(k)           Any sale, mortgage, pledge, transfer, lease or other assignment of any of its tangible assets outside of the ordinary course of business;

(l)            Any capital expenditure in excess of $100,000; or

(m)          Any arrangement or commitment by the Company to do any of the acts described in subsection 2.8(a) through 2.8 (k) above.

2.9           Title to Properties and Assets.  The Company has good and marketable title to all respective properties and assets reflected on its account books, in each case subject to no mortgage, pledge, lien, encumbrance, security interest or charge of any kind.  With respect to the property and assets it leases, the Company and the lessor are in compliance with such leases and the Company holds valid leasehold interests in such assets free of any liens, encumbrances, security interests or claims of any party other than the lessors of such property and assets.

2.10         Intellectual Property; Status of Proprietary Rights.

(a)           The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights (“Intellectual Property”) necessary to the business of the Company as presently conducted, the lack of which could reasonably be expected to have a Material Adverse Effect, without any conflict with or infringement of the rights of others.  Disclosure Schedule 2.10 contains a complete list of the Company’s patents, trademarks, copyrights and domain names and pending patent, trademark and copyright applications.  Except for agreements with its own employees or consultants, standard end-user license agreements, support/maintenance agreements and agreements entered in the ordinary course of the Company’s business, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity.  The Company has not received any written communication alleging that the Company has violated or, by conducting its business as currently conducted, would violate any of the Intellectual Property of any other person or entity, nor is the Company aware of any basis therefor.  The Company is not obligated to make any payments by way of royalties, fees or otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with the conduct of its business as presently conducted.  There are no agreements, understandings, instruments, contracts, judgments, orders or decrees to which the Company is a party or by which it is bound which involve indemnification by the Company with respect to infringements of Intellectual Property.  The Company has obtained executed employment and consulting agreements containing intellectual property rights assignment, noncompetition and confidentiality provisions in the form provided to the Investor and its

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counsel and subject to final approval by the Investor in its sole discretion, from all current and former employees, consultants and contactors of the Company.

(b)           No Breach by Employees.  The Company is not aware that any of its employees is obligated under any contract or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or her efforts to promote the interests of the Company or that would conflict with the Company’s business as presently conducted.  Neither the execution nor the delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated.  The Company does not believe it is or will be necessary to use any inventions of any of their employees made prior to their employment by the Company.

2.11         Litigation.  There is no action, suit, proceeding, claim, arbitration or investigation (“Action”) pending or, to the Company’s knowledge, currently threatened against the Company, the Company’s activities, properties or assets, or any officer, director or employee of the Company in connection with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of, the Company.  There is no factual or legal basis for any such Action that might result, individually or in the aggregate, in any Material Adverse Effect on the Company.  The Company is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality and there is no Action by the Company currently pending or which it intends to initiate.

2.12         Tax Returns.  The Company has timely filed all tax returns and reports required to be filed by it with appropriate national and local governmental agencies.  These returns and reports are true and correct in all material respects.  All taxes shown to be due and payable on such returns and reports, any assessments imposed, and, to the Company’s knowledge, all other taxes due and payable by the Company on or before the Closing have been paid or will be paid prior to the time they become delinquent.  The Company has not been advised in writing (i) that any of its returns and reports have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment with respect to its taxes.

2.13       Employees

(a)           The Company does not maintain or contribute to any welfare funds, social benefits, medical benefits, insurance, retirement benefits, pensions or any similar plan or agreement (an “Employee Benefit Plan”) other than the Employee Benefit Plans identified in Disclosure Schedules 2.13 (a). To the Company’s knowledge, there are no unfunded obligations of the Company under any welfare funds, social benefits, medical benefits, insurance, retirement

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benefits, pensions or similar program, and any employee contributions withheld from payroll have been timely and fully contributed to the appropriate Employee benefit Plan as required under applicable law.

(b)           Disclosure Schedule 2.13 (b) sets forth a list of each contract, commitment, arrangement, or understanding, whether oral or written, relating to the employment of, or the performance of services by, any employee, consultant, or independent contractor. The Company is not delinquent in payments to any of its employees for any services performed for it to the date hereof or amounts required to be reimbursed to such employees.  To the Company’s knowledge, the Company has complied with all applicable PRC employment and labor laws and regulations, including laws and regulations pertaining to terms and conditions of employment, and wages and hours.

(c)           No employee of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company because of the nature of the business conducted by the Company; and to the Company’s knowledge, the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent contractors, will not result in any such violation. The Company has not received notice alleging that any such violation has occurred. No employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. To the Company’s knowledge, none of the officers or key employees, or any group of key employees, intends to terminate his, her or their employment with the Company, nor does the Company have a present intention to terminate the employment of any of the foregoing individuals.

2.14         Compliance with Other Instruments.  The Company is not in, nor will the conduct of business of the Company as proposed to be conducted result in, any violation, breach or default of any constitutional document of the Company, or in any material respect of any term or provision of any mortgage, indenture, contract, agreement or instrument to which the Company is a party or by which it may be bound, or of any provision of any judgment, decree, order, statute, rule or regulation applicable to or binding upon the Company.  The execution, delivery and performance of and compliance with the Transaction Documents and the consummation of the transactions contemplated hereby will not result in any such violation, breach or default, or be in conflict with or constitute, with or without the passage of time or the giving of notice or both, either a default under any such constitutional documents, any such contract, agreement or instrument or a violation of any statutes, laws, regulations or orders, or an event which results in the creation of any lien, charge or encumbrance upon any asset of the Company. Especially, the Company shall guarantee that the sale of the Equity Interests pursuant to this Agreement will not

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affect any of the Company’s Intellectual Property rights or licenses with respect to CSP technology.

2.15         Environmental and Safety Laws.  To the Company’s knowledge, the Company is not in violation of any applicable statute, law, or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law, or regulation.

2.16         Obligations of Management.  Each employee and consultant of the Company is currently devoting one hundred percent (100%) of his or her working time to the conduct of the business of the Company.  The Company is not aware that any such employee is planning to work less than fulltime at the Company in the future.  To the knowledge of the Company, no such employee is currently working for a competitive enterprise, whether or not such person is or will be compensated by such enterprise.

2.17         Use of Proceeds.  The Company will use the proceeds of the sale of the Equity Interests for increase of its production capability and working capital. No proceeds will be used to pay off the Company’s debts and liabilities outstanding prior to the Closing.

2.18         Minute Books.  The minute books of the Company made available to the Investor contain a complete summary of all meetings and actions taken by directors and shareholders or owners of the Company since its time of formation, and reflect all transactions referred to in such meetings and actions accurately in all material respects.

2.19         Disclosure.  No representation or warranty by the Company in this Agreement or in any written statement or certificate furnished or to be furnished to the Investor pursuant to any Transaction Document contains or will contain any untrue statement of fact or omits or will omit to state any fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they are made, not misleading in any way.  The Company has fully provided the Investor with all the information that the Investor has requested for the purpose of deciding whether to purchase the equity interests and all information that could reasonably be expected to enable the Investor to make such decision.

SECTION 3
Representations and Warranties of the Investor

The Investor hereby represents and warrants to the Company as follows:

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3.1           Authorization.  The Investor has all requisite power and authority to execute and deliver the Transaction Documents, to purchase the Equity Interests hereunder and to carry out and perform its obligations under the terms of the Transaction Documents.  All action on the part of the Investor necessary for the authorization, execution, delivery and performance of the Transaction Documents, and the performance of all of the Investor’s obligations under the Transaction Documents, has been taken or will be taken prior to the Closing.

3.2           Investment Purpose.  The Investor represents that the Equity Interests to be received by it will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that it has no present intention of selling, granting any participation in or otherwise distributing the same.

3.3           No Public Market.  The Investor understands that no public market now exists for any of the Equity Interests issued by the Company and that the Company has made no assurances that a public market will ever exist for the Company’s securities.

SECTION 4
Conditions to Investor’s Obligations to Close

The Investor’s obligation to purchase the equity interests at the Closing is subject to the fulfillment on or before the Closing of each of the following conditions unless waived in writing by the Investor:

4.1           Representations and Warranties.  The representations and warranties made by the Company in Section 2 (as modified by the disclosures on Disclosure Schedules) shall be true and correct as of the date of such Closing.

4.2           Covenants.  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing shall have been performed or complied with.

4.3           No Material Adverse Effect.  No event or events shall have occurred, or could reasonably be expected to occur, which, individually or in the aggregate, have, or could reasonably be expected to have, a Material Adverse Effect on the Company.

4.4           Transaction Documents.  The Company and the Investor shall have executed and delivered each of the Transaction Documents, provided that each such agreement shall be in a final form that is acceptable to the Investor in the Investor’s sole discretion.

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4.5           Regulatory Approval.  All authorization, approvals and permits of any governmental authority or regulatory body that are required to be obtained in connection with the sale of Equity Interests pursuant to this Agreement, including but not limited to, the Certificate of Approval for Establishment of Enterprises with Foreign Investment in the People’s Republic of China and the Business License that approve and evidence the increased registered capital, shall have been duly obtained and shall be effective as of the Closing.

4.6           Officer’s Certificate  The Company shall have delivered to the Investor an Officer’s Certificate, executed by the President of the Company, dated the Closing Date, in substantially the form attached hereto as Exhibit D, certifying the satisfaction of the conditions to closing listed in this Section 4 and the true and correctness of (i) the Restated Articles as in effect at the time of the Closing, (ii) the Restated JV Agreement as in effect at the time of the Closing, (iii) resolutions approved by the Board of Directors authorizing the transactions contemplated hereby; and (iv) resolutions approved by the shareholders of the Company authorizing the transactions contemplated hereby and waiving certain rights.

4.7           Corporate Documents  The Company shall have delivered to the Investor or its counsel copies of all corporate documents of the Company as the Investor shall reasonably request.

4.8           Board of Directors; Supervisors.  Effective upon the Closing, the Investor’s appointee,                 , shall have been elected as the director to the Board of Directors of the Company. As of the Closing, the Board shall consist of              ,              ,              ,              ,               and              .  In addition, Investor shall be entitled to appoint one of the two Supervisors, with the right of re-appointment.

4.9           Indemnification Agreements.  The director elected by the Investor shall have entered into an Indemnification Agreement with the Company upon the Closing in a form that is satisfactory to the Investor.

4.10         Employment Arrangements.  The employment arrangements for each of the executives of the Company shall be satisfactory to the Investor.

4.11         Proprietary Information and Invention Assignment Agreement.  Each of the management personnel of the Company shall have entered into the Proprietary Information and Invention Assignment Agreement in such form that is satisfactory to the Investor.

4.12         Service Agreement  The Company shall have entered into a Service Agreement with the Investor, with principle terms that the Company shall give to Investor loading priority in preference to all other customers, at the most favorable price.

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4.13         Legal Opinion.  The Investor shall have received opinions, dated as of the Closing, from Fangda Partners, the Company’s PRC counsel, in such forms as are acceptable to the Investor in its sole discretion.

SECTION 5
Conditions to Company’s Obligation to Close

The Company’s obligation to sell its equity interests at the Closing is subject to the fulfillment on or before such Closing of the following conditions unless waived by the Company:

5.1           Representations and Warranties.  The representations and warranties made by the Investor at such Closing pursuant to Section 3 shall be true and correct when made and shall be true and correct as of the date of such Closing.

5.2           Transaction Documents.  The Restated Articles and the Restated JV Agreement shall have been duly authorized and shall be in full force and effect as of the Closing.

SECTION 6
Miscellaneous

6.1           Governing Law.  This Agreement shall be governed by the laws of State of New York, U.S.A., without regard to principles of conflict of laws.

6.2           Arbitration.  If the Parties should have a material dispute arising out of or relating to this Agreement, or the Parties’ respective rights and duties hereunder or as to the Investor of the Company (including any claims or assertions regarding breach of the fiduciary duties of the Company’s directors), then the Parties will refer the issue (to the exclusion of a court of law) to final and binding arbitration in Hong Kong under the UNCITRAL Arbitration Rules in accordance with the Hong Kong International Arbitration Centre Procedures for the Administration of International Arbitration in force at the date of this Agreement, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  In any arbitration pursuant to this Agreement, the award or decision shall be rendered by a majority of the members of a Board of Arbitration (the “Board of Arbitration”) consisting of three (3) members, one (1) of whom shall be appointed by each party and the third of whom shall be the chairman of the panel and be appointed by mutual agreement of said two (2) party-appointed arbitrators.  In the event of failure of said two (2) arbitrators to agree within thirty (30) days after the commencement of the arbitration proceeding upon the appointment of the third

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arbitrator to the Board of Arbitration, the third arbitrator shall be appointed by the Hong Long International Arbitration Centre. Nothing set forth above shall be interpreted to prevent the Parties from agreeing in writing to submit any dispute to a single arbitrator in lieu of a three (3) member Board of Arbitration.  Upon the completion of the selection of the Board of Arbitration (or if the Parties agree otherwise in writing, a single arbitrator), an award or decision shall be rendered within no more than forty-five (45) days.  Notwithstanding the foregoing, the request by the Parties for preliminary or permanent injunctive relief, whether prohibitive or mandatory, shall not be subject to arbitration and may be adjudicated only by the courts of proper jurisdiction.

6.3           Attorney Fees.  In the event that any suit or action is instituted to enforce any provisions in this Agreement, the prevailing Party in such dispute shall be entitled to recover from the losing Party all fees, costs and expenses of enforcing any right of such prevailing Party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

6.4           Survival.  The warranties, representations and covenants of the Company and the Investor contained in this Agreement shall survive the execution and delivery of this Agreement and the Closing, and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investor or the Company.

6.5           Indemnification of Investor.

(a)           The Company hereby agrees to hold harmless and indemnify the Investor, the Investor’ direct and indirect subsidiaries, affiliated entities and corporations (collectively, referred to as the “Investor Indemnitees”) against any and all direct damages, liabilities, losses, reasonable costs and expenses (including attorneys’ fees and expenses), whether or not arising out of third-party claims, attributable to (i) any material inaccuracy in, or any material breach by the Company of, anyrepresentation or warranty or other statement expressly contained in this Agreement including the Disclosure Schedules, or (ii) any material breach of any covenant or agreement expressly contained in this Agreement including the Disclosure Schedules (collectively, the “Indemnifiable Claims”).