under the Securities Act. The Subscriber has such knowledge, sophistication and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities; it has evaluated such merits and risks and has determined that it is able to bear the economic risk of an investment in the Securities for an indefinite period of time, in view of the restrictions on transfer set out in Section 4.2
2.   It acknowledges that in making the decision to purchase the Sale Shares, it has relied upon its independent investigation of the Issuer and its affairs, and has not relied upon any information or representations made by any third party or upon any oral or written representations or assurances from the Issuer, its officers, directors or employees or any other representatives or agents of the Issuer other than as set forth in the Agreement. It is familiar with the business, operations, properties, financial condition and prospects of the Issuer, has reviewed the Issuer’s publicly-available information filed with and submitted to the SEC, and has had an opportunity to ask questions of, and receive answers from, the Issuer’s officers and directors concerning the Issuer, its affairs and the terms and conditions of the issue and sale of the Shares.
3.   It is acquiring the Shares for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Shares in violation of the United States securities laws.
4.   It understands the Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”) or the securities laws of any state of the United States and that the sale contemplated hereby is being made in reliance on a safeharbour from such registration requirements.

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5.   The undersigned is not a “U.S. Person” as defined by Regulation S of the Securities Act and is not acquiring the Shares for the account or benefit of a U.S. Person.
 
    A “U S. Person” is defined by Regulation S of the Act to be any person who is:
  (h)   any natural person resident in the United States;
 
  (i)   any partnership or corporation organized or incorporated under the laws of the United States;
 
  (j)   any estate of which any executor or administrator is a U.S. person;
 
  (k)   any trust of which any trustee is a U.S. person;
 
  (1)   any agency or branch of a foreign entity located in the United States;
 
  (m)   any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and
 
  (n)   any partnership or corporation if:
  (i)   organized or incorporated under the laws of any foreign jurisdiction; and
 
  (ii)   formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited Subscriber as defined in Section 230.501(a) of the Act who are not natural persons, estates or trusts.
6.   The undersigned was not in the United States at the time the offer to purchase the Shares was received and the Subscriber was not in the United States at the time these Warrants were exercised.
7.   The undersigned acknowledges that the Shares are “affiliate securities” within the meaning of the Securities Act and will be issued to the Subscriber in accordance with Regulation S of the Securities Act without registration under the Securities Act.
8.   The undersigned agrees to resell the Shares only in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act.
9.   The undersigned agrees not to engage in hedging transactions with regard to the Shares unless in compliance with the Securities Act.

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10.   The Subscriber acknowledges and agrees that all certificates representing the Shares will be endorsed with the following legend in accordance with Regulation S of the Securities Act:
 
    “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
 
11.   The Subscriber and the Issuer agree that the Issuer will refuse to register any transfer of the Shares not made in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act, pursuant to an available exemption from registration, or pursuant to this Agreement.
                 
Signature of Purchaser or Authorized
               
Signatory of Purchaser
(if the Purchaser is not an individual):
               
             
 
               
Title of Authorized Signatory of Purchaser
(if the Purchaser is not an individual):
               
             
 
               
Name of Authorized Signatory of Purchaser
(if the Purchaser is not an individual):
               
             
 
               
Name of Purchaser:
               
             
 
               
Address of Purchaser:
               
             

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SCHEDULE A
Issuer’s Receiving Bank Account Information
     
Name of Bank:
  Standard Chartered Bank (HK) Ltd.
 
  (CHINESE CHARACTERS)
 
   
Bank account name:
  CHINA MERCHANTS SECURITIES (HK) CO. LTD.
 
  (CHINESE CHARACTERS)
 
   
Account Number:
  (CHINESE CHARACTERS)(HKD A/C) 368-1-036056-6
 
  (CHINESE CHARACTERS)(USD A/C) 368-0-035285-4
 
   
Reference:
  In favor of China Technology Development Group Corporation

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Dated November 27, 2006
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
and
EASTERN CEREMONY GROUP LIMITED
 
Subscription Agreement
 
Baker & McKenzie
14/F, Hutchison House
10 Harcourt Road
Hong Kong Special Administrative Region, China

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CONTENTS
             
        Page
ARTICLE 1
  Definitions And Interpretation     122  
 
           
 
           
ARTICLE 2
  Agreement to Subscribe     128  
 
           
ARTICLE 3
  Completion     129  
 
           
ARTICLE 4
  Agreements of the Subscriber     131  
 
           
ARTICLE 5
  Representations and Warranties of Subscriber     134  
 
           
ARTICLE 6
  Agreements of the Issuer     138  
 
           
ARTICLE 7
  Representations and Warranties of the Issuer     140  
 
           
ARTICLE 8
  Conditions Precedent     146  
 
           
ARTICLE 9
  Indemnification     148  
 
           
ARTICLE 10
  Miscellaneous Provisions     148  
 
           
EXECUTION
        152  
 
           
EXHIBIT A
  Form of Warrant Certificate     153  
 
           
EXHIBIT B
  Form of Notice of Exercise     162  
 
           
SCHEDULE A
  Issuer’s Receiving Bank Account Information     165  

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SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of November 27, 2006, by and among China Technology Development Group Corporation, a company incorporated under the laws of the British Virgin Islands with its registered address at P.O. Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands (the “Issuer”) and Eastern Ceremony Group Limited, a company incorporated under the laws of the British Virgin Islands with its registered address at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands (the “Subscriber”).
WHEREAS, the Shares of the Issuer are listed for trading on NASDAQ.
WHEREAS, subject to the terms and conditions set out in this Agreement, the Issuer wishes to issue Subscription Shares and Warrants to the Subscriber, and the Subscriber wishes to subscribe for such Shares and Warrants.
WHEREAS, concurrently with the execution of this Subscription Agreement, the Subscriber will acquire 500,000 Shares of the Issuer that are currently issued and outstanding through a separate placing arrangement.
WHEREAS, the Completion (as defined hereinafter) of the sale and purchase of the SPA Sale Shares pursuant to the Share Sale and Purchase Agreement, and the completion of the placing of the Placing Sale Shares pursuant to the Placing Agency Agreement are conditions precedent to the Completion of the subscription for the Subscription Shares and Warrants pursuant to this Agreement.
WHEREAS, simultaneously with the execution of this Agreement the Issuer is entering into a Registration Rights Agreement with the Subscriber covering the Subscription Shares, the Warrant Shares and the Sale Shares.
WHEREAS, the Issuer and the Subscriber note that upon the completion of this Agreement, the Subscriber may be deemed to be an affiliate of the Issuer.

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NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement, and other good and valuable consideration receipt of which is hereby acknowledged, the Issuer and the Subscriber hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions.   The following terms will have the following meanings for all purposes of this Agreement:
  (a)   Accredited Investor — shall have the following meaning as defined in Rule 501 of Regulation D:
  i.   a bank, insurance company, registered investment company, business development company, or small business investment company;
 
  ii.   an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
 
  iii.   a charitable organization, corporation, or partnership with assets exceeding $5 million;
 
  iv.   a director, executive officer, or general partner of the company selling the securities;
 
  v.   a business in which all the equity owners are accredited investors;
 
  vi.   a natural person who has individual net worth, or joint net worth with the person spouse, that exceeds $1 million at the time of the purchase;
 
  vii.   a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
 
  viii.   a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

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  (b)   “affiliates” means the persons that directly, or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the person specified as defined in Rule 405 under the Securities Act.
 
  (c)   “Aggregate Share Subscription Price” is as defined in Article 2, Section 2.1(a).
 
  (d)   “Aggregate Subscription Price” is as defined in Article 2, Section 2.1(b).
 
  (e)   “Aggregate Warrant Subscription Price” is as defined in Article 2, Section 2.1(b).
 
  (f)   “Business Days” means any day, excluding Saturdays, on which banks in Hong Kong are generally open for business.
 
  (g)   “change in internal controls over financial reporting” as defined in Item 308(c) of Regulation S-K, means the disclosure of any change in the registrant’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the registrant’s last fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
 
  (h)   “Completion” means the completion of the Transaction.
 
  (i)   “Completion Date” is as defined in Article 3, Section 3.1.
 
  (j)   “Common Stock” means the shares of the Issuer, par value US$0.01 per share.
 
  (k)   “directed selling efforts” means any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the securities being offered in reliance on Regulation S, as defined in Rule 902 of Regulation S.
 
  (l)   “distribution compliance period” means a period that begins when the securities were first offered to persons other than distributors in reliance upon this Regulation S or the date of Completion of the offering, whichever is later, and continues until the end of the period of time specified in the relevant provision of Rule 903 of Regulation S, except for certain transactions as set out in Rule 902 of Regulation S.

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  (m)   “Escrow Agreement” means the escrow agreement dated November 27, 2006, by and among Arculli Fong & Ng, the escrow agent, Beijing Holdings Limited (“Beijing Holdings”), China Internet Technology Co. Ltd (“China Internet”), CMEC Ceramics Holdings Limited (“CMEC”), Perfect Capital Holdings Limited (“Perfect Capital”) and China Biotech Holdings Limited (“China Biotech”), pursuant to the requirements under the Share Sale and Purchase Agreement and the Placing Agency Agreement;
 
  (n)   “foreign issuer” means any issuer which is a foreign government, a national of any foreign country or a corporation or other organization incorporated or organized under the laws of any foreign country, as defined in Rule 405 under the Securities Act.
 
  (o)   “foreign private issuer” as defined in Rule 405 under the Securities Act, means any foreign issuer other than a foreign government except an issuer meeting the following conditions:
  i.   More than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States; and
 
  ii.   Any of the following:
    The majority of the executive officers or directors are United States citizens or residents;
 
    More than 50 percent of the assets of the issuer are located in the United States; or
 
    The business of the issuer is administered principally in the United States.
  (p)   “Hong Kong SAR” means the Hong Kong Special Administrative Region, the People’s Republic of China.
 
  (q)   “Issuer” means China Technology Development Group Corporation, a company incorporated under the laws of the British Virgin Islands.

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  (r)   “Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any of this Agreement, the Warrants and any other documents executed or delivered with this Agreement or in connection herewith, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Issuer and the subsidiaries, taken as a whole, or (iii) an impairment to the Issuer’s ability to perform on a timely basis its obligations under any Transaction Document.
 
  (s)   “NASDAQ” means The NASDAQ Stock Market, Inc.
 
  (t)   “Placing Agency Agreement” means the placing agency agreement, dated November 27, 2006, by and among Beijing Holdings, China Internet, CMEC and Perfect Capital as vendors of 4,250,000 Shares (“Placing Sale Shares”), and China Merchants Securities (HK) Co. Ltd. (“Placing Agent”), in respect of the placing of the Placing Sale Shares.
 
  (u)   “Registration Rights Agreement(s)” means the agreements by and between the Issuer and each of the Subscriber, China Biotech, Harvest Smart Overseas Limited (“Harvest Smart”) and Beijing Holdings, which governs the rights of the Subscriber, China Biotech, Harvest Smart and Beijing Holdings, to cause the Issuer to register the Registrable Securities as defined therein.
 
  (v)   “Reports” means the Annual Reports of the Issuer on Form 20-F filed with the SEC.
 
  (w)   “restricted securities” means for purpose of this Agreement securities acquired directly or indirectly from the issuer, or from an affiliate of the issuer, in a transaction or chain of transactions not involving any public offering.
 
  (x)   “SEC” means the United States Securities and Exchange Commission.
 
  (y)   “Securities” means the Subscription Shares, the Warrants and the Warrant Shares.
 
  (z)   “Securities Act” means the United States Securities Act of 1933, as amended.
 
  (aa)   “Shares” means the shares of the Issuer, par value US$0.01 per share, which are listed for trading on NASDAQ.

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  (ab)   “Share Sale and Purchase Agreement” means the agreement, dated November 27, 2006, by and between Beijing Holdings and China Biotech for the sale and purchase of 2,000,000 Shares of the Issuer (“SPA Sale Shares”).
 
  (ac)   “Share Transfer Agent” means American Stock Transfer and Trust Company.
 
  (ad)   “Shareholders’ Circular” means the shareholders’ circular attached to the proxy and the notice of the Shareholders’ Meeting, to be dated on or about November 28, 2006, of the Issuer.
 
  (ae)   “Shareholders’ Meeting” means the shareholders’ 2006 annual meeting of the Issuer, to be held on December 22, 2006, convened by the Board of Directors of the Issuer.
 
  (af)   “Subscriber” means Harvest Smart Overseas Limited, a company incorporated under the laws of British Virgin Islands, as identified on the signature page hereof.
 
  (ag)   “Subscription Agreement(s)” means this Agreement and the agreements by and between the Issuer and each of Harvest Smart and China Biotech, for the subscription of the Subscription Securities as defined therein.
 
  (ah)   “Subscription Securities” means, in relation to the Subscriber, the Subscription Shares and Warrants subscribed for by the Subscriber pursuant to this Agreement.
 
  (ai)   “Subscription Shares” means 500,000 newly issued Shares of the Issuer.
 
  (aj)   “Transaction” means, for purpose of this Agreement, the subscription of the Subscription Securities by the Subscriber for the Aggregate Subscription Price.
 
  (ak)   “Transaction Documents” shall mean this Agreement (including the Warrants), the Registration Rights Agreement between the Issuer and the Subscriber, the Share Sale and Purchase Agreement, the Placing Agency Agreement and the Subscription Agreements and the Registration Rights Agreements for each of Harvest Smart and China Biotech.

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  (al)   A “U. S. Person” means any person who is:
  (i)   any natural person resident in the United States;
 
  (ii)   any partnership or corporation organized or incorporated under the laws of the United States;
 
  (iii)   any estate of which any executor or administrator is a U.S. person;
 
  (iv)   any trust of which any trustee is a U S person;
 
  (v)   any agency or branch of a foreign entity located in the United States;
 
  (vi)   any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and
 
  (vii)   any partnership or corporation if
  (A)   organized or incorporated under the laws of any foreign jurisdiction; and
 
  (B)   formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors who are not natural persons, estates or trusts.
  (am)   “Warrants” means 500,000 warrants for the purchase of 500,000 newly issued Shares of the Issuer.
 
  (an)   “Warrant Shares” means the Shares currently issuable and/or issued pursuant to exercise of the Warrants.

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ARTICLE 2
AGREEMENT TO SUBSCRIBE
             
2.1   Subscription.   Subject to the terms and conditions of this Agreement, the Issuer agrees to issue and allot, and the Subscriber agrees to subscribe for and purchase:
 
           
    (a) Subscription Shares.   The number of Subscription Shares specified on the signature page hereto at the Subscription Price per Share (the product of such number of Subscription Shares and the Subscription Price per Share is the Subscriber’s “Aggregate Share Subscription Price”).
 
           
    (b) Warrants.   The number of Warrants specified on the signature page hereto at the Subscription Price per Warrant (the product of such number of Warrants and the Subscription Price per Warrant is the Subscriber’s “Aggregate Warrant Subscription Price”; the sum of the Subscriber’s Aggregate Share Subscription Price and Aggregate Warrant Subscription Price is the Subscriber’s “Aggregate Subscription Price”). The Subscription Shares and Warrants to be subscribed by the Subscriber are the “Subscription Securities”.
 
           
2.2   Acceptance by the Issuer.   The Issuer will not accept subscriptions from any person who:
 
           
    (a) Delivery of Agreement.   Fails to deliver this Agreement duly executed, containing representations, warranties and acknowledgements as to, among other things, such person’s qualification as an institutional “accredited investor”, as such term is defined in Rule 501 of Regulation D under the Securities Act; its identity as not being a “U.S. person” as such term is defined in Regulation S under the Securities Act, and others.
 
           
    (b) Compliance with Laws.   Fails to comply with all securities laws and other applicable laws of the jurisdiction in which the Subscriber is resident, or fails to deliver such certificates, representations, warranties or other documents as counsel for the Issuer may reasonably require to verify compliance with such laws.
Any subscriptions received by the Issuer from persons who do not comply with this Section 2.2 will be returned to such person without interest.

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2.3   Warrants.   The certificates evidencing the Warrants shall be substantially in the form set out as Exhibit A to this Agreement.
 
           
2.4   Placing Agent.   The Issuer and the Subscriber hereby agree in respect of the Subscription Securities to appoint China Merchants Securities (HK) Co. Ltd. as the placing agent (“Placing Agent”), and the Placing Agent hereby agrees to act as the sole placing agent for the Issuer in respect of the Subscription Securities on terms and subject to conditions set out in this Agreement. For the avoidance of doubt, the Placing Agent shall not charge the Issuer any commission in connection with this Agreement. However, the Issuer hereby agrees to reimburse the Placing Agent for any out-of-pocket fees or transactional charges incurred by the Placing Agent in connection with the Agreement.
 
           
ARTICLE 3
COMPLETION

 
           
3.1   Completion Date.   Subject to the satisfaction of the conditions set out in Article 8, the Completion of the sale and purchase of the Subscription Securities contemplated in this Agreement shall take place on the day agreed by the parties that is not later than ten (10) Business Days following the date of the Shareholders’ Meeting, or such other date as the parties may agree.
 
           
3.2   Completion Transactions.   On the Completion Date, subject to the satisfaction of the conditions set out in Article 8, subject to fulfillment of the Conditions Precedent as set out in Clause 8, Completion shall take place at 8:30 a.m. on the Completion Date in the offices of Baker & McKenzie, legal advisor to the Issuer in the following manner:–
 
           
 
      (a)   On the Completion Date, the Subscriber shall have transferred through the Clearing House Automatic Transfer System (“CHATS”) in immediately available funds the sum in US dollars equal to the Subscriber’s Aggregate Subscription Price to an account opened with the Placing Agent;

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      (b)   subject to the satisfaction of Clause 8 and other terms and conditions of this Agreement, including but not limited to the presentation of all required board approvals, shareholders’ approvals, certifications and other requested documentation, on the Completion Date, the Subscriber shall instruct the Placing Agent to transfer the Aggregate Subscription Price from its account with the Placing Agent to an Issuer’s account (information set out in Schedule A attached hereto) opened with the Placing Agent that is jointly operated by persons designated by the board of directors of the Issuer and satisfactory to China Biotech;
 
           
 
      (c)   subject to the satisfaction of Clause 8 and other terms and conditions of this Agreement, the Issuer, upon receipt of the applicable amount of the Aggregate Subscription Price shall issue a confirmation to the Subscriber and the Placing Agent; the Issuer shall also deliver the newly issued share certificates representing the Subscription Shares and Warrants to the Subscriber on the Completion Date and concurrently provide certified copies of the same to the Placing Agent; and
 
           
 
      (d)   subject to the satisfaction of Clauses 3, 8, and other terms and conditions of this Agreement, on the Completion Date, the Issuer shall issue a written instruction to the Share Transfer Agent authorizing and requesting the Share Transfer Agent to enter and record the name of the Subscriber in the register of members of the Issuer as registered shareholder of the Issuer. The Issuer shall take necessary steps to update the copy of the register of members maintained at the registered office of the Issuer in the British Virgin Islands in accordance with the relevant laws and regulations.

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ARTICLE 4
AGREEMENTS OF THE SUBSCRIBER

 
           
4.1   Exemption from Registration.   The Subscriber acknowledges and agrees that the Securities will be offered and sold to the Subscriber without such offers and sales being registered under the Securities Act and will be issued to the Subscriber in an offshore transaction outside of the United States in accordance with a safe harbour from the registration requirements of the Securities Act, in reliance provided by Rule 903 of Regulation S of the Securities Act based on the representations and warranties of the Subscriber in this Agreement.
 
           
4.2   Resales of Securities.   The Subscriber acknowledges that after giving effect to the Transaction contemplated by this Agreement and the Placing Agency Agreement, it may be deemed to be an “affiliate” of the Issuer, as such term is defined in Rule 405 under the Securities Act. The Subscriber may not offer, sell, resell, pledge or otherwise transfer (any such action being referred to hereinafter as “reselling”, or “resale”) the Securities except pursuant to an available exemption from registration under the Securities Act or pursuant to an effective registration statement under the Securities Act and in compliance with all applicable state securities laws and the laws of any other jurisdiction. Accordingly, the Subscriber agrees to resell the Securities only in accordance with the provisions of Rule 903 or 904 of Regulation S of the Securities Act, pursuant to an effective registration statement under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act, including the exemption from registration provided by Rule 144 under the Securities Act. In particular, the Subscriber agrees that it will not offer, sell, resell, pledge or otherwise transfer (including to a nominee) the Subscription Securities except (a) during the period of one year commencing on the Completion Date, (i) in compliance with Rule 903 of Regulation S under the Securities Act, or (ii) pursuant to an effective registration statement; and (b) after one year from the Completion Date, (i) pursuant to either of clause (a)(i) or (a)(ii) above, or (ii) pursuant to the exemption provided by Rule 144 under the Securities Act, if available. The Subscriber acknowledges that the Issuer makes no representations regarding the availability of the exemption provided by Rule 144 at any time. The Subscriber agrees that the Issuer will refuse to

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        register any transfer of the Securities not made in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act or pursuant to an available exemption from registration. The Subscriber agrees that the Issuer may require an opinion of legal counsel reasonably acceptable to the Issuer in the event of any resale of any of the Securities by the Subscriber pursuant to an exemption from registration under the Securities Act.
 
           
4.3   Hedging Transactions.   The Subscriber agrees not to engage in or enter into any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic consequences of ownership of the Securities may be transferred to any person, including any U.S. person.
 
           
4.4   Share Certificates.   The Subscriber acknowledges and agrees that all certificates representing the Subscription Shares and the Warrant Shares (if issued in certificated form) will be endorsed with the following legend, or such similar legend as deemed advisable by legal counsel for the Issuer, to ensure compliance with Regulation S of the Securities Act and to reflect the status of the Subscription Shares and Warrant Shares as securities held by affiliates of the Issuer:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
         
4.5
  Warrant Certificates.   The Subscriber acknowledges and agrees that all certificates representing the Warrants will be endorsed with the following legend, or such similar legend as deemed advisable by legal counsel for the Issuer, to ensure compliance with Regulation S of the Securities Act and to reflect the status of the Warrants as securities held by affiliates of the Issuer:

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THE WARRANT AND THE UNDERLYING SHARES AND WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY RELEVANT STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN THEM BY REGULATION S UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
         
4.6
  Notice of Transfer Restrictions
to Subsequent Transferees.
  The Subscriber will advise any subsequent transferee of the Subscription Securities of the foregoing restrictions on transfer, and will procure that any such transferee shall deliver to the Issuer an undertaking to observe and be bound by such restrictions.
 
       
4.7
  Removal of Legends.   Upon application by the Subscriber and the transferee, the Issuer may instruct the share registrar to reissue share certificates that do not bear such legends (i) in the case of a resale by a non-affiliated Subscriber pursuant to Rule 904 of Regulation S, after the expiration of the 40-day distribution compliance period, (ii) in the case of a resale of such securities pursuant to an effective registration under the Securities Act or (iii) where certified by an opinion of counsel recognized as being experienced in matters of United States securities laws in form and content reasonably satisfactory to the Issuer to the effect that the securities proposed to be disposed of may be lawfully so disposed of without registration, qualification or legend. In the case of an application under (iii) above, the Issuer may require appropriate certifications, acknowledgements, representations and warranties of the Subscriber and the transferee, and an opinion of legal counsel reasonably acceptable to the Issuer.

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4.8
  Lock-Up.   The Subscriber agrees that during the period beginning from the Completion Date and continuing to and including the date that is 12 months after the Completion Date, it will not (i) offer, sell, contract to sell, pledge or otherwise dispose of, or permit any person acting on its behalf to offer, sell, contract to sell, pledge or otherwise dispose of, any Subscription Shares, Warrants or Warrant Shares, or (ii) engage in or enter into any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic consequences of ownership of the Subscription Shares, Warrants or Warrant Shares may be transferred to any person.
 
       
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER

         
5.1
  Representations and Warranties.   The Subscriber hereby represents and warrants to the Issuer, and agrees with the Issuer, that:
 
       
 
  (a) No Registration.   It understands that the Securities have not been and will not be registered under the Securities Act and, if in the future the Subscriber decides to resell the Securities, it may do so only in accordance with the restrictions set out in Section 4.2. No United States federal or state agency or similar agency of any other country, or any securities exchange has approved, passed upon or made any recommendation with respect to the Securities.
 
       
 
  (b) Not a U.S. Person.   It is not a “U.S. person” as defined in Rule 902 of Regulation S; it is not organized or incorporated under the laws of any United States jurisdiction; and it was not formed for the purpose of investing in securities not registered under the Securities Act. It is purchasing the Subscription Securities for its own account. The Subscriber’s principal place of business is located outside of the United States, and at the time of entering into this Agreement and at the Completion Date, the Subscriber was located outside the United States.

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  (c) Accredited Investor.   It is an “accredited investor” within the meaning of Rule 501(a)(3) under the Securities Act. The Subscriber has such knowledge, sophistication and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities; it has evaluated such merits and risks and has determined that it is able to bear the economic risk of an investment in the Securities for an indefinite period of time, in view of the restrictions on transfer set out in Section 4.2.
 
       
 
  (d) Investment Intent.   It is subscribing for and purchasing the Securities solely for investment purposes, for its own account and not for the account or benefit of any other person, including any U.S. person, and not with a view or intent to the distribution or transfer thereof. The Subscriber has not entered into, and there does not exist, any agreement, arrangement or understanding with any other party for the sale, resale, pledge, transfer or assignment of all or any of the Securities or any interest therein, including without limitation any such agreement, arrangement or understanding relating to any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic benefits and obligations of ownership of the Securities may be transferred to any other party.
 
       
 
  (e) Independent Investigation.   In making the decision to subscribe for and purchase the Securities, it has relied upon its independent investigation of the Issuer and its affairs, and has not relied upon any information or representations made by any third party or upon any oral or written representations or assurances from the Issuer, its officers, directors or employees or any other representatives or agents of the Issuer, other than as set forth in this Agreement. The Subscriber is familiar with the business, operations, properties, financial condition and prospects of the Issuer, has reviewed the Issuer’s publicly-available information filed with and submitted to the SEC, and has had an opportunity to ask questions of, and receive answers from, the Issuer’s officers and directors concerning the Issuer, its affairs and the terms and conditions of the issue and sale of the Securities.

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  (f) No Advice from Issuer.   It has had the opportunity to review this Agreement and the transactions contemplated hereby with the Subscriber’s own professional advisors. Except for any representations, warranties or statements made by the Issuer in this Agreement, the Subscriber is relying solely on its own counsel and advisors and not on any representations, warranties or statements of the Issuer or any of its representatives or agents for legal, tax or investment advice with respect to the subscription and purchase of the Subscription Securities or the securities or other laws of any jurisdiction.
 
       
 
  (g) Due Incorporation and
          Good Standing.
  It is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation.
 
       
 
  (h) Power and Authorization.   It has the requisite power and authority to enter into and perform its obligations under this Agreement, and to subscribe for and purchase the Subscription Securities to be acquired by it. The execution, delivery and performance of this Agreement by the Subscriber and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Subscriber or its board of directors, shareholders, members or others is required.

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  (i) No Conflicts.   Assuming that the representations and warranties of the Issuer in Article 7 are true and correct, the execution, delivery and performance of this Agreement, and the subscription and purchase of the Subscription Securities by the Subscriber do not and will not:
                 
 
        (1 )   violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would constitute a default) under (i) the memorandum and articles of association of the Subscriber; (ii) to the Subscriber’s knowledge, any decree, judgment, order, law, treaty, rule or regulation (“Applicable Laws”) applicable to the Subscriber of any court, governmental agency or body, or arbitrator having jurisdiction over the Subscriber or its property; or (iii) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, indenture, lease, mortgage, deed of trust or other instrument to which the Subscriber is a party or by which it or any of its properties is bound; or
 
               
 
        (2 )   result in the creation or imposition of any lien, charge or encumbrance upon the assets of the Subscriber;
except for such conflicts, violations and breaches as would not, individually or in the aggregate, have a Material Adverse Effect on the Subscriber.
             
    (j) No Consents.   It is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to subscribe for and purchase the Subscription Securities to be acquired by it; provided that for purposes of the representations made in this sentence, the Subscriber is assuming and relying upon the accuracy of the relevant representations made by the Issuer herein.
 
           
    (k) Enforceability.   This Agreement has been duly authorized and executed by the Subscriber and, when delivered by the Subscriber, will become the Subscriber’s valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

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5.2   Accuracy of Representations.   The representations, warranties and agreements of the Subscriber are true and correct as of the date of this Agreement, and (unless the Subscriber otherwise notifies the Issuer prior to the Completion Date) shall be true and correct as of the Completion Date. The Subscriber acknowledges and agrees that the Issuer, in making the offer, issue and allotment of the Subscription Securities, and determining the availability of the applicable exemption from the registration requirement of the Securities Act, has relied on and will rely on the accuracy of the Subscriber’s representations and warranties set out herein.
 
           
5.3   Notification of Breach.   The Subscriber agrees promptly to notify the Issuer of any matter or event which becomes known to it prior to Completion of the transactions contemplated by this Agreement which would or would reasonably be considered to render or have rendered any representation or warranty given by it to be or to have been untrue, inaccurate or misleading in any material respect.
 
           
5.4   Survival.   The foregoing representations and warranties of the Subscriber shall survive the Completion Date and the Completion of the transactions contemplated by this Agreement.
 
           
ARTICLE 6
AGREEMENTS OF THE ISSUER

The Issuer hereby agrees with the Subscriber that:
         
6.1
  NASDAQ Listing.   It will comply with the listing rules for, and maintain the listing of the Shares on NASDAQ. It will apply for and obtain approval for the listing of the Subscription Shares and the number of Warrant Shares that would currently be issuable upon exercise of the Warrants. If the number of Warrant Shares issuable upon exercise of the Warrants increases as a result of the operation of any of the adjustment provisions under the Warrants, the Issuer will apply for and obtain approval for the listing of such increased number of Warrant Shares.

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6.2 SEC Reporting and Compliance.
  The Issuer will take all actions necessary to ensure that the Shares will continue to be registered under Section 12(b) or Section 12(g) of the Exchange Act. It will timely file all reports required pursuant to the Securities Exchange Act, including without limitation those required pursuant to Section 13 or 15(d) thereof and the rules and regulations thereunder. It will comply with all provisions of the Securities Act and the Securities Exchange Act and the rules and regulations thereunder relating to corporate governance, FCPA, record keeping and controls and procedures and other similar provisions, including without limitation those required pursuant to Securities Exchange Act Sections 10A, 13, 15(d), 30A, Form 20-F and the respective rules and regulations thereunder.
 
   
6.3 Warrant Shares.
  The number of Warrant Shares that would currently be issuable upon exercise of the Warrants has been duly authorized and validly reserved for issuance. If the number of Warrant Shares issuable upon exercise of the Warrants increase as a result of the operation of any of the adjustment provisions under the Warrants, the Issuer will ensure that such increased number of Warrant Shares is at all times duly authorized and validly reserved for issuance pursuant to the exercise of the Warrants.
 
   
6.4 Transaction Documents.
  It will prepare and obtain the effectiveness of the Transaction Documents and the Shareholders’ Circular in a form reasonably acceptable to the Subscriber.
 
   
6.5 Non-Public Information.
  The Issuer agrees that neither it nor any other person acting on its behalf will provide the Subscriber or its agents or counsel with any information that the Issuer believes constitutes material non-public information, unless prior thereto the Subscriber shall have agreed in writing to receive such information. The Issuer understands and confirms that the Subscriber shall be relying on the foregoing representation in effecting transactions in the Securities.

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6.6 Announcement.
  The Issuer will prepare and release a Shareholders’ Circular and an announcement relating to the Transactions in compliance with the securities laws of the United States and applicable NASDAQ listing rules. Such announcement will be filed with the SEC under cover of Form 6-K, and released through the NASDAQ press release web page. In addition, each party hereby agrees that the Issuer may issue an announcement upon the execution of the Transaction Documents. Except as set out in this Clause 6.6, each party hereby undertakes that no public announcement or communication which is material in relation to the Transactions shall be made or despatched by the Subscriber.
 
   
6.7 Further Assurances.
  Subject to the terms and conditions set out herein, the Issuer agrees to take all other actions reasonably necessary or appropriate and to cooperate with the Subscriber to carry the transactions contemplated in this Agreement into effect, including without limitation in relation to Section 4.7.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
     
7.1 Representations and Warranties of the Issuer.
  The Issuer represents and warrants to the Subscriber and agrees with the Subscriber, that:
 
   
     (a) Due Incorporation and Good Standing.
  The Issuer is a company with limited liability duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands.
 
   
     (b) Power and Authorization.
  The Issuer has the requisite corporate power and authority (1) to enter into and perform its obligations under this Agreement, and to issue and sell the Subscription Securities and (2) to own its properties and to carry on its business as disclosed in the Reports and the Shareholders’ Circular. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Issuer or its board of directors, shareholders, members or others is required.
 
   
     (c) Foreign Issuer.
  The Issuer is a “foreign private issuer" as defined in Rule 405 under the Securities Act, and a “foreign issuer” as defined in Rule 902(e) of Regulation S under the Securities Act.

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(d) Authorized and Outstanding Share Capital.
  The authorized share capital of the Issuer is US$25,000,000 and subject to the approval and adoption of the proposed Amended and Restated Memorandum and Articles of Association by the shareholders of the Issuer at its Shareholders’ Meeting, shall be increased to US$50,000,000. At the date of this Agreement, the Issuer has a total of 11,309,497 Shares issued and outstanding. All such issued and outstanding Shares have been duly authorized and validly issued and are fully-paid and non-assessable.
 
   
 
  After giving effect to the issue and sale of the Subscription Securities (and assuming the exercise of all Warrants), a total of 16,809,497 Shares will be issued and outstanding.
 
   
(e) No Conflicts.
  Assuming that the representations and warranties of the Subscriber in Article 5 are true and correct, the execution, delivery and performance of this Agreement, and the issue and sale of the Subscription Securities by the Issuer do not and will not:
 
   
 
 
(1)  violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would constitute a default) under (i) the memorandum or articles of association or bylaws of the Issuer; (ii) to the Issuer’s knowledge, any Applicable Laws of any court, governmental agency or body, or arbitrator having jurisdiction over the Issuer or its property; or (iii) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries or any of their respective properties is bound;
 
   
 
 
(2)  result in the creation or imposition of any lien, charge or encumbrance upon the Subscription Securities or the assets of the Issuer or its subsidiaries; or
 
   
 
 
(3)  result in the activation of any anti-dilution rights or a reset or repricing of any debt instrument of any other creditor or equity holder of the Issuer, nor result in the acceleration of the due date of any obligation of the Issuer.

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(f) No Consents.
  Other than (1) the approval of the Issuer’s shareholders for the Transaction and (2) the confirmations of NASDAQ (i) relating to the continued listing of the Shares and (ii) that the Issuer will not be required, as a result of the Transactions, to file an original listing application for the Shares, which approval and confirmations have been duly obtained and are in full force and effect, the Issuer is not required to obtain any additional consent, authorization or order of, or make any filing or registration with, any court, governmental agency, securities exchange or of the Issuer’s shareholders, in order for it to execute, deliver or perform any of its obligations under this Agreement or to issue and sell the Subscription Securities; provided that for the purposes of the representations made in this sentence, the Issuer is assuming and relying upon the accuracy of the relevant representations made by the Subscriber herein.
 
   
(g) Enforceability.
  This Agreement has been duly authorized and executed by the Issuer and, when delivered will become the Issuer’s valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.
 
   
(h) Litigation or Investigation.
  There is no material pending or, to the best knowledge of the Issuer, threatened action, suit, proceeding or investigation before any court, governmental agency or body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries that would affect the execution, delivery and performance by the Issuer of this Agreement or the consummation of the transactions contemplated hereby. Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Issuer, threatened action, suit, proceeding or investigation before any court, governmental agency or body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries which, if adversely determined, would have a Material Adverse Effect on the Issuer.

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(i) Reporting Company.
  The Issuer is subject to the reporting requirements of Section 13 of the Securities Exchange Act, and has a class of common shares registered pursuant to Section 12(b) of the Securities Exchange Act. The Issuer has filed with the SEC all reports and other materials required to be filed thereunder during the preceding 12 months. Notwithstanding the foregoing, the Issuer did not file its Annual Report on Form 20-F for 2005 on a timely basis.
 
   
(j) Information Concerning the Issuer.
  The Subscriber has not been provided with any material non-public information concerning the Issuer, except as the terms and conditions of the transactions contemplated by this Agreement may constitute such information. The Reports and the Shareholders’ Circular contain all material information relating to the Issuer and its operations and financial condition as of their respective dates which is required to be disclosed therein. Since the date of the financial statements included in the Reports, there has been no event or occurrence that may have or result in a Material Adverse Effect relating to the Issuer’s business, operations, financial condition, property or prospects. Neither the Reports, the Shareholders’ Circular nor any information disclosed to the Subscriber contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Issuer’s representations and warranties set forth herein are true and correct. The Issuer understands and confirms that the Subscriber will rely on such representations and warranties in effecting transactions in the Securities.

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(k) Internal Controls.
  Save as otherwise disclosed in the Issuer’s most recently filed Annual Report on Form 20-F and other reports, the Issuer and its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (1) transactions are executed in accordance with management’s general or specific authorization; (2) transactions are recorded as necessary to permit the financial statements to be fairly presented in accordance with US GAAP and to maintain accountability for assets; (3) access to assets is permitted only in accordance with management’s general or specific authorization; and (4) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to differences.
 
   
(l) No Integrated Offering.
  Neither the Issuer, its affiliates nor any person acting on its or their behalf has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the issue and sale or the Subscription Securities pursuant to this Agreement to be integrated with prior offerings by the Issuer for purposes of the Securities Act or the NASDAQ listing rules. The Issuer and its affiliates will not take any action that would cause the issue and sale of the Subscription Securities to be integrated with other offerings, nor conduct any other offering that would be integrated with the issue and sale of the Subscription Securities.
 
   
(m) No Registration Required.
  Neither the Issuer nor any of its affiliates nor any person acting on its or their behalf (1) has, directly or indirectly, made offers or sales of any security, or solicited offers to buy, or will do so, or otherwise negotiated in respect of, any security, under circumstances that would require the registration of the Subscription Securities under the Securities Act or (2) has engaged, or will engage, in any form of general solicitation or general advertising (within the meaning of the Securities Act) in connection with any offer or sale of the Subscription Securities.
 
   
(n) Listing of Shares.
  The Shares are listed for trading on NASDAQ.

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(o) Warrant Shares.
  The Warrant Shares have been duly authorized and validly reserved for issuance, and when issued upon exercise of the Warrant in accordance with the terms thereof (and upon payment of the exercise price therefor), will be validly issued, fully paid and non-assessable Shares. The shareholders of the Issuer have no preemptive or similar rights over the Warrant Shares.
 
   
(p) No Directed Selling Efforts.
  Neither the Issuer nor any of its affiliates nor any person acting on its or their behalf has engaged, or will engage, in any directed selling efforts (within the meaning of Regulation S) with respect to the Subscription Securities and the Issuer and all of its affiliates and any person acting on its or their behalf have complied and will continue to comply with the offering restrictions requirement of Regulation S.
 
   
7.2 Accuracy of Representations.
  The representations, warranties and agreements of the Issuer are true and correct as of the date of this Agreement, and (unless the Issuer otherwise notifies the Subscriber prior to the Completion Date) shall be true and correct as of the Completion Date.
 
   
7.3 Notification of Breach.
  The Issuer agrees promptly to notify the Subscriber of any matter or event which becomes known to it prior to the Completion of the transactions contemplated by this Agreement which would or would reasonably be considered to render or have rendered any representation or warranty given by it to be or to have been untrue, inaccurate or misleading in any material respect.
 
   
7.4 Survival.
  The foregoing representations and warranties of the Issuer shall survive the Completion Date and the Completion of the transactions contemplated by this Agreement.

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ARTICLE 8
CONDITIONS PRECEDENT
The obligations of the Issuer to issue and sell the Subscription Securities, and the obligations of the Subscriber to subscribe for and purchase the Subscription Securities, are subject to the satisfaction of the following conditions precedent:
     
8.1 Representations and Warranties.
  The representations and warranties of each of the Issuer and the Subscriber are true and correct as of the date hereof, and shall be true and correct as of the Completion Date, and there shall be no breach of such representations and warranties by any party.
 
   
8.2 Performance of Obligations.
  Each of the Issuer and the Subscriber shall have duly performed all obligations to be performed by them hereunder on or prior to the Completion Date.
 
   
8.3 NASDAQ Listing Status.
  The Shares shall be listed for trading on the NASDAQ, the supplemental listing application for listing of the Subscription Shares and the Warrant Shares that would currently be issuable upon exercise of the Warrants shall have been filed and approved by NASDAQ, and the Issuer shall have provided to the Subscriber evidence reasonably satisfactory to them that (i) the delisting procedures in relation to the Issuer’s Shares shall have been satisfactorily resolved, NASDAQ does not propose to take any further action regarding delisting of the Shares and that the continued listing of the Shares has been confirmed and (ii) NASDAQ has confirmed that the Issuer will not be required, as a result of the Transactions, to file an original listing application.
 
   
8.4 Execution of Agreements.
  Each of the parties shall have duly executed and delivered this Agreement, and the Issuer shall have executed the Warrant Certificates and the Registration Rights Agreement. Each party hereby acknowledges and agrees that the completion and effectiveness of this Agreement and the Warrants are subject to the satisfaction of the conditions precedent as set out in this Article 8 and to the concurrent execution and completion of all Transaction Documents (except for the Subscription Agreement and the Registration Rights Agreement between the Issuer and China Biotech) and the execution of the Escrow Agreement.

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8.5 Preparation of Transaction Documents.
  The Issuer shall have prepared the Transaction Documents and the Shareholders’ Circular in a form reasonably acceptable to the Subscriber, and the conditions precedent contained in the various Transaction Documents shall have been satisfied.
 
   
8.6 Fairness Opinion; Independent Directors’ Approval.
  The Issuer shall have received a favorable fairness opinion from a licensed independent financial advisor in relation to the Transaction, including the pricing thereof. The committee of independent directors of the Issuer shall have approved the Transaction and recommended the same for the approval of shareholders.
 
   
8.7 Shareholders’ Approval.
  The shareholders of the Issuer shall have approved the Transaction and all resolutions as set out in the Shareholders’ Circular including but not limited to the sale of Placing Sale Shares, the sale of SPA Sale Shares, the issuance and subscription of Subscription Securities and the adoption of the Amended and Restated Memorandum and Articles of Association in the form and substance satisfactory to the Subscriber at a general meeting of shareholders duly convened in accordance with the Issuer’s articles of association.
 
   
8.8 Share Certificates.
  Seven (7) Business Days before the Completion of the Agreement, the Issuer shall prepare or cause the Share Transfer Agent to prepare share certificates representing the number of Subscription Shares and the Warrant certificates to be allotted to the Subscriber bearing the appropriate Securities Act legend, duly executed in favor of the Subscriber. The newly issued share certificates shall be delivered by the Share Transfer Agent and received by the Issuer one (1) Business Day before the Completion Date.
 
8.9 Officer’s Certificate.
  The Issuer shall have furnished to the Subscriber an officer’s certificate confirming the matters set out above and such other matters as the Subscriber may reasonably request.

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ARTICLE 9
INDEMNIFICATION
     
9.1 Indemnification by the Issuer.
  The Issuer agrees to indemnify, defend and hold the Subscriber (which term shall, for the purposes of this Section 9.1, include the Subscriber and its shareholders, managers, partners, directors, officers, members, employees, direct or indirect Subscriber, agents and affiliates and assignees and the stockholders, partners, directors, members, managers, officers, employees direct or indirect Subscriber and agents of such affiliates and assignees) harmless against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statement, representation, warranty or covenant of the Issuer contained in this Agreement.
 
   
9.2 Indemnification by the Subscriber.
  The Subscriber agrees to indemnify and hold harmless the Issuer, its controlling persons (within the meaning of Section 15 of the Securities Act and Section 20 of the Securities Exchange Act) and their respective directors, officers, agents, shareholders and employees, from and against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statement, representation, warranty or covenant of the Subscriber contained in this Agreement.
ARTICLE 10
MISCELLANEOUS PROVISIONS
     
10.1 Effectiveness of Representations; Survival.
  Each party is entitled to rely on the representations, warranties and agreements of each of the other parties and all such representations, warranties and agreements will be effective regardless of any investigation that any party has undertaken or failed to undertake. The representation, warranties and agreements will survive the Completion and continue in full force and effect until the date that is one year after the Completion Date.
 
   

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10.2 Further Assurances.
  Each of the parties hereto will cooperate with the others and execute and deliver to the other parties hereto such other instruments and documents and take such other actions as may be reasonably requested from time to time by any other party hereto as necessary to carry out, evidence, and confirm the intended purposes of this Agreement.
 
   
10.3 Amendment.
  This Agreement may not be amended except by an instrument in writing signed by each of the parties.
 
   
10.4 Expenses.
  Each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel, and accountants. The Subscriber shall not deduct the expenses from the Aggregate Subscription Price to be released to the Issuer.
 
   
10.5 Entire Agreement.
  This Agreement, the exhibits, schedules attached hereto and the other Transaction Documents contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior arrangements and understandings, both written and oral, expressed or implied, with respect thereto.
 
   
10.6 Severability.
  If one or more provisions of this Agreement is held to be unenforceable under applicable law, such provision will be excluded from the Agreement and the balance of this Agreement will be enforceable in accordance with its terms.
 
   
10.7 Notices.
  All notices and other communications required or permitted under this Agreement must be in writing and will be deemed given if sent by personal delivery, faxed with electronic confirmation of delivery, internationally-recognized express courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as will be specified by like notice):

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If to the Subscriber:
Mr. Chiu Tung Ping
Eastern Ceremony Group Limited

Flat E, 14/F, Block 34, Laguna City
Kowloon
Hong Kong Special Administrative Region, China
If to the Issuer:
Mr. Qian Xu
China Technology Development Group Corporation

Room 2413-18, Shui On Centre
8 Harbour Road
Hong Kong Special Administrative Region, China
All such notices and other communications will be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a fax, when the party sending such fax has received electronic confirmation of its delivery, (c) in the case of delivery by internationally-recognized express courier, on the business day following dispatch and (d) in the case of mailing, if given or made by letter within Hong Kong, on the two (2) Business Days after mailing; if given or made by letter outside Hong Kong, seven (7) Business Days after mailing. Any notice received on a day which is not a business day shall be deemed to be received on the next business day.
     
10.8 Headings.
  The headings contained in this Agreement are for convenience purposes only and will not affect in any way the meaning or interpretation of this Agreement.
 
   
10.9 Benefits.
  This Agreement is and will only be construed as for the benefit of or enforceable by those persons party to this Agreement.
 
   
10.10 Assignment.
  This Agreement may not be assigned (except by operation of law) by any party without the consent of the other parties.
 
   
10.11 Governing Law.
  This Agreement will be governed by and construed in accordance with the laws of the Hong Kong SAR, China, applicable to contracts made and to be performed therein.
 
   
10.12 Counterparts.
  This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

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10.13 Schedules and Exhibits.
  The schedules and exhibits are attached to this Agreement and incorporated herein.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first written above.

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Signature Page
SIGNED by
for and on behalf of
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
in the presence of:
     
Witness’ signature
  :
 
   
Witness’ name
  :
 
   
Witness’ occupation
  :
 
   
Witness’ address
  :
 
   
SIGNED by
for and on behalf of
EASTERN CEREMONY GROUP LIMITED
in the presence of:
     
Witness’ signature
  :
 
   
Witness’ name
  :
 
   
Witness’ occupation
  :
 
   
Witness’ address
  :

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EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY RELEVANT STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN THEM BY REGULATION S UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
China Technology Development Group Corporation (the “Issuer”)
Room 2413-18, Shui On Centre
8 Harbour Road
Hong Kong Special Administrative Region, China
     
Warrant Certificate No.                                         
 
   
Name of Holder:
  Eastern Ceremony Group Limited
 
   
Address of Holder:
  P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
 
   
Number of Shares:
  500,000 Shares
 
   
Date of Issuance:
                                          
 
   
Exercise Price:
  US$5.00 per Share
 
   
Expiry Date:
                                           (24 months from date of issuance)

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THIS WARRANT CERTIFIES THAT, for value received, the above named holder or its registered assigns (the “Holder”), shall have the right to purchase from the Issuer the above referenced number of fully paid and non-assessable shares of par value US$0.01 per Share (the “Shares”) of the Issuer at an exercise price equal to the exercise price set forth above (the “Exercise Price”), subject to further adjustment as set forth in this Certificate, at any time from the date hereof until 5:00 P.M., Hong Kong time, on the expiry date set forth above (the “Expiry Date”). This Warrant is issued pursuant to the Subscription Agreement between the Issuer and Holder (the “Agreement”) pursuant to which the Holder subscribed for and purchased Subscription Shares and Warrants of the Issuer. The exercise of this Warrant shall be subject to the provisions, limitations and restrictions contained herein.
1. Exercise.
     
     1.1 Procedure for Exercise of Warrant.
  The Holder may exercise this Warrant by delivering the following to the principal office of the Issuer in accordance with Section 5.1 hereof:
 
   
 
 
(a)  a duly executed Notice of Exercise in substantially the form attached as Exhibit B;
 
   
 
 
(b)  either (i) a written certification that the Holder is not in the United States or a U.S. person, and that the Warrant is not being exercised in the United States on behalf of a U.S. person, which written certificate may be contained in the Notice of Exercise delivered pursuant to sub-paragraph (a) above; or (ii) a written opinion of counsel to the effect that the Warrant and the Shares have been registered under the Securities Act or are exempt from registration thereunder;
 
   
 
 
(c)  payment of the Exercise Price then in effect for each of the Shares being purchased, as designated in the Notice of Exercise; and
 
   
 
 
(d)  this Warrant.
Payment of the Exercise Price may be in cash, certified or official bank check payable to the order of the Issuer, or wire transfer of funds to the Issuer’s account (or any combination of any of the foregoing) in the amount of the Exercise Price for each Share being purchased.

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1.2 Delivery of Certificate and New Warrant.
  In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Shares so purchased, registered in the name of the Holder, together with any other securities or other property which the Holder is entitled to receive upon exercise of this Warrant, shall be delivered to the Holder hereof, at the Issuer’s expense, within a reasonable time, not exceeding fifteen (15) calendar days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of Shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder hereof within such time. The person in whose name any certificate for Shares is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Warrant was surrendered and payment of the Exercise Price was received by the Issuer, irrespective of the date of delivery of such certificate.
 
   
1.3 Transfer Restrictions and Restrictive Legend.
  This Warrant and the Shares have not been registered under the Securities Act and the Warrants have been and the Shares, upon exercise of the Warrants, will be issued pursuant to exemptions from the registration requirements of the Securities Act. Neither this Warrant nor any of the Shares or any other security issued or issuable upon exercise of this Warrant may be offered, resold, pledged or otherwise transferred except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the Act relating to such security or pursuant to an available exemption from the registration under the Securities Act. Each certificate for the Warrant, the Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Issuer, setting forth the restrictions on transfer contained in this Section. The initial Holder understands that this Warrant constitutes and the Shares upon issuance will constitute “affiliate securities" under the Securities Act, subject to the restrictions on transfer set out in Section 4.2 of the Agreement. The Holder acknowledges and agrees that all certificates representing the Shares will be endorsed with the following legend:

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
     
     1.4 Fractional Shares.
  No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Issuer shall eliminate such fractional share interest by paying to Holder an amount computed by multiplying the fractional interest by the current market price of a full Share.
2. Covenants of the Issuer.
   
 
   
     2.1 Authorized Shares.
  The Issuer covenants and agrees that the Issuer will at all times have authorized and reserved, free from preemptive rights, a sufficient number of Shares to provide for the exercise in full of the rights represented by this Warrant.
 
   
     2.2 Issuance of Shares.
  The Issuer covenants and agrees that all Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and free from all transfer taxes, liens and charges with respect to the issue thereof.

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3. Transfer and Replacement.
  (a)   Subject to compliance with any applicable securities laws and the conditions set forth herein, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Issuer, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Issuer shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Shares without having a new warrant issued.
 
  (b)   The Issuer agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.
 
  (c)   If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Issuer may require, as a condition of allowing such transfer that (i) the Holder or transferee of this Warrant, as the case may be, furnish to the Issuer a written opinion of counsel to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) that the holder or transferee execute and deliver to the Issuer such documentation as is necessary to establish that the Warrants Shares are being transferred pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws or in an offshore transaction pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S of the Securities Act.
 
  (d)   The Issuer covenants that upon receipt by the Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any share certificate relating to the Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or share certificate, if mutilated, the Issuer will make and deliver a new Warrant or share certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or share certificate.

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4.   Adjustments of Exercise Price and/or Number of Shares.
     
     4.1 Subdivision or Combination of Shares.
  The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Issuer shall (i) pay a dividend in Shares or make a distribution in Shares to holders of its outstanding Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue any Shares of its capital stock in a reclassification of the Shares, then the number of Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Shares or other securities of the Issuer which it would have owned or have been entitled to receive had such Warrant been exercised prior to the occurrence of such event. Upon each such adjustment of the kind and number of Shares or other securities of the Issuer which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Shares or other securities of the Issuer resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
 
   
     4.2 Reorganization, Reclassification,
                Consolidation, Merger or Sale.
  If any recapitalization, reclassification or reorganization of the share capital of the Issuer, or any consolidation or merger of the Issuer with another company, or the sale of all or substantially all of its Shares and/or assets or other transaction (including, without limitation, a sale of substantially all of its assets followed by a liquidation) shall be effected in such a way that holders of Shares shall be entitled to receive Shares, securities or other assets or property, then, as a condition of such recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales, lawful and adequate provisions shall be made by the Issuer whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Shares or other

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  securities of the Issuer immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such Shares, securities or other assets or property as may be issued or payable with respect to or in exchange for the number of outstanding Shares which such Holder would have been entitled to receive had such Holder exercised this Warrant immediately prior to the consummation of such recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales. The Issuer or its successor shall promptly issue to the Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to give effect to the adjustments provided for in this Section 4 including, without limitation, adjustments to the Exercise Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 4.2 shall similarly apply to successive recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales.
 
     4.3 Notice of Adjustment.
  Whenever the number of Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Issuer shall give notice thereof to the Holder, which notice shall state the number of Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

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5. Miscellaneous Provisions.
     
     5.1 Notices.
  Any notice or other document required or permitted to be given or delivered to the Holder shall be delivered or forwarded to the Holder at the address for the Holder provide on the first page of this Warrant or to such other address or number as shall have been furnished to the Issuer in writing by the Holder. Any notice or other document required or permitted to be given or delivered to the Issuer shall be delivered or forwarded to the Issuer at the address set forth above, Attention: Chief Executive Officer or Company Secretary. All notices, requests and approvals required by this Warrant shall be in writing and shall be conclusively deemed to be given (a) when hand-delivered to the other party, (b) when received if sent by facsimile at the address and number set forth above; provided that notices given by facsimile shall not be effective, unless either (i) a duplicate copy of such facsimile notice is promptly given by depositing the same in the mail, postage prepaid and addressed to the party as set forth below or (ii) the receiving party delivers a written confirmation of receipt for such notice by any other method permitted under this paragraph; and further provided that any notice given by facsimile received after 5:00 p.m. (recipient’s time) or on a non-business day shall be deemed received on the next business day; (c) five (5) business days after deposit in the United States mail, certified, return receipt requested, postage prepaid, and addressed to the party as set forth below; or (d) the next business day after deposit with an international overnight delivery service, postage prepaid, addressed to the party as set forth below with next business day delivery guaranteed; provided that the sending party receives confirmation of delivery from the delivery service provider.
 
   
     5.2 Limitation of Liability.
  No provision hereof, in the absence of affirmative action by the Holder to purchase Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price hereunder or as a shareholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer.

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     5.3 No Rights as Shareholder.
  This Warrant shall not entitle the Holder to any of the rights of a shareholder of the Issuer except upon exercise in accordance with the terms hereof and the subsequent issue of Shares of the Issuer registered in the name of the Holder.
 
     5.4 Governing Law.
  This warrant shall be governed by and construed in accordance with the laws of Hong Kong Special Administrative Region, China, applicable to agreements made and to be performed herein.
 
     5.5 Waiver, Amendments and Headings.
  This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by both parties (either generally or in a particular instance and either retroactively or prospectively). The headings in this Warrant are for purposes of reference only and shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be signed by its duly authorized officer effective as of the                      day of                      , 2006.
China Technology Development Group Corporation
       
Signature of Authorized Signatory: By:
     
 
Name of Authorized Signatory:
     
 
Position of Authorized Signatory:
     

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EXHIBIT B
FORM OF NOTICE OF EXERCISE
TO: China Technology Development Group Corporation
The undersigned hereby exercises the right to purchase the number of shares of China Technology Development Group Corporation (the “Issuer”) set forth below (the “Shares”) pursuant to the Warrant to Purchase Shares issued by the Issuer and dated November 27, 2006. In accordance with the provisions of the Warrant, the undersigned hereby tenders the following concurrently with the delivery of this Notice of Exercise (i) payment of the Exercise Price payable by the undersigned for the Shares (the “Purchase Price”) in effect for each of the Shares being purchased, and (ii) the original Warrant.
Number of Shares Purchased:                                         Shares
Aggregate Purchase Price:     US$                                        
The undersigned represents and warrants to and agrees with the Issuer that:
1.   It is an “accredited investor” within the meaning of Rule 501(a)(3) under the Securities Act. The Subscriber has such knowledge, sophistication and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities; it has evaluated such merits and risks and has determined that it is able to bear the economic risk of an investment in the Securities for an indefinite period of time, in view of the restrictions on transfer set out in Section 4.2.
 
2.   It acknowledges that in making the decision to purchase the Sale Shares, it has relied upon its independent investigation of the Issuer and its affairs, and has not relied upon any information or representations made by any third party or upon any oral or written representations or assurances from the Issuer, its officers, directors or employees or any other representatives or agents of the Issuer other than as set forth in the Agreement. It is familiar with the business, operations, properties, financial condition and prospects of the Issuer, has reviewed the Issuer’s publicly-available information filed with and submitted to the SEC, and has had an opportunity to ask questions of, and receive answers from, the Issuer’s officers and directors concerning the Issuer, its affairs and the terms and conditions of the issue and sale of the Shares.
 
3.   It is acquiring the Shares for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Shares in violation of the United States securities laws.
 
4.   It understands the Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”) or the securities laws of any state of the United States and that the sale contemplated hereby is being made in reliance on a safeharbour from such registration requirements.

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5.   The undersigned is not a “U.S. Person” as defined by Regulation S of the Securities Act and is not acquiring the Shares for the account or benefit of a U.S. Person.
 
    A “U S. Person” is defined by Regulation S of the Act to be any person who is:
  (h)   any natural person resident in the United States;
 
  (i)   any partnership or corporation organized or incorporated under the laws of the United States;
 
  (j)   any estate of which any executor or administrator is a U.S. person;
 
  (k)   any trust of which any trustee is a U.S. person;
 
  (1)   any agency or branch of a foreign entity located in the United States;
 
  (m)   any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and
 
  (n)   any partnership or corporation if:
 
  (i)   organized or incorporated under the laws of any foreign jurisdiction; and
 
  (ii)   formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited Subscriber as defined in Section 230.501(a) of the Act who are not natural persons, estates or trusts.
6.   The undersigned was not in the United States at the time the offer to purchase the Shares was received and the Subscriber was not in the United States at the time these Warrants were exercised.
 
7.   The undersigned acknowledges that the Shares are “affiliate securities” within the meaning of the Securities Act and will be issued to the Subscriber in accordance with Regulation S of the Securities Act without registration under the Securities Act.
 
8.   The undersigned agrees to resell the Shares only in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act.
 
9.   The undersigned agrees not to engage in hedging transactions with regard to the Shares unless in compliance with the Securities Act.

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10.   The Subscriber acknowledges and agrees that all certificates representing the Shares will be endorsed with the following legend in accordance with Regulation S of the Securities Act:
 
    “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
 
11.   The Subscriber and the Issuer agree that the Issuer will refuse to register any transfer of the Shares not made in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act, pursuant to an available exemption from registration, or pursuant to this Agreement.
         
Signature of Purchaser or Authorized
       
Signatory of Purchaser
       
(if the Purchaser is not an individual):                                            
       
 
       
Title of Authorized Signatory of Purchaser
       
(if the Purchaser is not an individual):                                            
       
 
       
Name of Authorized Signatory of Purchaser
       
(if the Purchaser is not an individual):                                            
       
 
       
Name of Purchaser:                                                                             
       
 
       
Address of Purchaser:                                                                                                        
       

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SCHEDULE A
Issuer’s Receiving Bank Account Information
     
Name of Bank:
  Standard Chartered Bank (HK) Ltd.
 
  (CHINESE CHARACTERS)
 
   
Bank account name:
  CHINA MERCHANTS SECURITIES (HK) CO. LTD.
 
  (CHINESE CHARACTERS)
 
   
Account Number:
  (CHINESE CHARACTERS) (HKD A/C 368-1-036056-6
 
  (CHINESE CHARACTERS) (USD A/C) 368-0-035285-4
 
   
Reference:
  In favor of China Technology Development Group Corporation

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Dated November 27, 2006
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
and
HARVEST SMART OVERSEAS LIMITED
 
Subscription Agreement
 
Baker & McKenzie
14/F, Hutchison House
10 Harcourt Road
Hong Kong Special Administrative Region, China

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CONTENTS
             
        Page
ARTICLE 1
  Definitions And Interpretation     169  
 
           
ARTICLE 2
  Agreement to Subscribe     175  
 
           
ARTICLE 3
  Completion     176  
 
           
ARTICLE 4
  Agreements of the Subscriber     178  
 
           
ARTICLE 5
  Representations and Warranties of Subscriber     181  
 
           
ARTICLE 6
  Agreements of the Issuer     185  
 
           
ARTICLE 7
  Representations and Warranties of the Issuer     187  
 
           
ARTICLE 8
  Conditions Precedent     193  
 
           
ARTICLE 9
  Indemnification     195  
 
           
ARTICLE 10
  Miscellaneous Provisions     195  
 
           
EXECUTION
        199  
 
           
EXHIBIT A
  Form of Warrant Certificate     200  
 
           
EXHIBIT B
  Form of Notice of Exercise     209  
 
           
SCHEDULE A
  Issuer’s Receiving Bank Account Information     212  

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SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of November 27, 2006, by and among China Technology Development Group Corporation, a company incorporated under the laws of the British Virgin Islands with its registered address at P.O. Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands (the “Issuer”) and Harvest Smart Overseas Limited, a company incorporated under the laws of the British Virgin Islands with its registered address at Plam Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands (the "Subscriber”).
WHEREAS, the Shares of the Issuer are listed for trading on NASDAQ.
WHEREAS, subject to the terms and conditions set out in this Agreement, the Issuer wishes to issue Subscription Shares and Warrants to the Subscriber, and the Subscriber wishes to subscribe for such Shares and Warrants.
WHEREAS, concurrently with the execution of this Subscription Agreement, the Subscriber will acquire 500,000 Shares of the Issuer that are currently issued and outstanding through a separate placing arrangement.
WHEREAS, the Completion (as defined hereinafter) of the sale and purchase of the SPA Sale Shares pursuant to the Share Sale and Purchase Agreement, and the completion of the placing of the Placing Sale Shares pursuant to the Placing Agency Agreement are conditions precedent to the Completion of the subscription for the Subscription Shares and Warrants pursuant to this Agreement.
WHEREAS, simultaneously with the execution of this Agreement the Issuer is entering into a Registration Rights Agreement with the Subscriber covering the Subscription Shares, the Warrant Shares and the Sale Shares.
WHEREAS, the Issuer and the Subscriber note that upon the completion of this Agreement, the Subscriber may be deemed to be an affiliate of the Issuer.

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NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement, and other good and valuable consideration receipt of which is hereby acknowledged, the Issuer and the Subscriber hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions.   The following terms will have the following meanings for all purposes of this Agreement:
  (a)   Accredited Investor — shall have the following meaning as defined in Rule 501 of Regulation D:
  i.   a bank, insurance company, registered investment company, business development company, or small business investment company;
 
  ii.   an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
 
  iii.   a charitable organization, corporation, or partnership with assets exceeding $5 million;
 
  iv.   a director, executive officer, or general partner of the company selling the securities;
 
  v.   a business in which all the equity owners are accredited investors;
 
  vi.   a natural person who has individual net worth, or joint net worth with the person spouse, that exceeds $1 million at the time of the purchase;
 
  vii.   a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
 
  viii.   a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

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  (b)   “affiliates” means the persons that directly, or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the person specified as defined in Rule 405 under the Securities Act.
 
  (c)   “Aggregate Share Subscription Price” is as defined in Article 2, Section 2.1(a).
 
  (d)   “Aggregate Subscription Price” is as defined in Article 2, Section 2.1(b).
 
  (e)   “Aggregate Warrant Subscription Price” is as defined in Article 2, Section 2.1(b).
 
  (f)   “Business Days” means any day, excluding Saturdays, on which banks in Hong Kong are generally open for business.
 
  (g)   “change in internal controls over financial reporting” as defined in Item 308(c) of Regulation S-K, means the disclosure of any change in the registrant’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the registrant’s last fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
 
  (h)   “Completion” means the completion of the Transaction.
 
  (i)   “Completion Date” is as defined in Article 3, Section 3.1.
 
  (j)   “Common Stock” means the shares of the Issuer, par value US$0.01 per share.
 
  (k)   “directed selling efforts” means any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the securities being offered in reliance on Regulation S, as defined in Rule 902 of Regulation S.
 
  (l)   “distribution compliance period” means a period that begins when the securities were first offered to persons other than distributors in reliance upon this Regulation S or the date of Completion of the offering, whichever is later, and continues until the end of the period of time specified in the relevant provision of Rule 903 of Regulation S, except for certain transactions as set out in Rule 902 of Regulation S.

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  (m)   “Escrow Agreement” means the escrow agreement dated November 27, 2006, by and among Arculli Fong & Ng, the escrow agent, Beijing Holdings Limited (“Beijing Holdings”), China Internet Technology Co. Ltd (“China Internet”), CMEC Ceramics Holdings Limited (“CMEC”), Perfect Capital Holdings Limited (“Perfect Capital”) and China Biotech Holdings Limited (“China Biotech”), pursuant to the requirements under the Share Sale and Purchase Agreement and the Placing Agency Agreement;
 
  (n)   “foreign issuer” means any issuer which is a foreign government, a national of any foreign country or a corporation or other organization incorporated or organized under the laws of any foreign country, as defined in Rule 405 under the Securities Act.
 
  (o)   “foreign private issuer” as defined in Rule 405 under the Securities Act, means any foreign issuer other than a foreign government except an issuer meeting the following conditions:
  i.   More than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States; and
 
  ii.   Any of the following:
    The majority of the executive officers or directors are United States citizens or residents;
 
    More than 50 percent of the assets of the issuer are located in the United States; or
 
    The business of the issuer is administered principally in the United States.
  (p)   “Hong Kong SAR” means the Hong Kong Special Administrative Region, the People’s Republic of China.
 
  (q)   “Issuer” means China Technology Development Group Corporation, a company incorporated under the laws of the British Virgin Islands.

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  (r)   “Material Adverse Effect” means any of (i) a material and adverse effect on the legality, validity or enforceability of any of this Agreement, the Warrants and any other documents executed or delivered with this Agreement or in connection herewith, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Issuer and the subsidiaries, taken as a whole, or (iii) an impairment to the Issuer’s ability to perform on a timely basis its obligations under any Transaction Document.
 
  (s)   “NASDAQ” means The NASDAQ Stock Market, Inc.
 
  (t)   “Placing Agency Agreement” means the placing agency agreement, dated November 27, 2006, by and among Beijing Holdings, China Internet, CMEC and Perfect Capital as vendors of 4,250,000 Shares (“Placing Sale Shares”), and China Merchants Securities (HK) Co. Ltd. (“Placing Agent”), in respect of the placing of the Placing Sale Shares.
 
  (u)   “Registration Rights Agreement(s)” means the agreements by and between the Issuer and each of the Subscriber, China Biotech, Eastern Ceremony Group Limited (“Eastern Ceremony”) and Beijing Holdings, which govern the rights of the Subscriber, China Biotech, Eastern Ceremony and Beijing Holdings, to cause the Issuer to register the Registrable Securities as defined therein.
 
  (v)   “Reports” means the Annual Reports of the Issuer on Form 20-F filed with the SEC.
 
  (w)   “restricted securities” means for purpose of this Agreement securities acquired directly or indirectly from the issuer, or from an affiliate of the issuer, in a transaction or chain of transactions not involving any public offering.
 
  (x)   “SEC” means the United States Securities and Exchange Commission.
 
  (y)   “Securities” means the Subscription Shares, the Warrants and the Warrant Shares.
 
  (z)   “Securities Act” means the United States Securities Act of 1933, as amended.

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  (aa)   “Shares” means the shares of the Issuer, par value US$0.01 per share, which are listed for trading on NASDAQ.
 
  (ab)   “Share Sale and Purchase Agreement” means the agreement, dated November 27, 2006, by and between Beijing Holdings and China Biotech for the sale and purchase of 2,000,000 Shares of the Issuer (“SPA Sale Shares”).
 
  (ac)   “Share Transfer Agent” means American Stock Transfer and Trust Company.
 
  (ad)   “Shareholders’ Circular” means the shareholders’ circular attached to the proxy and the notice of the Shareholders’ Meeting, to be dated on or about November 28, 2006,of the Issuer.
 
  (ae)   “Shareholders’ Meeting” means the shareholders’ 2006 annual meeting of the Issuer, to be held on December 22, 2006, convened by the Board of Directors of the Issuer.
 
  (af)   “Subscriber” means Harvest Smart Overseas Limited, a company incorporated under the laws of British Virgin Islands, as identified on the signature page hereof.
 
  (ag)   “Subscription Agreement(s)” means this Agreement and the agreements by and between the Issuer and each of Eastern Ceremony and China Biotech, for the subscription of the Subscription Securities as defined therein.
 
  (ah)   “Subscription Securities” means, in relation to the Subscriber, the Subscription Shares and Warrants subscribed for by the Subscriber pursuant to this Agreement.
 
  (ai)   “Subscription Shares” means 500,000 newly issued Shares of the Issuer.
 
  (aj)   “Transaction” means, for purpose of this Agreement, the subscription of the Subscription Securities by the Subscriber for the Aggregate Subscription Price.
 
  (ak)   “Transaction Documents” shall mean this Agreement (including the Warrants), the Registration Rights Agreement between the Issuer and the Subscriber, the Share Sale and Purchase Agreement, the Placing Agency Agreement and the Subscription Agreements and the Registration Rights Agreements for each of Eastern Ceremony and China Biotech.

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  (al)   A “U. S. Person” means any person who is:
  (i)   any natural person resident in the United States;
 
  (ii)   any partnership or corporation organized or incorporated under the laws of the United States;
 
  (iii)   any estate of which any executor or administrator is a U.S. person;
 
  (iv)   any trust of which any trustee is a U S person;
 
  (v)   any agency or branch of a foreign entity located in the United States;
 
  (vi)   any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and
 
  (vii)   any partnership or corporation if
  (A)   organized or incorporated under the laws of any foreign jurisdiction; and
 
  (B)   formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors who are not natural persons, estates or trusts.
  (am)   “Warrants” means 500,000 warrants for the purchase of 500,000 newly issued Shares of the Issuer.
 
  (an)   “Warrant Shares” means the Shares currently issuable and/or issued pursuant to exercise of the Warrants.

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ARTICLE 2
AGREEMENT TO SUBSCRIBE
         
2.1
  Subscription.   Subject to the terms and conditions of this Agreement, the Issuer agrees to issue and allot, and the Subscriber agrees to subscribe for and purchase:
 
       
 
  (a) Subscription Shares.   The number of Subscription Shares specified on the signature page hereto at the Subscription Price per Share (the product of such number of Subscription Shares and the Subscription Price per Share is the Subscriber’s “Aggregate Share Subscription Price”).
 
       
 
  (b) Warrants.   The number of Warrants specified on the signature page hereto at the Subscription Price per Warrant (the product of such number of Warrants and the Subscription Price per Warrant is the Subscriber’s “Aggregate Warrant Subscription Price”; the sum of the Subscriber’s Aggregate Share Subscription Price and Aggregate Warrant Subscription Price is the Subscriber’s “Aggregate Subscription Price”). The Subscription Shares and Warrants to be subscribed by the Subscriber are the “Subscription Securities”.
 
       
2.2
  Acceptance by the Issuer.   The Issuer will not accept subscriptions from any person who:
 
       
 
  (a) Delivery of Agreement.   Fails to deliver this Agreement duly executed, containing representations, warranties and acknowledgements as to, among other things, such person’s qualification as an institutional “accredited investor”, as such term is defined in Rule 501 of Regulation D under the Securities Act; its identity as not being a “U.S. person" as such term is defined in Regulation S under the Securities Act, and others.
 
       
 
  (b) Compliance with Laws.   Fails to comply with all securities laws and other applicable laws of the jurisdiction in which the Subscriber is resident, or fails to deliver such certificates, representations, warranties or other documents as counsel for the Issuer may reasonably require to verify compliance with such laws.
 
       
Any subscriptions received by the Issuer from persons who do not comply with this Section 2.2 will be returned to such person without interest.

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2.3
  Warrants.   The certificates evidencing the Warrants shall be substantially in the form set out as Exhibit A to this Agreement.
 
       
2.4
  Placing Agent.   The Issuer and the Subscriber hereby agree in respect of the Subscription Securities to appoint China Merchants Securities (HK) Co. Ltd. as the placing agent (“Placing Agent”), and the Placing Agent hereby agrees to act as the sole placing agent for the Issuer in respect of the Subscription Securities on terms and subject to conditions set out in this Agreement. For the avoidance of doubt, the Placing Agent shall not charge the Issuer any commission in connection with this Agreement. However, the Issuer hereby agrees to reimburse the Placing Agent for any out-of-pocket fees or transactional charges incurred by the Placing Agent in connection with the Agreement.
ARTICLE 3
COMPLETION
         
3.1
  Completion Date.   Subject to the satisfaction of the conditions set out in Article 8, the Completion of the sale and purchase of the Subscription Securities contemplated in this Agreement shall take place on the day agreed by the parties that is not later than ten (10) Business Days following the date of the Shareholders’ Meeting, or such other date as the parties may agree.
 
       
3.2
  Completion Transactions.   On the Completion Date, subject to the satisfaction of the conditions set out in Article 8, subject to fulfillment of the Conditions Precedent as set out in Clause 8, Completion shall take place at 8:30 am on the Completion Date in the offices of Baker & McKenzie, legal advisor to the Issuer in the following manner:-
 
       
 
     
(a)  On the Completion Date, the Subscriber shall have transferred through the Clearing House Automatic Transfer System (“CHATS”) in immediately available funds the sum in US dollars equal to the Subscriber’s Aggregate Subscription Price to an account opened with the Placing Agent;

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(b)   subject to the satisfaction of Clause 8 and other terms and conditions of this Agreement, including but not limited to the presentation of all required board approvals, shareholders’ approvals, certifications and other requested documentation, on the Completion Date, the Subscriber shall instruct the Placing Agent to transfer the Aggregate Subscription Price from its account with the Placing Agent to an Issuer’s account (information set out in Schedule A attached hereto) opened with the Placing Agent that is jointly operated by persons designated by the board of directors of the Issuer and satisfactory to China Biotech;
 
       
 
     
(c)   subject to the satisfaction of Clause 8 and other terms and conditions of this Agreement, the Issuer, upon receipt of the applicable amount of the Aggregate Subscription Price shall issue a confirmation to the Subscriber and the Placing Agent; the Issuer shall also deliver the newly issued share certificates representing the Subscription Shares and Warrants to the Subscriber on the Completion Date and concurrently provide certified copies of the same to the Placing Agent; and
 
       
 
     
(d)   subject to the satisfaction of Clauses 3, 8, and other terms and conditions of this Agreement, on the Completion Date, the Issuer shall issue a written instruction to the Share Transfer Agent authorizing and requesting the Share Transfer Agent to enter and record the name of the Subscriber in the register of members of the Issuer as registered shareholder of the Issuer. The Issuer shall take necessary steps to update the copy of the register of members maintained at the registered office of the Issuer in the British Virgin Islands in accordance with the relevant laws and regulations.

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ARTICLE 4
AGREEMENTS OF THE SUBSCRIBER
         
4.1
  Exemption from Registration.   The Subscriber acknowledges and agrees that the Securities will be offered and sold to the Subscriber without such offers and sales being registered under the Securities Act and will be issued to the Subscriber in an offshore transaction outside of the United States in accordance with a safe harbour from the registration requirements of the Securities Act, in reliance provided by Rule 903 of Regulation S of the Securities Act based on the representations and warranties of the Subscriber in this Agreement.
 
       
4.2
  Resales of Securities.   The Subscriber acknowledges that after giving effect to the Transaction contemplated by this Agreement and the Placing Agency Agreement, it may be deemed to be an “affiliate" of the Issuer, as such term is defined in Rule 405 under the Securities Act. The Subscriber may not offer, sell, resell, pledge or otherwise transfer (any such action being referred to hereinafter as “reselling”, or “resale”) the Securities except pursuant to an available exemption from registration under the Securities Act or pursuant to an effective registration statement under the Securities Act and in compliance with all applicable state securities laws and the laws of any other jurisdiction. Accordingly, the Subscriber agrees to resell the Securities only in accordance with the provisions of Rule 903 or 904 of Regulation S of the Securities Act, pursuant to an effective registration statement under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act, including the exemption from registration provided by Rule 144 under the Securities Act. In particular, the Subscriber agrees that it will not offer, sell, resell, pledge or otherwise transfer (including to a nominee) the Subscription Securities except (a) during the period of one year commencing on the Completion Date, (i) in compliance with Rule 903 of Regulation S under the Securities Act, or (ii) pursuant to an effective registration statement; and (b) after one year from the Completion Date, (i) pursuant to either of clause (a)(i) or (a)(ii) above, or (ii) pursuant to the exemption provided by Rule 144 under the Securities Act, if available. The Subscriber acknowledges that the Issuer makes no representations regarding the availability of the exemption provided by Rule 144 at any time. The Subscriber agrees that the Issuer will refuse to

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      register any transfer of the Securities not made in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act or pursuant to an available exemption from registration. The Subscriber agrees that the Issuer may require an opinion of legal counsel reasonably acceptable to the Issuer in the event of any resale of any of the Securities by the Subscriber pursuant to an exemption from registration under the Securities Act.
 
       
4.3
  Hedging Transactions.   The Subscriber agrees not to engage in or enter into any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic consequences of ownership of the Securities may be transferred to any person, including any U.S. person.
 
       
4.4
  Share Certificates.   The Subscriber acknowledges and agrees that all certificates representing the Subscription Shares and the Warrant Shares (if issued in certificated form) will be endorsed with the following legend, or such similar legend as deemed advisable by legal counsel for the Issuer, to ensure compliance with Regulation S of the Securities Act and to reflect the status of the Subscription Shares and Warrant Shares as securities held by affiliates of the Issuer:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
         
4.5
  Warrant Certificates.   The Subscriber acknowledges and agrees that all certificates representing the Warrants will be endorsed with the following legend, or such similar legend as deemed advisable by legal counsel for the Issuer, to ensure compliance with Regulation S of the Securities Act and to reflect the status of the Warrants as securities held by affiliates of the Issuer:

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THE WARRANT AND THE UNDERLYING SHARES AND WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY RELEVANT STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN THEM BY REGULATION S UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
         
4.6
  Notice of Transfer Restrictions to
   Subsequent Transferees.
  The Subscriber will advise any subsequent transferee of the Subscription Securities of the foregoing restrictions on transfer, and will procure that any such transferee shall deliver to the Issuer an undertaking to observe and be bound by such restrictions.
 
       
4.7
  Removal of Legends.   Upon application by the Subscriber and the transferee, the Issuer may instruct the share registrar to reissue share certificates that do not bear such legends (i) in the case of a resale by a non-affiliated Subscriber pursuant to Rule 904 of Regulation S, after the expiration of the 40-day distribution compliance period, (ii) in the case of a resale of such securities pursuant to an effective registration under the Securities Act or (iii) where certified by an opinion of counsel recognized as being experienced in matters of United States securities laws in form and content reasonably satisfactory to the Issuer to the effect that the securities proposed to be disposed of may be lawfully so disposed of without registration, qualification or legend. In the case of an application under (iii) above, the Issuer may require appropriate certifications, acknowledgements, representations and warranties of the Subscriber and the transferee, and an opinion of legal counsel reasonably acceptable to the Issuer.

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4.8
  Lock-Up.   The Subscriber agrees that during the period beginning from the Completion Date and continuing to and including the date that is 12 months after the Completion Date, it will not (i) offer, sell, contract to sell, pledge or otherwise dispose of, or permit any person acting on its behalf to offer, sell, contract to sell, pledge or otherwise dispose of, any Subscription Shares, Warrants or Warrant Shares, or (ii) engage in or enter into any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic consequences of ownership of the Subscription Shares, Warrants or Warrant Shares may be transferred to any person.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER
         
5.1
  Representations and Warranties.   The Subscriber hereby represents and warrants to the Issuer, and agrees with the Issuer, that:
 
       
 
  (a) No Registration.   It understands that the Securities have not been and will not be registered under the Securities Act and, if in the future the Subscriber decides to resell the Securities, it may do so only in accordance with the restrictions set out in Section 4.2. No United States federal or state agency or similar agency of any other country, or any securities exchange has approved, passed upon or made any recommendation with respect to the Securities.
 
       
 
  (b) Not a U.S. Person.   It is not a “U.S. person" as defined in Rule 902 of Regulation S; it is not organized or incorporated under the laws of any United States jurisdiction; and it was not formed for the purpose of investing in securities not registered under the Securities Act. It is purchasing the Subscription Securities for its own account. The Subscriber’s principal place of business is located outside of the United States, and at the time of entering into this Agreement and at the Completion Date, the Subscriber was located outside the United States.

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  (c) Accredited Investor.   It is an “accredited investor" within the meaning of Rule 501(a)(3) under the Securities Act. The Subscriber has such knowledge, sophistication and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities; it has evaluated such merits and risks and has determined that it is able to bear the economic risk of an investment in the Securities for an indefinite period of time, in view of the restrictions on transfer set out in Section 4.2.
 
       
 
  (d) Investment Intent.   It is subscribing for and purchasing the Securities solely for investment purposes, for its own account and not for the account or benefit of any other person, including any U.S. person, and not with a view or intent to the distribution or transfer thereof. The Subscriber has not entered into, and there does not exist, any agreement, arrangement or understanding with any other party for the sale, resale, pledge, transfer or assignment of all or any of the Securities or any interest therein, including without limitation any such agreement, arrangement or understanding relating to any trust, any option to sell or purchase or any equity swap or similar hedging arrangement pursuant to which the economic benefits and obligations of ownership of the Securities may be transferred to any other party.
 
       
 
  (e) Independent Investigation.   In making the decision to subscribe for and purchase the Securities, it has relied upon its independent investigation of the Issuer and its affairs, and has not relied upon any information or representations made by any third party or upon any oral or written representations or assurances from the Issuer, its officers, directors or employees or any other representatives or agents of the Issuer, other than as set forth in this Agreement. The Subscriber is familiar with the business, operations, properties, financial condition and prospects of the Issuer, has reviewed the Issuer’s publicly-available information filed with and submitted to the SEC, and has had an opportunity to ask questions of, and receive answers from, the Issuer’s officers and directors concerning the Issuer, its affairs and the terms and conditions of the issue and sale of the Securities.

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  (f) No Advice from Issuer.   It has had the opportunity to review this Agreement and the transactions contemplated hereby with the Subscriber’s own professional advisors. Except for any representations, warranties or statements made by the Issuer in this Agreement, the Subscriber is relying solely on its own counsel and advisors and not on any representations, warranties or statements of the Issuer or any of its representatives or agents for legal, tax or investment advice with respect to the subscription and purchase of the Subscription Securities or the securities or other laws of any jurisdiction.
 
       
 
  (g) Due Incorporation and Good
        Standing.
  It is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation.
 
       
 
  (h) Power and Authorization.   It has the requisite power and authority to enter into and perform its obligations under this Agreement, and to subscribe for and purchase the Subscription Securities to be acquired by it. The execution, delivery and performance of this Agreement by the Subscriber and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Subscriber or its board of directors, shareholders, members or others is required.

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  (i) No Conflicts.   Assuming that the representations and warranties of the Issuer in Article 7 are true and correct, the execution, delivery and performance of this Agreement, and the subscription and purchase of the Subscription Securities by the Subscriber do not and will not:
 
       
 
     
(1)   violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would constitute a default) under (i) the memorandum and articles of association of the Subscriber; (ii) to the Subscriber’s knowledge, any decree, judgment, order, law, treaty, rule or regulation (“Applicable Laws”) applicable to the Subscriber of any court, governmental agency or body, or arbitrator having jurisdiction over the Subscriber or its property; or (iii) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, indenture, lease, mortgage, deed of trust or other instrument to which the Subscriber is a party or by which it or any of its properties is bound; or
 
       
 
     
(2)   result in the creation or imposition of any lien, charge or encumbrance upon the assets of the Subscriber;
except for such conflicts, violations and breaches as would not, individually or in the aggregate, have a Material Adverse Effect on the Subscriber.
         
 
  (j) No Consents.   It is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to subscribe for and purchase the Subscription Securities to be acquired by it; provided that for purposes of the representations made in this sentence, the Subscriber is assuming and relying upon the accuracy of the relevant representations made by the Issuer herein.
 
       
 
  (k) Enforceability.   This Agreement has been duly authorized and executed by the Subscriber and, when delivered by the Subscriber, will become the Subscriber’s valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

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5.2
  Accuracy of Representations.   The representations, warranties and agreements of the Subscriber are true and correct as of the date of this Agreement, and (unless the Subscriber otherwise notifies the Issuer prior to the Completion Date) shall be true and correct as of the Completion Date. The Subscriber acknowledges and agrees that the Issuer, in making the offer, issue and allotment of the Subscription Securities, and determining the availability of the applicable exemption from the registration requirement of the Securities Act, has relied on and will rely on the accuracy of the Subscriber’s representations and warranties set out herein.
 
       
5.3
  Notification of Breach.   The Subscriber agrees promptly to notify the Issuer of any matter or event which becomes known to it prior to Completion of the transactions contemplated by this Agreement which would or would reasonably be considered to render or have rendered any representation or warranty given by it to be or to have been untrue, inaccurate or misleading in any material respect.
 
       
5.4
  Survival.   The foregoing representations and warranties of the Subscriber shall survive the Completion Date and the Completion of the transactions contemplated by this Agreement.
ARTICLE 6
AGREEMENTS OF THE ISSUER
The Issuer hereby agrees with the Subscriber that:
         
6.1
  NASDAQ Listing.   It will comply with the listing rules for, and maintain the listing of the Shares on NASDAQ. It will apply for and obtain approval for the listing of the Subscription Shares and the number of Warrant Shares that would currently be issuable upon exercise of the Warrants. If the number of Warrant Shares issuable upon exercise of the Warrants increases as a result of the operation of any of the adjustment provisions under the Warrants, the Issuer will apply for and obtain approval for the listing of such increased number of Warrant Shares.

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6.2
  SEC Reporting and Compliance.   The Issuer will take all actions necessary to ensure that the Shares will continue to be registered under Section 12(b) or Section 12(g) of the Exchange Act. It will timely file all reports required pursuant to the Securities Exchange Act, including without limitation those required pursuant to Section 13 or 15(d) thereof and the rules and regulations thereunder. It will comply with all provisions of the Securities Act and the Securities Exchange Act and the rules and regulations thereunder relating to corporate governance, FCPA, record keeping and controls and procedures and other similar provisions, including without limitation those required pursuant to Securities Exchange Act Sections 10A, 13, 15(d), 30A, Form 20-F and the respective rules and regulations thereunder.
 
       
6.3
  Warrant Shares.   The number of Warrant Shares that would currently be issuable upon exercise of the Warrants has been duly authorized and validly reserved for issuance. If the number of Warrant Shares issuable upon exercise of the Warrants increase as a result of the operation of any of the adjustment provisions under the Warrants, the Issuer will ensure that such increased number of Warrant Shares is at all times duly authorized and validly reserved for issuance pursuant to the exercise of the Warrants.
 
       
6.4
  Transaction Documents.   It will prepare and obtain the effectiveness of the Transaction Documents and the Shareholders’ Circular in a form reasonably acceptable to the Subscriber.
 
       
6.5
  Non-Public Information.   The Issuer agrees that neither it nor any other person acting on its behalf will provide the Subscriber or its agents or counsel with any information that the Issuer believes constitutes material non-public information, unless prior thereto the Subscriber shall have agreed in writing to receive such information. The Issuer understands and confirms that the Subscriber shall be relying on the foregoing representation in effecting transactions in the Securities.

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6.6
  Announcement.   The Issuer will prepare and release a Shareholders’ Circular and an announcement relating to the Transactions in compliance with the securities laws of the United States and applicable NASDAQ listing rules. Such announcement will be filed with the SEC under cover of Form 6-K, and released through the NASDAQ press release web page. In addition, each party hereby agrees that the Issuer may issue an announcement upon the execution of the Transaction Documents. Except as set out in this Clause 6.6, each party hereby undertakes that no public announcement or communication which is material in relation to the Transactions shall be made or despatched by the Subscriber.
 
       
6.7
  Further Assurances.   Subject to the terms and conditions set out herein, the Issuer agrees to take all other actions reasonably necessary or appropriate and to cooperate with the Subscriber to carry the transactions contemplated in this Agreement into effect, including without limitation in relation to Section 4.7.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
         
7.1
  Representations and Warranties of the    Issuer.   The Issuer represents and warrants to the Subscriber and agrees with the Subscriber, that:
 
       
 
  (a) Due Incorporation and Good         Standing.   The Issuer is a company with limited liability duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands.
 
       
 
  (b) Power and Authorization.   The Issuer has the requisite corporate power and authority (1) to enter into and perform its obligations under this Agreement, and to issue and sell the Subscription Securities and (2) to own its properties and to carry on its business as disclosed in the Reports and the Shareholders’ Circular. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Issuer or its board of directors, shareholders, members or others is required.
 
       
 
  (c) Foreign Issuer.   The Issuer is a “foreign private issuer" as defined in Rule 405 under the Securities Act, and a “foreign issuer” as defined in Rule 902(e) of Regulation S under the Securities Act.

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  (d)Authorized and Outstanding Share      Capital.   The authorized share capital of the Issuer is US$25,000,000 and subject to the approval and adoption by the shareholders of the Issuer of the proposed Amended and Restated Memorandum and Articles of Association at its Shareholders’ Meeting, shall be increased to US$50,000,000. At the date of this Agreement, the Issuer has a total of 11,309,497 Shares issued and outstanding. All such issued and outstanding Shares have been duly authorized and validly issued and are fully-paid and non-assessable.
After giving effect to the issue and sale of the Subscription Securities (and assuming the exercise of all Warrants), a total of 16,809,497 Shares will be issued and outstanding.
         
 
  (e) No Conflicts.   Assuming that the representations and warranties of the Subscriber in Article 5 are true and correct, the execution, delivery and performance of this Agreement, and the issue and sale of the Subscription Securities by the Issuer do not and will not:
 
       
 
     
(1)   violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would constitute a default) under (i) the memorandum or articles of association or bylaws of the Issuer; (ii) to the Issuer’s knowledge, any Applicable Laws of any court, governmental agency or body, or arbitrator having jurisdiction over the Issuer or its property; or (iii) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries or any of their respective properties is bound;
 
       
 
     
(2)   result in the creation or imposition of any lien, charge or encumbrance upon the Subscription Securities or the assets of the Issuer or its subsidiaries; or
 
       
 
     
(3)   result in the activation of any anti-dilution rights or a reset or repricing of any debt instrument of any other creditor or equity holder of the Issuer, nor result in the acceleration of the due date of any obligation of the Issuer.

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  (f) No Consents.   Other than (1) the approval of the Issuer’s shareholders for the Transaction and (2) the confirmations of NASDAQ (i) relating to the continued listing of the Shares and (ii) that the Issuer will not be required, as a result of the Transactions, to file an original listing application for the Shares, which approval and confirmations have been duly obtained and are in full force and effect, the Issuer is not required to obtain any additional consent, authorization or order of, or make any filing or registration with, any court, governmental agency, securities exchange or of the Issuer’s shareholders, in order for it to execute, deliver or perform any of its obligations under this Agreement or to issue and sell the Subscription Securities; provided that for the purposes of the representations made in this sentence, the Issuer is assuming and relying upon the accuracy of the relevant representations made by the Subscriber herein.
 
       
 
  (g) Enforceability.   This Agreement has been duly authorized and executed by the Issuer and, when delivered will become the Issuer’s valid and binding agreement enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.
 
       
 
  (h) Litigation or Investigation.   There is no material pending or, to the best knowledge of the Issuer, threatened action, suit, proceeding or investigation before any court, governmental agency or body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries that would affect the execution, delivery and performance by the Issuer of this Agreement or the consummation of the transactions contemplated hereby. Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Issuer, threatened action, suit, proceeding or investigation before any court, governmental agency or body or arbitrator having jurisdiction over the Issuer or any of its subsidiaries which, if adversely determined, would have a Material Adverse Effect on the Issuer.

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  (i) Reporting Company.   The Issuer is subject to the reporting requirements of Section 13 of the Securities Exchange Act, and has a class of common shares registered pursuant to Section 12(b) of the Securities Exchange Act. The Issuer has filed with the SEC all reports and other materials required to be filed thereunder during the preceding 12 months. Notwithstanding the foregoing, the Issuer did not file its Annual Report on Form 20-F for 2005 on a timely basis.
 
       
 
  (j) Information Concerning the Issuer.   The Subscriber has not been provided with any material non-public information concerning the Issuer, except as the terms and conditions of the transactions contemplated by this Agreement may constitute such information. The Reports and the Shareholders’ Circular contain all material information relating to the Issuer and its operations and financial condition as of their respective dates which is required to be disclosed therein. Since the date of the financial statements included in the Reports, there has been no event or occurrence that may have or result in a Material Adverse Effect relating to the Issuer’s business, operations, financial condition, property or prospects. Neither the Reports, the Shareholders’ Circular nor any information disclosed to the Subscriber contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Issuer’s representations and warranties set forth herein are true and correct. The Issuer understands and confirms that the Subscriber will rely on such representations and warranties in effecting transactions in the Securities.

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  (k) Internal Controls.   Save as otherwise disclosed in the Issuer’s most recently filed Annual Report on Form 20-F and other reports, the Issuer and its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (1) transactions are executed in accordance with management’s general or specific authorization; (2) transactions are recorded as necessary to permit the financial statements to be fairly presented in accordance with US GAAP and to maintain accountability for assets; (3) access to assets is permitted only in accordance with management’s general or specific authorization; and (4) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to differences.
 
       
 
  (l) No Integrated Offering.   Neither the Issuer, its affiliates nor any person acting on its or their behalf has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the issue and sale or the Subscription Securities pursuant to this Agreement to be integrated with prior offerings by the Issuer for purposes of the Securities Act or the NASDAQ listing rules. The Issuer and its affiliates will not take any action that would cause the issue and sale of the Subscription Securities to be integrated with other offerings, nor conduct any other offering that would be integrated with the issue and sale of the Subscription Securities.
 
       
 
  (m) No Registration Required.   Neither the Issuer nor any of its affiliates nor any person acting on its or their behalf (1) has, directly or indirectly, made offers or sales of any security, or solicited offers to buy, or will do so, or otherwise negotiated in respect of, any security, under circumstances that would require the registration of the Subscription Securities under the Securities Act or (2) has engaged, or will engage, in any form of general solicitation or general advertising (within the meaning of the Securities Act) in connection with any offer or sale of the Subscription Securities.
 
       
 
  (n) Listing of Shares.   The Shares are listed for trading on NASDAQ.

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  (o) Warrant Shares.   The Warrant Shares have been duly authorized and validly reserved for issuance, and when issued upon exercise of the Warrant in accordance with the terms thereof (and upon payment of the exercise price therefor), will be validly issued, fully paid and non-assessable Shares. The shareholders of the Issuer have no preemptive or similar rights over the Warrant Shares.
 
       
 
  (p) No Directed Selling Efforts.   Neither the Issuer nor any of its affiliates nor any person acting on its or their behalf has engaged, or will engage, in any directed selling efforts (within the meaning of Regulation S) with respect to the Subscription Securities and the Issuer and all of its affiliates and any person acting on its or their behalf have complied and will continue to comply with the offering restrictions requirement of Regulation S.
 
       
7.2
  Accuracy of Representations.   The representations, warranties and agreements of the Issuer are true and correct as of the date of this Agreement, and (unless the Issuer otherwise notifies the Subscriber prior to the Completion Date) shall be true and correct as of the Completion Date.
 
       
7.3
  Notification of Breach.   The Issuer agrees promptly to notify the Subscriber of any matter or event which becomes known to it prior to the Completion of the transactions contemplated by this Agreement which would or would reasonably be considered to render or have rendered any representation or warranty given by it to be or to have been untrue, inaccurate or misleading in any material respect.
 
       
7.4
  Survival.   The foregoing representations and warranties of the Issuer shall survive the Completion Date and the Completion of the transactions contemplated by this Agreement.

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ARTICLE 8
CONDITIONS PRECEDENT
The obligations of the Issuer to issue and sell the Subscription Securities, and the obligations of the Subscriber to subscribe for and purchase the Subscription Securities, are subject to the satisfaction of the following conditions precedent:
     
8.1 Representations and Warranties.
  The representations and warranties of each of the Issuer and the Subscriber are true and correct as of the date hereof, and shall be true and correct as of the Completion Date, and there shall be no breach of such representations and warranties by any party.
 
   
8.2 Performance of Obligations.
  Each of the Issuer and the Subscriber shall have duly performed all obligations to be performed by them hereunder on or prior to the Completion Date.
 
   
8.3 NASDAQ Listing Status.
  The Shares shall be listed for trading on the NASDAQ, the supplemental listing application for listing of the Subscription Shares and the Warrant Shares that would currently be issuable upon exercise of the Warrants shall have been filed and approved by NASDAQ, and the Issuer shall have provided to the Subscriber evidence reasonably satisfactory to them that (i) the delisting procedures in relation to the Issuer’s Shares shall have been satisfactorily resolved, NASDAQ does not propose to take any further action regarding delisting of the Shares and that the continued listing of the Shares has been confirmed and (ii) NASDAQ has confirmed that the Issuer will not be required, as a result of the Transactions, to file an original listing application.
 
   
8.4 Execution of Agreements.
  Each of the parties shall have duly executed and delivered this Agreement, and the Issuer shall have executed the Warrant Certificates and the Registration Rights Agreement. Each party hereby acknowledges and agrees that the completion and effectiveness of this Agreement and the Warrants are subject to the satisfaction of the conditions precedent as set out in this Article 8 and to the concurrent execution and completion of all Transaction Documents (except for the Subscription Agreement and the Registration Rights Agreement between the Issuer and China Biotech) and the execution of the Escrow Agreement.

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8.5 Preparation of Transaction Documents.
  The Issuer shall have prepared the Transaction Documents and the Shareholders’ Circular in a form reasonably acceptable to the Subscriber, and the conditions precedent contained in the various Transaction Documents shall have been satisfied.
 
   
8.6 Fairness Opinion; Independent Directors’ Approval.
  The Issuer shall have received a favorable fairness opinion from a licensed independent financial advisor in relation to the Transaction, including the pricing thereof. The committee of independent directors of the Issuer shall have approved the Transaction and recommended the same for the approval of shareholders.
 
   
8.7 Shareholders’ Approval.
  The shareholders of the Issuer shall have approved the Transaction and all resolutions as set out in the Shareholders’ Circular including but not limited to the sale of Placing Sale Shares, the sale of SPA Sale Shares, the issuance and subscription of Subscription Securities and the adoption of the Amended and Restated Memorandum and Articles of Association in the form and substance satisfactory to the Subscriber at a general meeting of shareholders duly convened in accordance with the Issuer’s articles of association.
 
   
8.8 Share Certificates.
  Seven (7) Business Days before the Completion of the Agreement, the Issuer shall prepare or cause the Share Transfer Agent to prepare share certificates representing the number of Subscription Shares and the Warrant certificates to be allotted to the Subscriber bearing the appropriate Securities Act legend, duly executed in favor of the Subscriber. The newly issued share certificates shall be delivered by the Share Transfer Agent and received by the Issuer one (1) Business Day before the Completion Date.
 
8.9 Officer’s Certificate.
  The Issuer shall have furnished to the Subscriber an officer’s certificate confirming the matters set out above and such other matters as the Subscriber may reasonably request.

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ARTICLE 9
INDEMNIFICATION
     
9.1 Indemnification by the Issuer.
  The Issuer agrees to indemnify, defend and hold the Subscriber (which term shall, for the purposes of this Section 9.1, include the Subscriber and its shareholders, managers, partners, directors, officers, members, employees, direct or indirect Subscriber, agents and affiliates and assignees and the stockholders, partners, directors, members, managers, officers, employees direct or indirect Subscriber and agents of such affiliates and assignees) harmless against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statement, representation, warranty or covenant of the Issuer contained in this Agreement.
 
   
9.2 Indemnification by the Subscriber.
  The Subscriber agrees to indemnify and hold harmless the Issuer, its controlling persons (within the meaning of Section 15 of the Securities Act and Section 20 of the Securities Exchange Act) and their respective directors, officers, agents, shareholders and employees, from and against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating to, or connected with the untruth, inaccuracy or breach of any statement, representation, warranty or covenant of the Subscriber contained in this Agreement.
ARTICLE 10
MISCELLANEOUS PROVISIONS
     
10.1 Effectiveness of Representations; Survival.
  Each party is entitled to rely on the representations, warranties and agreements of each of the other parties and all such representations, warranties and agreements will be effective regardless of any investigation that any party has undertaken or failed to undertake. The representation, warranties and agreements will survive the Completion and continue in full force and effect until the date that is one year after the Completion Date.

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10.2 Further Assurances.
  Each of the parties hereto will cooperate with the others and execute and deliver to the other parties hereto such other instruments and documents and take such other actions as may be reasonably requested from time to time by any other party hereto as necessary to carry out, evidence, and confirm the intended purposes of this Agreement.
 
   
10.3 Amendment.
  This Agreement may not be amended except by an instrument in writing signed by each of the parties.
 
   
10.4 Expenses.
  Each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel, and accountants. The Subscriber shall not deduct the expenses from the Aggregate Subscription Price to be released to the Issuer.
 
   
10.5 Entire Agreement.
  This Agreement, the exhibits, schedules attached hereto and the other Transaction Documents contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior arrangements and understandings, both written and oral, expressed or implied, with respect thereto.
 
   
10.6 Severability.
  If one or more provisions of this Agreement is held to be unenforceable under applicable law, such provision will be excluded from the Agreement and the balance of this Agreement will be enforceable in accordance with its terms.
 
   
10.7 Notices.
  All notices and other communications required or permitted under this Agreement must be in writing and will be deemed given if sent by personal delivery, faxed with electronic confirmation of delivery, internationally-recognized express courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as will be specified by like notice):

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If to the Subscriber:
Ms. Jennie Mak
Harvest Smart Overseas Limited

Room 3201
32/F, Singga Commercial Centre
148 Connaught Road West
Hong Kong Special Administrative Region, China
If to the Issuer:
Mr. Qian Xu
China Technology Development Group Corporation

Room 2413-18, Shui On Centre
8 Harbour Road
Hong Kong Special Administrative Region, China
All such notices and other communications will be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a fax, when the party sending such fax has received electronic confirmation of its delivery, (c) in the case of delivery by internationally-recognized express courier, on the business day following dispatch and (d) in the case of mailing, if given or made by letter within Hong Kong, on the two (2) Business Days after mailing; if given or made by letter outside Hong Kong, seven (7) Business Days after mailing. Any notice received on a day which is not a business day shall be deemed to be received on the next business day.
     
10.8 Headings.
  The headings contained in this Agreement are for convenience purposes only and will not affect in any way the meaning or interpretation of this Agreement.
 
   
10.9 Benefits.
  This Agreement is and will only be construed as for the benefit of or enforceable by those persons party to this Agreement.
 
   
10.10 Assignment.
  This Agreement may not be assigned (except by operation of law) by any party without the consent of the other parties.
 
   
10.11 Governing Law.
  This Agreement will be governed by and construed in accordance with the laws of the Hong Kong SAR, China, applicable to contracts made and to be performed therein.

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10.12 Counterparts.
  This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.
 
   
10.13 Schedules and Exhibits.
  The schedules and exhibits are attached to this Agreement and incorporated herein.
IN WITNESS WHEREOF, this Agreement is executed as of the day and year first written above.

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Signature Page
SIGNED by
for and on behalf of
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
in the presence of:
     
Witness’ signature
  :
 
   
Witness’ name
  :
 
   
Witness’ occupation
  :
 
   
Witness’ address
  :
 
   
SIGNED by
   
for and on behalf of
HARVEST SMART OVERSEAS LIMITED
in the presence of:
     
Witness’ signature
  :
 
   
Witness’ name
  :
 
   
Witness’ occupation
  :
 
   
Witness’ address
  :

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EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THE WARRANT AND THE UNDERLYING SHARES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY RELEVANT STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN THEM BY REGULATION S UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
China Technology Development Group Corporation (the “Issuer”)
Room 2413-18, Shui On Centre
8 Harbour Road
Hong Kong Special Administrative Region, China
     
Warrant Certificate No.
                                                              
 
   
Name of Holder:
  Harvest Smart Overseas Limited
 
   
Address of Holder:
  Plam Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands
 
   
Number of Shares:
  500,000 Shares
 
   
Date of Issuance:
                                                              
 
   
Exercise Price:
  US$5.00 per Share
 
   
Expiry Date:
                                                               (24 months from date of issuance)

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THIS WARRANT CERTIFIES THAT, for value received, the above named holder or its registered assigns (the “Holder”), shall have the right to purchase from the Issuer the above referenced number of fully paid and non-assessable shares of par value US$0.01 per Share (the “Shares”) of the Issuer at an exercise price equal to the exercise price set forth above (the “Exercise Price”), subject to further adjustment as set forth in this Certificate, at any time from the date hereof until 5:00 P.M., Hong Kong time, on the expiry date set forth above (the “Expiry Date”). This Warrant is issued pursuant to the Subscription Agreement between the Issuer and Holder (the “Agreement”) pursuant to which the Holder subscribed for and purchased Subscription Shares and Warrants of the Issuer. The exercise of this Warrant shall be subject to the provisions, limitations and restrictions contained herein.
1. Exercise.
     
     1.1 Procedure for Exercise of Warrant.
  The Holder may exercise this Warrant by delivering the following to the principal office of the Issuer in accordance with Section 5.1 hereof:
 
   
 
 
(a)    a duly executed Notice of Exercise in substantially the form attached as Exhibit B;
 
   
 
 
(b)    either (i) a written certification that the Holder is not in the United States or a U.S. person, and that the Warrant is not being exercised in the United States on behalf of a U.S. person, which written certificate may be contained in the Notice of Exercise delivered pursuant to sub-paragraph (a) above; or (ii) a written opinion of counsel to the effect that the Warrant and the Shares have been registered under the Securities Act or are exempt from registration thereunder;
 
   
 
 
(c)    payment of the Exercise Price then in effect for each of the Shares being purchased, as designated in the Notice of Exercise; and
 
   
 
 
(d)    this Warrant.
Payment of the Exercise Price may be in cash, certified or official bank check payable to the order of the Issuer, or wire transfer of funds to the Issuer’s account (or any combination of any of the foregoing) in the amount of the Exercise Price for each Share being purchased.

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1.2 Delivery of Certificate and New Warrant.
  In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Shares so purchased, registered in the name of the Holder, together with any other securities or other property which the Holder is entitled to receive upon exercise of this Warrant, shall be delivered to the Holder hereof, at the Issuer’s expense, within a reasonable time, not exceeding fifteen (15) calendar days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of Shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder hereof within such time. The person in whose name any certificate for Shares is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such Shares on the date on which the Warrant was surrendered and payment of the Exercise Price was received by the Issuer, irrespective of the date of delivery of such certificate.
     
1.3 Transfer Restrictions and Restrictive Legend.
  This Warrant and the Shares have not been registered under the Securities Act and the Warrants have been and the Shares, upon exercise of the Warrants, will be issued pursuant to exemptions from the registration requirements of the Securities Act. Neither this Warrant nor any of the Shares or any other security issued or issuable upon exercise of this Warrant may be offered, resold, pledged or otherwise transferred except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the Act relating to such security or pursuant to an available exemption from the registration under the Securities Act. Each certificate for the Warrant, the Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Issuer, setting forth the restrictions on transfer contained in this Section. The initial Holder understands that this Warrant constitutes and the Shares upon issuance will constitute “affiliate securities” under the Securities Act, subject to the restrictions on transfer set out in Section 4.2 of the Agreement. The Holder acknowledges and agrees that all certificates representing the Shares will be endorsed with the following legend:

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AND HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT PROVIDED BY REGULATION S UNDER THE ACT. SUCH SECURITIES MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
     
     1.4 Fractional Shares.
  No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Issuer shall eliminate such fractional share interest by paying to Holder an amount computed by multiplying the fractional interest by the current market price of a full Share.
2. Covenants of the Issuer.
     
     2.1 Authorized Shares.
  The Issuer covenants and agrees that the Issuer will at all times have authorized and reserved, free from preemptive rights, a sufficient number of Shares to provide for the exercise in full of the rights represented by this Warrant.
 
   
     2.2 Issuance of Shares.
  The Issuer covenants and agrees that all Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and free from all transfer taxes, liens and charges with respect to the issue thereof.

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3. Transfer and Replacement.
  (a)   Subject to compliance with any applicable securities laws and the conditions set forth herein, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Issuer, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Issuer shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Shares without having a new warrant issued.
 
  (b)   The Issuer agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.
 
  (c)   If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Issuer may require, as a condition of allowing such transfer that (i) the Holder or transferee of this Warrant, as the case may be, furnish to the Issuer a written opinion of counsel to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) that the holder or transferee execute and deliver to the Issuer such documentation as is necessary to establish that the Warrants Shares are being transferred pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws or in an offshore transaction pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S of the Securities Act.
 
  (d)   The Issuer covenants that upon receipt by the Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any share certificate relating to the Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or share certificate, if mutilated, the Issuer will make and deliver a new Warrant or share certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or share certificate.

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4. Adjustments of Exercise Price and/or Number of Shares.
     
     4.1 Subdivision or Combination of Shares.
  The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Issuer shall (i) pay a dividend in Shares or make a distribution in Shares to holders of its outstanding Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue any Shares of its capital stock in a reclassification of the Shares, then the number of Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Shares or other securities of the Issuer which it would have owned or have been entitled to receive had such Warrant been exercised prior to the occurrence of such event. Upon each such adjustment of the kind and number of Shares or other securities of the Issuer which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Shares or other securities of the Issuer resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
 
   
     4.2 Reorganization, Reclassification, Consolidation,
Merger or Sale.
  If any recapitalization, reclassification or reorganization of the share capital of the Issuer, or any consolidation or merger
of the Issuer with another company, or the sale of all or substantially all of its Shares and/or assets or other transaction (including, without limitation, a sale of substantially all of its assets followed by a liquidation) shall be effected in such a way that holders of Shares shall be entitled to receive Shares, securities or other assets or property, then, as a condition of such recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales, lawful and adequate provisions shall be made by the Issuer whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Shares or other

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  securities of the Issuer immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such Shares, securities or other assets or property as may be issued or payable with respect to or in exchange for the number of outstanding Shares which such Holder would have been entitled to receive had such Holder exercised this Warrant immediately prior to the consummation of such recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales. The Issuer or its successor shall promptly issue to the Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to give effect to the adjustments provided for in this Section 4 including, without limitation, adjustments to the Exercise Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 4.2 shall similarly apply to successive recapitalizations, reclassifications, reorganizations, consolidations, mergers or sales.
 
   
4.3 Notice of Adjustment.
  Whenever the number of Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Issuer shall give notice thereof to the Holder, which notice shall state the number of Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

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5. Miscellaneous Provisions.
     
     5.1 Notices.
  Any notice or other document required or permitted to be given or delivered to the Holder shall be delivered or forwarded to the Holder at the address for the Holder provide on the first page of this Warrant or to such other address or number as shall have been furnished to the Issuer in writing by the Holder. Any notice or other document required or permitted to be given or delivered to the Issuer shall be delivered or forwarded to the Issuer at the address set forth above, Attention: Chief Executive Officer or Company Secretary. All notices, requests and approvals required by this Warrant shall be in writing and shall be conclusively deemed to be given (a) when hand-delivered to the other party, (b) when received if sent by facsimile at the address and number set forth above; provided that notices given by facsimile shall not be effective, unless either (i) a duplicate copy of such facsimile notice is promptly given by depositing the same in the mail, postage prepaid and addressed to the party as set forth below or (ii) the receiving party delivers a written confirmation of receipt for such notice by any other method permitted under this paragraph; and further provided that any notice given by facsimile received after 5:00 p.m. (recipient’s time) or on a non-business day shall be deemed received on the next business day; (c) five (5) business days after deposit in the United States mail, certified, return receipt requested, postage prepaid, and addressed to the party as set forth below; or (d) the next business day after deposit with an international overnight delivery service, postage prepaid, addressed to the party as set forth below with next business day delivery guaranteed; provided that the sending party receives confirmation of delivery from the delivery service provider.
 
   
     5.2 Limitation of Liability.
  No provision hereof, in the absence of affirmative action by the Holder to purchase Shares, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Exercise Price hereunder or as a shareholder of the Issuer, whether such liability is asserted by the Issuer or by creditors of the Issuer.

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     5.3 No Rights as Shareholder.
  This Warrant shall not entitle the Holder to any of the rights of a shareholder of the Issuer except upon exercise in accordance with the terms hereof and the subsequent issue of Shares of the Issuer registered in the name of the Holder.
 
   
     5.4 Governing Law.
  This warrant shall be governed by and construed in accordance with the laws of Hong Kong Special Administrative Region, China, applicable to agreements made and to be performed herein.
 
   
     5.5 Waiver, Amendments and Headings.
  This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by both parties (either generally or in a particular instance and either retroactively or prospectively). The headings in this Warrant are for purposes of reference only and shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Issuer has caused this Warrant to be signed by its duly authorized officer effective as of the                                                                                 day of                                                                                   , 2006.
China Technology Development Group Corporation
     
Signature of Authorized Signatory: By:
                                                                                  
 
   
Name of Authorized Signatory:
                                                                                  
 
   
Position of Authorized Signatory:
                                                                                  

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EXHIBIT B
FORM OF NOTICE OF EXERCISE
TO: China Technology Development Group Corporation
The undersigned hereby exercises the right to purchase the number of shares of China Technology Development Group Corporation (the “Issuer”) set forth below (the “Shares”) pursuant to the Warrant to Purchase Shares issued by the Issuer and dated November 27, 2006. In accordance with the provisions of the Warrant, the undersigned hereby tenders the following concurrently with the delivery of this Notice of Exercise (i) payment of the Exercise Price payable by the undersigned for the Shares (the “Purchase Price”) in effect for each of the Shares being purchased, and (ii) the original Warrant.
     
Number of Shares Purchased:
                                                                                  Shares
 
   
Aggregate Purchase Price:
  US$                                                                                
The undersigned represents and warrants to and agrees with the Issuer that:
1.   It is an “accredited investor” within the meaning of Rule 501(a)(3) under the Securities Act. The Subscriber has such knowledge, sophistication and experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities; it has evaluated such merits and risks and has determined that it is able to bear the economic risk of an investment in the Securities for an indefinite period of time, in view of the restrictions on transfer set out in Section 4.2.
2.   It acknowledges that in making the decision to purchase the Sale Shares, it has relied upon its independent investigation of the Issuer and its affairs, and has not relied upon any information or representations made by any third party or upon any oral or written representations or assurances from the Issuer, its officers, directors or employees or any other representatives or agents of the Issuer other than as set forth in the Agreement. It is familiar with the business, operations, properties, financial condition and prospects of the Issuer, has reviewed the Issuer’s publicly-available information filed with and submitted to the SEC, and has had an opportunity to ask questions of, and receive answers from, the Issuer’s officers and directors concerning the Issuer, its affairs and the terms and conditions of the issue and sale of the Shares.
3.   It is acquiring the Shares for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Shares in violation of the United States securities laws.
4.   It understands the Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”) or the securities laws of any state of the United States and that the sale contemplated hereby is being made in reliance on a safeharbour from such registration requirements.

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5.   The undersigned is not a “U.S. Person” as defined by Regulation S of the Securities Act and is not acquiring the Shares for the account or benefit of a U.S. Person.
A “U S. Person” is defined by Regulation S of the Act to be any person who is:
  (h)   any natural person resident in the United States;
 
  (i)   any partnership or corporation organized or incorporated under the laws of the United States;
 
  (j)   any estate of which any executor or administrator is a U.S. person;
 
  (k)   any trust of which any trustee is a U.S. person;
 
  (1)   any agency or branch of a foreign entity located in the United States;
 
  (m)   any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and
 
  (n)   any partnership or corporation if:
  (i)   organized or incorporated under the laws of any foreign jurisdiction; and
 
  (ii)   formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited Subscriber as defined in Section 230.501(a) of the Act who are not natural persons, estates or trusts.
6.   The undersigned was not in the United States at the time the offer to purchase the Shares was received and the Subscriber was not in the United States at the time these Warrants were exercised.
7.   The undersigned acknowledges that the Shares are “affiliate securities” within the meaning of the Securities Act and will be issued to the Subscriber in accordance with Regulation S of the Securities Act without registration under the Securities Act.
8.   The undersigned agrees to resell the Shares only in accordance with the provisions of Regulation S of the Securities Act, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration pursuant to the Securities Act.
9.   The undersigned agrees not to engage in hedging transactions with regard to the Shares unless i