DISTRIBUTORS

As of June 30, 2009, we had a total of 26 distributors including 22 independent distributors in 22 provinces and regions and 4 authorized distributors in 2 provinces.
Independent Distributors. In 2009, we have 22 independent distributors covering 22 provinces and regions of China. Each distributor is entitled to sell our products exclusively in one province or region. We sell our products to the distributors at a uniform discount to the unified retail price. The distributors then distribute our products through their sales network in their respective province. Our independent distributors manage local networks through the third party retail operators they appointed. In 2009, our independent distributors control a total of 24 retail outlets in 22 provinces and regions.
Authorized Distributors. To be qualified as our authorized distributors, such distributors need to own and directly manage a minimum of three retail outlets, counters in department stores and shopping malls, or wall racks in large supermarkets.  In 2009, we have 4 authorized distributors who own and directly manage their branches and retail stores to sell our products in four cities. The authorized distributors are required to sell our products to consumers at our unified retail price.

Qualification of Distributor
All distributors are required to be financially and professionally competent in the sale of sports and casual footwear. Prospective distributors should submit their application for distribution and get assessed, and only qualified candidates may conclude a one-year distributor agreement with us and get permission as a regional distributor. All distributors shall sell the Baopiao branded sports and leisure products in a specified region under our authorization, being responsible for the market development and management and actively expanding sales outlets. Counterfeited Baopiao branded products are denied, otherwise, the Company shall have the right to disqualify such distributors. We believe that our sales network through our distributors is relatively strong in second and third-tier cities in the PRC.

Evaluation of Distributor
We conduct evaluation to our distributors once a quarter in terms to our annual performance, store appearance maintenance, outlet exploration scales and speed, the timeliness and accuracy of information feedback, the scale of fixed assets, the standardization of operation and the like. If any distributor fails to fulfill its monthly sales target or annual sales target or target for establishing new sales outlets for consecutive 6 months, we are entitled to cancel the exclusive distribution right of such distributor.

At Baopiao 2009 Autumn-Winter Collection Summit, CEO Mr. Haiting Li is signing the cooperation agreements with distributors.