[ ] CO., LTDProposed RTO and Financing on Over the Counter Bulletin BoardLegal Due Diligence Report[], [] Province,From:Date: [ ], 2007Re: Legal Due Diligence Report of [] XX LtdDear SirsWe have been instructed as solicitors to[ ](the “Company”).We present our legal due diligence report on the Company in connection with the proposed RTO of the Company’s offshore holding company with an OTCBB shell company and financing (the “Project”).This Legal Due Diligence Report (this “Report”) is presented on the following bases:1. The information contained in this Report is primarily based on:(i) information and documentation supplied by the Company in response to the informationsought in the due diligence questionnaire and our further requests for supplemental information and documentation;(ii) discussions with the directors, management and staff of the Company;(iii) a search of the public records of the Company available for inspection at relevant PRC authorities in charge of administration for industry and commerce1;2. In reviewing the documentation supplied to, or obtained by, us we have assumed that:(i) all copies made from original documents are true and complete and that such originaldocuments are authentic and complete;(ii) all documents supplied to, or obtained by, us as originals are authentic and complete;(iii) all signatures appearing on documents supplied to, or obtained by, us as originals or copies of originals are genuine;(iv) the Company has the requisite corporate power to enter into all contractual arrangements to which it is a party and to perform its obligations thereunder;1 Such public records were provided to us by the Company.(v) all contractual documents have been duly authorised, executed and delivered by the parties thereto and constitute legally enforceable obligations of the parties under the laws of relevant jurisdictions;(vi) the Company has not passed a voluntary winding up resolution and that no petition has been presented to or order made by any court for the winding up or administration of the Company and that no receiver has been appointed in relation to the Company or any of its assets or revenue;(vii)the Company has drawn to our attention all matters relevant to our information requests.3. This Report is subject to the following qualifications:(i) we have not attempted independently to verify the authenticity and completeness of anyoriginal documents by contacting third parties;(ii)this Report does not of itself constitute a verification exercise;(iii) we are qualified to practice law only in the People’s Republic of China and we express no opinion as to any other laws;(iv) we have not investigated and have not attempted to comment on the commercial, financial ,technical or accounting implications of documents which have been supplied to, or obtained by, us or make any assessment of the current financial condition of the Company;(v) we have not investigated and make no comment on the adequacy of the Company’s insurance cover;(vi) this Report is by its nature a factual analysis and a legal review of the information supplied to us and should not be regarded as, or relied upon as being, a comprehensive or formal legal opinion concerning any matter referred to in it;(vii) we accept no responsibility whatsoever to update this Report for events or circumstances occurring after the date of this Report and cannot accept responsibility for information supplied to us by, or obtained by us from, third parties which may have become out of date at the date of this Report;(viii) this Report is not to be construed as advice on whether or not to proceed with the Project.Instead, regard should be had to a variety of other factors, commercial, financial, technical, accounting and otherwise, which come or should come, to the notice of the addressees of this Report by means other than legal due diligence;(ix) there can be no assurance that the information supplied to, or obtained by, us is complete or accurate in all respects or that there is no material information in relation to the Company of which we have not been made aware.The addressees of this Report should be aware that circumstances such as laws which are applicable in an insolvency, receivership, administration or creditors rights generally may affect the enforceability, performance or validity of agreements summarised in this Report.This Report makes fair disclosure of the legal matters which are referred to in it. However, we accept no responsibility whatsoever for any inaccuracy or incompleteness in this Report to the extent that any inaccuracy or incompleteness of the information and/or documentation on which we report would notbe apparent from a careful and thorough appraisal of such information and documentation as it has been supplied to, or obtained by, us and reviewed and after appropriate enquiry arising therefrom. This Report is limited to the effect of the laws of the People’s Republic of China as they, and the facts bearing upon this Report, existed on the date of this Report. We expressly disclaim any obligation or undertaking to update or modify this Report as a consequence of any future changes in such laws or in any facts bearing upon this Report. Additionally, we have not investigated, and we do not express or imply any view or opinion on, or in respect of, the laws of any country other than the PRC, and we have assumed that no such other laws would affect the contents contained in this Report.This Report is addressed solely to you for your benefit and for the purpose of the Placing and Project. It should not be shown, communicated or disclosed to any other person nor relied upon by any other person or for any other purpose. It must not be quoted or referred to in any public document or filed with any person without our prior express written consent.Yours faithfullyCONTENTS1.Corporate matters 82.Licenses, approvals and regulation 133.Banking arrangements and borrowings 174.Contracts 195.Real Property 206.Directors, senior executives and other employees 217.Intellectual property 228.Litigation 239.Insurances 2410.Environmental 2511.Prize and Honour 26DefinitionsThe following definitions are used in this Report:In this Report, the phrase “we are informed” means we are informed by directors, management and staff of the Company, either verbally or in writing.References to Sections and Paragraphs are to sections and paragraphs of this Report.Executive summarySubject to those contents specified in the text of this Report, we hereby summarise our findings of the Company in the following aspects.Corporate mattersThe Company is properly set up and is complying with requirements under PRC law and its own constitution. According to the Articles of Association, the corporate governance of the Company, such as Shareholders’ Meeting and the Board of Directors, is in good standing.Banking arrangements and borrowingsBanking agreements are signed on ordinary commercial terms and the formalities are standard. The interests of the Company can be protected in accordance with the agreements. We are informed that the Company is not aware of any breach of such banking agreements. ContractsWe have reviewed the model contracts provided by the Company and found no non-compliance with laws and regulations of the PRC, and terms and conditions of such contracts are in usual form, and we found no unusual or adverse terms.Real PropertyThe certificates show that the real properties of the Company are duly registered.Intellectual propertyWe are informed that the Company has no ownership of registered intellectual property.LitigationWe are informed that the Company is not aware of any other litigations, prosecutions, disputes or other proceedings (whether current, pending or threatened) to which the Company is or may become a party. InsuranceWe are informed that the Company has vehicle traffic compulsive insurance for its vehicles. EnvironmentalWe are informed that the Company is not aware of any investigations, prosecutions, disputes, claims or other proceedings in respect of environmental protection, nor the Company has been punished or can foresee any punishment to be made by any environmental administration authorities of the PRC.1.Corporate matters1.1 Summary corporate details of the Company*Details of shareholding1.2Corporate history of the Company since 2000After our review of documents filed with [] State Administration of Industry and Commerce, we find corporate history of the company as follows:1)Establishment of [] Zhonglv Eco-technology Enterprise Stock Co., LtdXX Co.,Ltd, [], [] Co.,Ltd, XX Co., Ltd and [] Meiste Business & Trade Co., Ltd （hereinafter referred to as “five shareholders”）applied to Xian Municipal Government for the examination and approval of Establishment of [] Zhonglv Eco-technology Enterprise Stock Co., Ltd on August 15,2000; With such approval, the five shareholders then applied to Xian Administration for Industry and Commerce (the “Local AIC”) for the establishment of [] Zhonglv Eco-technology Enterprise Stock Co., Ltd on 8 March 2001. The registered capital was RMB38,000,000. [] Jia He Certified Public Accountings LTD issued the capital verification report (document number: []) on 2 July 2001, certifying that as of 2 July 2001, [] Co., Ltd had received five shareholders’ contributions.The shareholding structure was as follows:2)The change of the Company’s name in 2005In July 2005, the Company applied to change the name of the Company from [] Zhonglv Eco-technology Enterprise Stock Co., Ltd to [] Co., Ltd2. The Company had completed the alteration registration with the Local AIC.3)The share transfer of the Company in 20 January, 2006Shareholders’ Meeting of the Company approved the share transfer as of December 2005.And the Company had completed the alteration registration with the Local AIC in 20 January, 2006.After this share transfer, the shareholder’s contribution list was as follows:4)Share purchase of [] in 2006In May, 2006, the company purchased 50.2% shares of [] Co., Ltd, and on the same day, [] Co., Ltd altered its name into [] Co. Ltd (hereinafter referred to as “[]”); In June, 2006, the company purchased 21.05% shares of [] from [] Surea (Group) Co. Ltd，11.15% shares of [] from [] Qin Mei Food Co., Ltd, 8.75% shares of [] from []After this share transfer, the shareholding structure of the [] was as follows:5)The increase of the registered capital of the Company and share transfer of the Company in2006In 12 September 2006, the Company applied to increase the registered capital of the Company. The registered capital of the Company was increased from RMB[] to RMB[]. [] Xin Bei Fang Limited Account Firm issued the Capital Verification Report (document number: []), certifying that as of 6 September 2006, the Company had received the newly increased capital R[], and the total registered capital of the Company was RMB[].Simultaneously, [] Hede Venture Capital Management Co., Ltd subscribed 20,080,000 shares of the Company and became the shareholder of the Company, Li Yao subscribed 7,120,000 shares of the Company and became the shareholder of the Company, [] subscribed 6,010,000 shares of the Company by execution of first refusal right on the basis of ratio of shareholding, [] subscribed 5,928,000 shares of the Company by execution of first refusal right on the basis of ratio of shareholding, [] subscribed [] shares of the Company by execution of first refusal right on the basis of ratio of shareholding, Wang Jianjun subscribed 1,800,000 shares of company by execution of first refusal right on the basis of ratio of shareholding, Dong Sheng subscribed []shares of company by execution of first refusal right on the basis of ratio of shareholding, Cui Yuan subscribed [] shares of company by execution of first refusal right on the basis of ratio of shareholding and Liu Yagang subscribed 1,200,000 shares of company by execution of first refusal right on the basis of ratio of shareholding. Shareholders’ meeting approved this capital increase as of 18 August 2006.The Company had completed the alteration registration with the Local AIC.After this capital increase and share transfer, the shareholdstructurer’s contribution list of the Company was as follows:6)The share transfer of company in January, 2007In 12 January 2007, The Company applied to Local AIC for alteration registration with respect to shareholders and shareholding structure. This alteration registration had been completed.After this share transfer, the shareholders’ contribution list of the Company was as follows:7)The share transfer of company in September, 2007In 10 January, 2007, [] (“[]”)，a company duly and legally incorporated in Vanuatu, and shareholders of the Company entered into share purchase agreement to the effect that [] purchased 22.818% shares of company from [] Hede Venture Capital Management Co.,Ltd,17.918% shares of company from [], 17.664% shares of company from [], 9.923% shares ofcompany from [], 9.567% shares of company from [] Ruicheng Business & Trade Co., Ltd,5.455% shares of company from [], 5.455% shares of company from [], 4.292% shares ofcompany from []， 3.636% shares of company from [] and 2.272% shares of company from [] Shareholders’Meeting approved this share transfer. In 3 September 2007, MOFCOM issued its approval (Shaang Zi Pi (2007) No.1175) as of this domestic enterprise merged by foreign investor, and then issued to the Company of Certificate of Approval for Establishment of Enterprises with Foreign Investment.After this share transfer, the shareholding structure of the Company was as follows:1.3Existence of the CompanyWe confirm in relation to the Company that:a)our search of its public records3 on file and available for inspection at []Administration for Industry and Commerce shows that it is a company dulyincorporated under the laws of the PRC and it is still in existence;b)our search of its public records4 on file and available for inspection at []Administration for Industry and Commerce reveals (1) no order or resolution for itswinding up; (2) no notice of appointment of a liquidator, administrator, receiver,administrative receiver, manager or other encumbrancer in respect of it, its businessor assets; and (3) no notice that it has entered into any voluntary arrangement orcomposition for the benefit of its creditors.1.4Registered Capital of the CompanyWe are informed that:a)there are no options, warrants or other rights to purchase, agreements or otherobligations to issue, or other rights to convert any obligations into equity stake orother securities or any interest in securities which are outstanding in respect of theCompany; andb)there are no contractual pre-emptive rights or rights of first refusal or rights of co-sale which relate to the equity stake of the Company.1.5Preferred StockNot applicable to the Company.1.6Options/WarrantsNot applicable to the Company.1.7Convertible debt or other securitiesNot applicable to the Company.3 Such records were provided by the Company.4 Such records were provided by the Company.2.Licenses, approvals and regulation2.1Existing licenses etc.The Company has the following licenses, permissions, authorizations, permits, registrations,consents and approvals in relation to its business, products and services:(i)Business License:See 1.1.(ii)Organization Code Certificate of the PRCSerial Number:Valid Period:Registration Number:(iii)Tax Registration CertificateState Taxation:Date of Issuance: 15 October 2007Local Taxation:Date of Issuance: 5 December 2007(iv)Certificate of Foreign Exchange RegistrationSerial Number:Date of Issuance:(v)Food Hygiene Permit CertificateCertificate No: []Valid Term:Issued by:(vi)Certificate for High and New Technology EnterpriseCertificate No：Issued by:Valid Term: Two Years from 26 December 2006(vii) Certificate for Qualification of Foreign Trade EnterpriseForeign Trade Enterprise Code:Registration No:Registration Date: 20 October 2006(viii) Registration Certificate of Declaration For Inspection & Quarantine On One’s Own Behalf And For One’s Own InterestsRegistration Number:Date Of Issuance: 10 November 2006Issued By: [] Department of Entry-Exist Inspection & Quarantine(ix)Membership Certificate of Commodity Bar Code SystemSerial Number:Manufacturer Identification Code：Date of Issuance: 25 October 2007Valid Term： Two years(x)Kosher CertificateDate of Issuance: December 09, 2007Product Scope:Expiration Date: September 30, 20082.2Existing licenses etc. for [] Modern Organic Agriculture Co., Ltd(i)Business License:Registration Number:Date of Issuance:Registered Capital:Registered Address:Legal Representative: [](ii)Organization Code Certificate of the PRCSerial Number:Valid Period: 28 June 2006 to 28 June 2010Registration Number:(iii)Tax Registration CertificateState Taxation:Issuing Date: 27 September 2006Local Taxation:Issuing Date: 29 September 2006(iv)Food Hygiene Permit CertificateCertificate No:Valid Term: From 28 July 2006 To 27 July 2010Issued by: [] Health Bureau(v)Foreign Trade Enterprise RegistrationForeign Trade Enterprise Code:Registration No:Registration Date: 22 August 2006(vi)Registration Certificate of Declaration For Inspection & Quarantine On One’s Own Behalf And For One’s Own InterestsRegistration Number:Date Of Issuance: 10 November 2006Issued By: [] Department of Entry-Exist Inspection and Quarantine (vii)Membership Certificate of Commodity Bar Code SystemSerial Number:Manufacturer Identification Code:Date of Issuance: 14 December 2006Valid Term: Two years(viii)Certificate Of Food Safety Management SystemRegistration Number:Product Scope:Valid Until: 30 December 20072.3Existing Licenses of [] Branch of the Company(i)Business LicenseRegistration number:Date of Issuance： 16 September 2006Registered Address:(ii)Organization Code Certificate of the PRCSerial Number:Valid Period: 27 September 2006 to 27 September 2010Registration Number:(iii)Tax Registration CertificateState Taxation:Issuing Date: 11October 2006Local Taxation:Issuing Date: 21 November 2006(iv)Food Hygiene Permit CertificateCertificate No:Date of Issuance: 17 August 2006Issued by: Health Bureau of [] County(v)Certificate of Food Safety Management SystemRegistration No：Product Scope：2.4Existing Licenses of [] Branch of [](i)Business LicenseRegistration number:Date of Issuance： 26 May 2003Registered Address:(ii)Organization Code Certificate of the PRCSerial Number:Valid Period: 19 October 2006 to 19 October 2010Registration Number:(iii)Tax Registration CertificateState Taxation:Issuing Date: 16 November 2006Local Taxation: 1Issuing Date: 16 November 2006(iv)Food Hygiene Permit CertificateCertificate No:Date of Issuance: January 8, 2008Expiration date: January 8, 2009Issued by:(v)National Industry Product Manufacture PermitCertificate Number：Product Name:Issuance date: August 21, 2007Expiration Date:Issued By: General Administration of Quality Supervision, Inspectionand Quarantine2.5BreachesWe are informed that the Company is not aware of any breach of, or non-compliance with, the terms of its licenses, approvals etc or of any notices of failure to remedy any such breach or non-compliance or of any circumstances which would or might give rise to any claims in relation thereto.2.6InvestigationsWe are informed that the Company is not aware of any actual or threatened inspections or investigations or any alleged violations concerning its licenses, approvals etc or otherwise.3.Banking arrangements and borrowings3.1 Loan agreements and banking facilitiesThe terms and conditions of the following agreements are within industry standards.The following circular is within standard arrangement.RMB [] million Loan Agreement ;RMB [] million Trade Finance Line Agreement ;Mortgage AgreementCircular of Establishment of Special Account for Fiduciary Export Rebate (the “Special Account”)Code of RMB []million Loan Agreement:Lender: []Borrower: the CompanyTerm: August 10, 2007 to June 7, 2008Amount: RMB 10 millionPurpose: working capitalAnnual Interest rate: 7.542%Code of RMB [] million Trade Finance Agreement: []Lender:Borrower: the CompanyTerm: []Maximum Amount Provided by the Lender: []Form of Loan: Trade Finance Loan with a Maximum AmountThe Mortgage AgreementCode of Mortgage Agreement: []Mortgagee: []Mortgagor: the CompanyForm of Mortgage: Mortgage for a Maximum amountMaximum amount under provided by the Mortgagor: RMB26millionTerm: []Mortgaged Assets:(a): the land use right of the Company. The land use right certificate is [], anduncompleted construction work on the piece of land.(b):Imported production line from Italy. The Import Certificate for the production lineis [].Circular of Establishment of Special Account for Fiduciary Export RebateIssued By: []Date of Issuance: []Beneficiary: []Content: Without Beneficiary’s Authority, this Special Account Shall Be Subject to No Alteration As of Date of Issuance.3.2 Charges and other securityWe are informed that except for the agreements mentioned in the above 3.1, there are no outstanding securities outstanding provided by the Company.3.3 Loans by the CompanyNone.3.4 Early repayment or breachW e are informed that no notice requiring repayment of any borrowings of theCompany has been served and that there has been no breach of any covenant contained in any charge, debenture or guarantee, loan agreement, facility letter or similardocument..4.Contracts4.1 Sales` ContractWe have examined model sales contract of the company and we do not find any special terms and conditions that may cause the Company to afford special obligations or be liable for any special responsibilities. We are of the opinion that the said models are in ordinary terms and conditions and are in compliance of the PRC laws and regulations.4.2 Purchase ContractWe are informed that [] and local farmers have entered into many kiwi fruit purchase agreements. Based on our examination of model kiwi purchase agreement, we have not found any special terms and conditions that may cause the Company to afford special obligations or be liable for any special responsibilities. We are of the opinion that the said models are in ordinary terms and conditions and are in compliance of the PRC laws and regulations.5.Real Property5.1.The Company has the following Rights on real property rights:(i)State Owned Land Use Right CertificateCertificate Number: []Issuing Authority: J[]User’s Name: the CompanyDate of Issuance: 9 April 2007Location:Purpose ofLand Use Right: industrial usageExpiry Date: 27 December 2056Acreage: 34476.04 square metersType of Use Right: grantedMortgage on the land use right: see above 3.1(ii)State Owned Land Use Right CertificateCertificate Number: []Issuing Authority: []User’s Name: []Date of Issuance: 15 November 2007Expiration Date: 14 November 2048Acreage: 34335.05 square metersType of Use Right: granted5.2.The Company has entered into the following building lease contract:Building Lease Contract executed with [] on 1 July 2007, whereby Yang leased a building (area: 300.24 m2) to the Company for office usage with a valid period from 1 July 2007 to 30 June 2008.The yearly rent is RMB126100.8.The location is: []6.Directors, senior executives and other employees6.1.Directors of the Company56.2.Senior Executives of the Company6.3.Standard employee documentationWe have been provided with a copy of a sample of the Company’s standard terms and conditions of employment. We do not find anything contained in these standard terms and conditions being in violation of any PRC laws or regulations.6.4.Trade UnionWe are informed that there is no Trade Union or entities of the like nature in the Company.5 Such information is based on a summary provided to us by the Company.7.Intellectual propertyThe Company and its subsidiaries have the following intellectual property: 7.1Notice for Acceptance of Registration ApplicationApplication No: []Co-applicant: the CompanyApplication Date: 4 November 2005Issued byDate of Issuance: 17 February 20067.2Notice for Acceptance of Registration ApplicationApplication No: 5000010Co-applicant: the CompanyApplication Date: 14 November 2005Issued byDate of Issuance: 3 March 20068.LitigationWe are informed that the Company is not aware of any litigation, prosecution, dispute or proceeding (whether current, pending or threatened) to which the Company is or may become a party.9.InsurancesThe Company has effected vehicle compulsive insurances for its seven motor vehicles. We have reviewed the insurance policy, and we are of the opinion that such policy is a standard contract.10.EnvironmentalEnvironment Monitoring ReportSerials Number: []Date of Issuance: 8 September 2007Conducted by: [] Environment Monitoring StationWe are informed that the Company is not aware of any investigations, prosecutions, disputes, claims or other proceedings in respect of environmental protection, nor the Company has been punished or can foresee any punishment to be made by any environmental administration authorities of the PRC.11.Prize and Honour11.1Certificate Of 2005- 2006 Excellent Leadership Enterprise Of National Food Industry Date of Issuance: November, 2006Issued By:Issued To: The Company11.2Certificate Of Excellent Leadership Enterprise Of [] Agriculture Industry Management Valid Term: 1 December 2006 to 1 December 2008Issued By: [] Agriculture BurearIssued To： []11.3Certificate Of Observance Of Contractual Obligations And Good CreditDate of Issuance: 9 January 2007Valid Term: One YearIssued By: [] SAICIssued To: The Company11.4Certificate Of Membership Of China Chamber Of Commerce For Import & Export OfFoodstuffs, Native Produce & Animal By-ProductsSerial Number: []Date of Issuance: 14 August 2007Issued By:Issued To: The Company。