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                                                                   EXHIBIT 10.16

                SHENZHEN REAL ESTATE SALES AND PURCHASE CONTRACT

                Shen Fu Bao (_____) Fang Yu Mai Zi ( ) No. ______


Seller ("Party A"):          SHENZHEN LIBAOYI INDUSTRY DEVELOPMENT CO., LTD.

Address:                     NO. 2 FENG HUANG ROAD, FUTIAN FREE TRADE ZONE,
                             SHENZHEN, PEOPLE'S REPUBLIC OF CHINA ("PRC")

Legal representative:        Wang Teng Qin; position: GENERAL MANAGER

I.D. Card/Passport No.:      230106581025042

Appointed agent:             BLANK  ; nationality/ancestral home: BLANK
                             telephone: BLANK

I.D. Card/Passport No.:      BLANK

Address:                     BLANK


Buyer ("Party B")            BLANK

Name:                        BLANK  ; nationality/ancestral home: BLANK
                             telephone: BLANK

I.D. Card/Passport No.:      BLANK

Address:                     BLANK

Name of company or
organization:                NEW FOCUS INC. (FOR ITSELF AND ON BEHALF OF ITS
                             WHOLLY FOREIGN-OWNED ENTERPRISE TO BE ESTABLISHED
                             IN THE FUTIAN FREE TRADE ZONE, SHENZHEN, PRC)

Address:                     2630 WALSH AVENUE, ; telephone: _________________
                             SANTA CLARA, CA, 95051, USA

Legal representative;        Bob Ma; position: General Manager

I.D. Card/Passport No.:      700848160

Appointed agent:             BLANK  ; nationality/ancestral home: BLANK



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                             telephone: BLANK

I.D. Card/Passport No.:      BLANK

Address:                     BLANK



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Article 1. This Contract is made in accordance with the relevant laws and
regulations of the People's Republic of China and the Regulations for the
Assignment of Real Estate in the Shenzhen Special Economic Zone.

Article 2. Having entered into a Contract for the Grant of Land Use Rights (ref.
Shen Bao Shui Tu Di Zi (   ) No. _________ with the Shenzhen Futian Bonded Zone
Administration (the "Municipal Administration"), Party A has obtained the land
use rights to Lot No. B105-93(2) in the Shenzhen Futian Bonded Zone with an area
of 9,520.8 square meters. The purpose of the land is INDUSTRIAL USE. The land
use term runs from 29 SEPTEMBER 1997 to 28 SEPEMBER 2047, a total of 50 years.
Ownership of the land vests in the People's Republic of China. The number of the
Real Estate Title Certificate obtained for the land is (NOT YET APPLIED).

Having obtained approval, Party A is constructing real estate named WANLI
INDUSTRIAL BUILDING on the said land. The principal building is INDUSTRIAL in
nature and has a FRAMEWORK structure of 7 floors. Party A is currently carrying
out approved pre-sale of the real estate. The number of its Real Estate Pre-Sale
Permit is BLANK and the number of its Permit for Foreign Sale of Commodity
Residences is BLANK. (PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS)

Article 3. Party B shall purchase from Party A Unit BLANK, Building/Block BLANK
of the said real estate. The said unit is located on the 5TH TO 7TH floor and
has a floor area of 10,796.31 square meters. (PLEASE SEE THE ATTACHED
SUPPLEMENTARY PROVISIONS)

Article 4. The Parties agree that the selling price of the said real estate
shall be RMB2,827.95/square meter (of floor area), totaling 30,526,985
Yuan Renminbi Exactly.

Article 5. Party A has appointed BLANK as pre-sale collection agent and escrow
and BLANK as the project's supervising engineers, and warrants that it will
perform the pre-sale moneys escrow agreement executed among the three parties.
Party B agrees to remit the pre-sale moneys set forth in Schedule BLANK to the
said collection agent. The name and number of the pre-sale collection agent's
account are BLANK and BLANK, respectively. (PLEASE SEE THE ATTACHED
SUPPLEMENTARY PROVISIONS)

Article 6. If Party B fails to make timely payment in accordance with Schedule
BLANK as specified in Article 5 hereof, Party A shall have the right to claim
liquidated damages from Party B. If the amount of the unit's price paid by Party
B is 50 percent or more of the amount payable, Party B shall pay to Party A
liquidated damages for late payment at the rate of 0.05 percent of the overdue
amount of the unit's price for each day of delay. If the amount of the unit's
price paid by Party B is less than 50 percent of the amount payable, Party A may
claim liquidated damages from Party B at the rate of BLANK percent of the total
price of the unit.

If the delay exceeds 60 days, Party A shall have the right to unilaterally



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terminate this Contract. In such case Party A shall, within 10 days, deduct the
liquidated damages specified in the preceding paragraph from the real estate
price already paid by Party B and refund the balance to Party B, together with
written notification. (PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS)

Article 7. Party A must deliver the real estate provided for herein, after it
has been accepted, to Party B for its use on BLANK. (PLEASE SEE THE ATTACHED
SUPPLEMENTARY PROVISIONS)

Article 8. If Party A fails to deliver the real estate to Party B for its use at
the time specified in the preceding Article, it shall pay liquidated damages to
Party B equal to 0.05 percent of the above-mentioned real estate price for each
day of delay.

If the delay exceeds 30 days, Party B shall have the right to unilaterally
terminate the Contract by written notice to Party A, in which case Party A
shall, within 10 days, refund to Party B the entire amount paid by Party B
(without interest) and pay liquidated damages at the rate of 10 percent of the
price of the real estate. If Party B does not terminate the Contract, Party A
shall pay liquidated damages to Party B equal to 0.03 percent of the
above-mentioned said real estate price for each day of delay. (PLEASE SEE THE
ATTACHED SUPPLEMENTARY PROVISIONS)

Article 9. If the Real Estate Sales and Purchase Contract becomes
non-performable or only partially performable as a result of an event of force
majeure such as a fire, earthquake, flood or war, etc., Party A must obtain
documentary evidence from the relevant municipal authority of Shenzhen.

Article. 10. The real estate sold by Party A may be delivered to Party B for its
use only after the entire construction project has been completed in accordance
with the engineering drawings approved by the Futian Bonded Zone Administration
and accepted by the Shenzhen municipal authority in charge of construction
projects, and the road access and water and power supply have been connected,
and the Certificate of Acceptance Upon Completion of Construction has been
obtained.

Article 11. If the actual floor area of the real estate delivered is larger or
smaller than the area provided for herein, Party A or Party B shall have the
right to demand that the other Party make up or refund the portion of the
purchase price which corresponds to the difference in area. If the finishing of
the real estate delivered is not according to the finishing standards stipulated
in Schedule 3 hereto, Party B shall have the right to demand compensation from
Party A for the portion of the price which corresponds to the difference in the
level of the finishing. (PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS)

Article 12. Party A shall issue a receipt for full payment of the unit's
purchase price after Party B has paid the same in full. (PLEASE SEE THE ATTACHED
SUPPLEMENTARY PROVISIONS)



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Article 13. BLANK shall be responsible for management of the real estate for the
period between the delivery of the real estate and the appointment of a
management organization for the residential area by the owner's committee. Party
B shall abide by the relevant property management regulations. Party A gives a
one-year maintenance warranty from the date of delivery of the real estate to
Party B. If the real estate suffers damage not attributable to Party A, Party A
may assist with repairs, but the repair expenses shall be borne by Party B
itself.
(PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS)

Article 14. Within 150 days after obtaining the Certificate of Acceptance Upon
Completion of Construction, Party A shall notify Party B that they should
jointly apply to the Shenzhen Futian Bonded Zone Administration for registration
of the real estate transfer. After the transfer of title to the real estate has
been registered and a certificate issued, Party B shall legally have the rights
of occupation, use, receipt of earnings and disposal. (PLEASE SEE THE ATTACHED
SUPPLEMENTARY PROVISIONS)

Article 15. Each of the Parties shall bear its own taxes and fees pertaining to
the obtaining of the Real Estate Title Certificate, in accordance with state,
provincial and municipal regulations.

Article 16. If Party B is unable to obtain the Real Estate Title Certificate
within the statutory period due to the fault of Party A, Party A shall pay rent
to Party B at the rent guidance rate specified by the authority in charge of
leasing of premises. Such rent shall be payable from the 180th day of the date
on which Party A obtains the Certificate of Acceptance Upon Completion of
Construction until the date on which the Futian Bonded Zone Administration
issues the Real Estate Title Certificate. (PLEASE SEE THE ATTACHED SUPPLEMENTARY
PROVISIONS)

Article 17. Lot No. BLANK on which the real estate sold by Party A is located as
well as the public facilities are owned in common by the real estate title
owners within that area (except where agreed otherwise). Party B shall bear
obligations according to the area apportioned to the land occupied by it.
(PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS)

Article 18. Party A reserves for itself the rights and interests in the projects
set forth in Schedule 4. (PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS)

Article 19. Party B shall pay land use fees in accordance with relevant
municipal regulations after it has obtained title to the real estate.

Article 20. When title to the real estate passes, Party A shall deliver a
photocopy of the Contract for the Grant of Land Use Rights to Party B. The
rights and obligations provided for in the Contract for the Grant of Land Use
Rights shall pass simultaneously with the passing of title.

Article 21. Party A shall file this Contract with the Shenzhen Futian Bonded



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Zone Administration for registration within seven days of its entry into effect.

Article 22. The Parties may stipulate other terms in Schedule 5. Schedule 5
which must be signed and sealed by the Parties.

Article 23. Disputes arising in connection with this Contract shall be resolved
through consultations between the Parties. If consultations are unsuccessful,
the dispute shall be resolved by one of the following methods (check the box of
the method selected; only one method may be selected): degrees1/4 application to
the Shenzhen Arbitration Commission for arbitration; degrees1/4 institution of
legal proceedings in a People's Court; degrees1/4 application to a Chinese
international economic and trade arbitration institution for arbitration
(applicable only if one or both Parties are organizations or individuals outside
China). (PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS)

Article 24. Schedules 1, 2, 3, 4 and 5 and the Map attached hereto all form part
of this Contract. Text entered in the Contract with a fountain pen shall be as
valid as the typed and printed text. (PLEASE SEE THE ATTACHED SUPPLEMENTARY
PROVISIONS)

Article 25. This Contract, together with Schedules 1, 2, 3, 4 and 5 and the Map,
has a total of BLANK pages and is made in BLANK, equally authentic copies, of
which Party A, Party B, the notary public's office (in the case of a real estate
sales and purchase contract with a foreign element) and the Shenzhen Futian
Bonded Zone Administration shall each hold one copy. (PLEASE SEE THE ATTACHED
SUPPLEMENTARY PROVISIONS)

Article 26. This Contract shall enter into effect on the date of execution by
both Parties. If one or both of the Parties are organizations or individuals
outside China, this Contract shall enter into effect on the date of notarization
by a Shenzhen notary public's office.

Party A (affix signature/seal):             Party B (affix signature/seal):

SHENZHEN LIBAOYI INDUSTRY                   NEW FOCUS INC.
DEVELOPMENT CO., LTD.                       (FOR ITSELF AND ON BEHALF OF ITS
                                            WHOLLY FOREIGN-OWNED ENTERPRISE TO
                                            BE ESTABLISHED IN FUTIAN FREE TRADE
                                            ZONE, SHENZHEN)



By: /s/ WANG BAO CHENG                      By: /s/ BOB MA
   ---------------------------------           ---------------------------------
Name: Wang Bao Cheng                        Name: Bob Ma
Title: Chairman                             Title: General Manager
Nationality: China                          Nationality: USA



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Agent of Party A                            Agent of Party B
(affix signature/seal):                     (affix signature/seal):



                                            Date: 6 April 2000


Certification unit:

Certifying representative (affix seal):


Date:



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SCHEDULE 1


Payment of the unit's price in a lump sum during the construction period:

A BLANK percent discount on the sales price is available for full payment if the
unit's price is paid in full at the time of execution of this Contract, in which
case the total price will be BLANK Yuan Renminbi/Hong Kong Dollars Exactly.



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SCHEDULE 2


Payment of the unit's price in BLANK installments during the construction
period:

1.      BLANK percent of the entire price of the unit, i.e. BLANK Yuan
        Renminbi/Hong Kong Dollars, shall be paid within BLANK days of the date
        of execution.

2.      BLANK percent of the entire price of the unit, i.e. BLANK Yuan
        Renminbi/Hong Kong Dollars, shall be paid by BLANK.

3.      BLANK percent of the entire price of the unit, i.e. BLANK Yuan
        Renminbi/Hong Kong Dollars, shall be paid by BLANK.

4.      BLANK percent of the entire price of the unit, i.e. BLANK Yuan
        Renminbi/Hong Kong Dollars, shall be paid by BLANK.

5.      BLANK percent of the entire price of the unit, i.e. BLANK Yuan
        Renminbi/Hong Kong Dollars, shall be paid by BLANK; or mortgage loan
        procedures shall be duly carried out with the relevant bank before that
        date and payment made within the prescribed time limit.



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SCHEDULE 3


Finishing standards:

1.      Exterior walls:             lath face bricks
                                    building floors: first floor: wearproof
                                  tiles; other floors: cement plaster

2.      Interior walls:             latex paint


3.      Ceilings:                   corridors: false ceilings; rooms: white
                                    latex paint

4.      Floors:                     first floor: wearproof tiles; other floors:
                                  cement plaster


5.      Doors and windows:          doors: fire doors windows: white aluminum
                                  alloy frames; green panes

6.      Kitchen:                     /

7.      Bathrooms:                  each unit has separate ladies' and gents'
                                  toilets

8.      Balcony:                     /

9.      Elevators:                  two 3-tonne goods elevators and two 2-tonne
                                  goods elevators

10.     Miscellaneous:            (a) each unit has a fire door
                                  (b) automatic sprinkler system, fire hydrant
                                      system



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SCHEDULE 4


The rights and interests in the projects set forth below shall vest in Party A:

1.      PARTY A AND PARTY B SHALL JOINTLY OWN ALL THE COMMON FACILITIES OF WANLI
        INDUSTRIAL BUILDING. THEIR SHARE OF INTEREST IN SUCH FACILITIES SHALL BE
        PROPORTIONAL TO THE AMOUNT OF GROSS FLOOR AREAS OF WANLI INDUSTRIAL
        BUILDING OWNED BY THEM RESPECTIVELY.


2.      BLANK

3.      BLANK

4.      BLANK

5.      BLANK



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SCHEDULE 5


Stipulations of the Parties: PLEASE SEE THE ATTACHED SUPPLEMENTARY PROVISIONS

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Party A (affix signature/seal):             Party B (affix signature/seal):



                                            Date:



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MAP


Floor plan:



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                                   SCHEDULE 5

SUPPLEMENTARY PROVISIONS TO THE SHENZHEN REAL ESTATE SALES AND PURCHASE CONTRACT


THESE SUPPLEMENTARY PROVISIONS TO THE SHENZHEN REAL ESTATE SALES AND PURCHASE
CONTRACT ("SUPPLEMENTARY PROVISIONS") are formulated by Party A and Party B to
supplement the Shenzhen Real Estate Sales and Purchase Contract ("CONTRACT") to
which these Supplementary Provisions is attached.


1.      DEFINITIONS

In this Contract and these Supplementary Provisions, Party A and Party B shall
be individually referred to as a "PARTY" and together as the "PARTIES". In
addition, the terms below shall have the following meanings ascribed to them:

1.1     "AFFILIATE" means any company which, through ownership of voting stock
        or otherwise, directly or indirectly, is controlled by, under common
        control with, or in control of, a Party; the term "control" meaning
        ownership of fifty percent (50%) or more of the voting stock of a
        company, or the power to appoint or elect a majority of the directors of
        a company, or the power to direct the management of a company.

1.2     "BUILDING" means Wanli Industrial Building located in FFTZ.

1.3     "CANCELLATION DATE" means 30 June 2000 or such later date as mutually
        agreed in writing by the Parties.

1.4     "DELIVERY DATE" means the date on which Party A delivers the Leased
        Portion to Party B in accordance with the Tenancy Agreement or a later
        date as agreed in writing by the Parties, being the date on which vacant
        possession of the Transfer Portion is delivered to Party B WFOE (or
        Party B, as the case may be).

1.5     "ESCROW AGENT" means the Bank of East Asia, Shenzhen Branch or any other
        bank operated in Shenzhen as mutually agreed in writing by the Parties.

1.6     "ESCROW AGREEMENT" means an escrow agreement to be entered into among
        the Parties and the Escrow Agent in accordance with Article 2.2 of these
        Supplementary Provisions.

1.7     "ESCROWED FUNDS" means US$3,677,950 (i.e. US$8,500,000 x 43.27%) which
        shall be deposited by Party B with the Escrow Agent pursuant to Article
        2.3 of these Supplementary Provisions.

1.8     "FFTZ" means Futian Free Trade Zone, Shenzhen, PRC.



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1.9     "LAND PARCEL" means the land parcel on which the Building is located.

1.10    "LEASE TERM" means the term of the Tenancy as more particularly set out
        in the Tenancy Agreement.

1.11    "LEASED PORTION" means that portion of the Building representing 50.27 %
        of the total Building gross floor area which is to be leased by Party A
        to Party B WFOE (or Party B, as the case may be) pursuant to the Tenancy
        Agreement, as more particularly described in Schedule 7.

1.12    "MORTGAGEE" means the Agricultural Bank of China, Shenzhen Branch, China
        Everbright Bank, Shenzhen Branch and Shenzhen Development Bank, Shenzhen
        Branch.

1.13    "OPTION" means the option granted to Party B WFOE (or Party B, as the
        case may be) as referred to in Article 4.3 of these Supplementary
        Provisions.

1.14    "PARTY B WFOE" means a PRC wholly-foreign owned enterprise to be
        established by Party B in FFTZ.

1.15    "PAYMENT DATE" means 17 April 2000.

1.16    "STS" means Shenzhen STS Microelectronics Co., Ltd.

1.17    "STS LEASE" means the lease contract dated 9 March 1999 between Party A
        and STS, a copy of which is attached hereto as Attachment 3.

1.18    "STS PORTION" means that portion of the Building currently occupied by
        STS, representing approximately 6.46% of the total Building gross floor
        area.

1.19    "TENANCY" means the lease of the Leased Portion by Party A to Party B
        pursuant to the terms of the Tenancy Agreement.

1.20    "TENANCY AGREEMENT" means the Shenzhen Futian Free Trade Zone Premises
        Lease entered into by Party A and Party B for the lease of the Leased
        Portion on the date hereof, a copy of which is attached hereto as
        Attachment 1.

1.21    "TRANSFER PORTION" means the 5th to 7th Floor of the Building with an
        aggregate gross floor area of 10,796.31 square meters (representing
        approximately 43.27% of the total Building gross floor area) to be
        transferred by Party A to Party B pursuant to the terms of this
        Contract, as more particularly described in Articles 2 and 3 and
        Schedule 7 of this Contract.

1.22    "TRANSFER DATE" means the date on which FFTZ Land Planning Department
        issues the Real Estate Title Certificate of the Transfer Portion to
        Party B WFOE (or Party B, as the case may be), after this Contract has
        been duly registered with the FFTZ Land Planning Department.

1.23    "WAIVER" means a written waiver to be provided by STS to Party A and
        Party



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        B, a form of which is attached hereto as Attachment 2.

2.      TRANSFER AND PAYMENT OF TRANSFER PORTION

2.1     Within 14 days after the issue of the business license of Party B WFOE,
        the board of directors of Party B WFOE shall ratify and adopt this
        Contract. This Contract shall become binding on both Party A and Party B
        WFOE as if they (instead of Party A and Party B) were the original
        parties thereto. Party A agrees and acknowledges that, as from such
        date, Party B shall be released of all its obligations under this
        Contract.

2.2     The Parties shall enter into the Escrow Agreement within 7 days of the
        signing of this Contract, and the Escrow Agreement shall incorporate the
        relevant terms of this Contract, including Schedule 6 hereto.

2.3     The consideration of the transfer of the Transfer Portion (as stated in
        Article 4 of this Contract) ("CONSIDERATION") shall be paid by Party B
        to Party A in the following manner:



        (i)     Party B shall pay the Escrowed Funds to the Escrow Agent on or
                before the Payment Date.

        (ii)    The terms governing the deposit and release by the Escrow Agent
                of the Escrowed Funds deposited into the Escrow Account are set
                out in Schedule 6 hereof, and the Parties agree to comply with
                such terms.

        (iii)   Within 7 days after the release of the Escrowed Funds by the
                Escrow Agent to Party A, Party A shall pay to Party B any amount
                in excess of the Consideration or Party B shall pay to Party A
                any amount in shortfall of the Consideration, as the case may
                be.

        (iv)    Party B is deemed to have fulfilled its payment obligations
                under Article 4 of this Contract and Article 2.3 of these
                Supplementary Provisions upon remittance by Party B of the
                relevant payment amount from a bank designated by Party B to the
                Escrow Agent or Party A or upon presentation of a cheque by
                Party B to the Escrow Agent or Party A.

        (v)     If Party B fails to pay the Escrowed Funds to the Escrow Agent
                on or before the Payment Date, Party B shall pay to Party A
                liquidated damages for late payment at the rate of 0.05% of the
                Escrowed Funds for each date of delay. If the delay in payment
                lasts for thirty (30) days or more, Party A shall have the right
                to terminate this Contract and claim the aforesaid liquidated
                damages and a default penalty equal to two percent (2%) of the
                Consideration from Party B.

2.4     If Party B WFOE has not been established on or before the Cancellation
        Date for whatever reason, Party B shall have the right to assume title
        to the Transfer Portion and obtain in its own name the Real Estate Title
        Certificate pursuant to Article 14 of this Contract, and Party B
        undertakes to inform the Escrow Agent after it has received such a Real
        Estate Title Certificate in its



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        own name.

2.5     Article 5 and Article 6 of this Contract shall be deleted in its
        entirety.

2.6     Article 7 of this Contract shall be amended as follows:

        "Article 7. Party A shall deliver vacant possession of the Transfer
        Portion to Party B WFOE (or Party B, as the case may be) on or before
        the Delivery Date."

2.7     Article 8 of this Contract shall be deleted in its entirety.

2.8     Articles 11, 12 and 13 of this Contract shall be amended and replaced to
        read as follows:

        "Article 11. If the actual floor area of the real estate delivered is
        larger or smaller than the area provided for herein, Party A or Party B
        shall have the right to demand that the other Party make up or refund
        the portion of the purchase price which corresponds to the difference in
        area. Party A represents and warrants to Party B that such deviance in
        the area of the Transfer Portion shall not exceed 5%, failing which
        Party B shall have the right to terminate this Contract and obtain full
        refund of the Escrowed Funds paid to the Escrow Agent and Party A
        undertakes to immediately inform the Escrow Agent in writing to release
        the Escrowed Funds to Party B. If the finishing of the real estate
        delivered is not according to the finishing standards stipulated in
        Schedule 3 hereto, Party B shall have the right to demand compensation
        from Party A for the portion of the price which corresponds to the
        difference in the level of the finishing.

        Article 12. Party A shall issue a receipt for full payment of the
        purchase price for the Transfer Portion after the Escrowed Funds have
        been released by the Escrow Agent to Party A in full and Party B has
        paid up any amount in shortfall of the Consideration in accordance with
        the terms herein.

        Article 13. Party A shall give a one-year maintenance warranty with
        respect to the Transfer Portion from the date of delivery of the
        Transfer Portion to Party B. If the Transfer Portion suffers damage not
        attributable to Party A, Party A may assist with repairs, but the repair
        expenses shall be borne by Party B itself."

2.9     Article 14 of this Contract shall be amended and replaced to read as
        follows:

        "Article 14. Party A shall submit an application to the Shenzhen FFTZ
        Administration Committee for registration of the transfer of the
        Transfer Portion in accordance with the terms of this Contract and the
        Supplementary Provisions attached hereto within 7 days after the signing
        of this Contract. After the transfer of title to the Transfer Portion
        has been registered with the relevant department of Shenzhen FFTZ
        Administration Committee, and a Real Estate Title Certificate is issued
        in the name of Party B WFOE (or Party B, as the case may be), Party B
        WFOE (or Party B, as the case may be) shall



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        legally have the rights of occupation, use, receipt of earnings and
        disposal."

2.10    Article 16, 17, 18 and Schedules 1, 2 and 4 shall be deleted in their
        entirety.

3.      INSPECTION, SIGNAGE, MANAGEMENT RIGHT AND RENOVATIONS

3.1     The Parties hereby acknowledge and confirm that before signing this
        Contract they had conducted and completed a joint inspection of the
        Transfer Portion and the Leased Portion.

3.2     Party A shall provide Party B at the time of delivery of the Transfer
        Portion approval documents evidencing that the Transfer Portion are in
        full compliance with PRC governmental requirements with respect to
        construction safety, environmental protection, building standard and
        fire safety and that the floor areas stated in this Contract are
        accurate and not misleading.

3.3     Party B shall be entitled to put out one or more signs, and to remove
        any existing signs, posters, etc., anywhere on, attached to or inside
        the Transfer Portion.

3.4     Forthwith after the delivery of the Transfer Portion and the Leased
        Portion by Party A to Party B, Party B shall have the sole right to
        manage the Building, provided that Party B shall manage the Building in
        accordance with applicable PRC laws and regulations.

3.5     Forthwith after the delivery of the Transfer Portion and the Leased
        Portion, Party B shall have the free and uninterrupted right to carry
        out any renovations to the Transfer Portion and the Leased Portion and
        increase the electricity and other utilities supply to the Building at
        any time provided that Party B has obtained the relevant PRC government
        approvals and that the relevant renovations will not alter the external
        appearances of the Building or damage the main structures of the
        Building. Party A is deemed to have given its consent to all such
        renovations shall use its best endeavours to assist Party B to obtain
        the relevant PRC government approvals. Party B undertakes to use its
        best endeavors to minimize any disturbances that may be caused to STS
        resulting from such renovations.

3.6     Upon issuance of Real Estate Title Certificate for the Transfer Portion
        to Party B WFOE (or Party B, as the case may be), Party A shall provide
        Party B WFOE (or Party B, as the case may be) with a full and
        uninterrupted right of access to the construction plans, maps, records,
        agreements and any other documents relating to the Building (including
        the right to make photocopies of such documents at Party B's or Party B
        WFOE's expense). Upon the exercise of the Option by Party B WFOE (or
        Party B, as the case may be) in accordance with Article 4.3 of these
        Supplementary Provisions, Party A shall deliver all such documents to
        Party B WFOE (or Party B, as the case may be) without any costs to Party
        B WFOE or Party B.

4.      OPTION ON LEASED PORTION AND STS PORTION



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4.1     Party A shall use its best efforts to vacate STS from the STS Portion.
        The reasonable costs associated with such vacation shall be borne by
        Party B WFOE, but only upon Party B WFOE's prior written consent.

4.2     Party A shall lease the STS Portion to Party B WFOE (or Party B, as the
        case may be), on the same terms and conditions stipulated in the Tenancy
        Agreement immediately after the STS Portion is vacated by STS.

4.3     Party B WFOE (or Party B, as the case may be) shall have an option
        ("OPTION") to purchase the Leased Portion and the STS Portion from Party
        A on or before the expiration of the first three years of the Lease Term
        in accordance with the following terms:

        (a)     The Option may be exercised by Party B WFOE (or Party B, as the
                case may be) by way of a written notice to Party A on or before
                the expiration of the first three years of the Lease Term.

        (b)     Following Party B WFOE's or Party B's written notice to Party A
                stating its intention to exercise the Option in accordance with
                Article 4.3(a) of these Supplementary Provisions, Party A agrees
                to enter into a separate purchase and sale contract with Party B
                WFOE (or Party B, as the case may be) for the transfer of the
                Leased Portion and the STS Portion. The terms of the transfer of
                the Leased Portion and the STS Portion shall be substantially
                the same as the terms governing the transfer of the Transfer
                Portion by Party A to Party B under this Contract. Party A
                agrees and acknowledges that Party B WFOE (or Party B, as the
                case may be) shall be the purchaser thereunder and shall take
                title of the Leased Portion and the STS Portion.

        (c)     The consideration for the transfer of the Leased Portion and the
                STS Portion by Party A to Party B WFOE (or Party B, as the case
                may be) shall be RMB40,023,015 ("OPTION PRICE") less the full
                amount of the rental deposit and the aggregate amount of the
                rental payment already paid under the Tenancy Agreement by Party
                B WFOE (or Party B, as the case may be) as at the date of
                exercise of the Option by Party B WFOE (or Party B, as the case
                may be), which deduction shall be subject to the following
                limits:

                (i)     70% of the rental payment amounts actually paid by Party
                        B WFOE (or Party B, as the case may be) to Party A in
                        the first year of the Lease Term;

                (ii)    70% of the rental payment amounts actually paid by Party
                        B WFOE (or Party B, as the case may be) to Party A in
                        the second year of the Lease Term, if applicable;

                (iii)   50% of the rental payment amounts actually paid by Party
                        B WFOE (or Party B, as the case may be) to Party A in
                        the third year of the Lease Term, if applicable.



                                       6
<PAGE>   20

        All duties, fees and taxes associated with the transfer of the Leased
        Portion and the STS Portion upon exercise of the Option by Party B WFOE
        (or Party B, as the case may be) as contemplated under this Article 4.3
        of these Supplementary Provisions shall be borne by the parties thereto
        as stipulated and listed in the relevant sale and purchase agreement.

4.4     Party A shall use its best endeavours to procure STS to provide the
        Parties with a duly executed Waiver on or before the Payment Date. If
        Party A fails to produce the Waiver to Party B on or before the Payment
        Date, Party B may elect to:

        (a)     terminate this Contract. In such a case, neither Party shall
                have the right to claim any compensation against the other Party
                save for any antecedent breaches committed by either Party; or

        (b)     continue with the purchase of Transfer Portion in accordance
                with this Contract. In such a case, Party A shall warrant and
                undertake to Party B that STS will not exercise its first right
                of refusal to lease or purchase Units A, B and C on the first
                floor of the Building (comprising an aggregate gross floor area
                of 2,130.48 square meters) or any other parts of the Building
                which STS may have under the STS Lease and applicable PRC laws
                and regulations and that Party B will be able to enjoy fully all
                its rights and benefits under this Contract without any
                interruption from STS (including, but not limited to, Party B's
                rights to lease and purchase the STS Portion in accordance with
                Articles 4.2 and 4.3 of these Supplementary Provisions).

4.5     If the Option has not been exercised by Party B WFOE (or Party B, as the
        case may be) pursuant to the terms herein, and the Tenancy either was
        terminated or has expired, Party A represents and warrants to Party B
        that Party B WFOE (or Party B, as the case may be) and subsequent users
        or occupiers of the Transfer Portion shall have full right of access to
        the Transfer Portion from public roads, through the front gate and the
        front door of the Building.

5.      TERMINATION

5.1     Party B shall have the right to terminate this Contract by written
        notification in writing to Party A if:

        (a)     Party A materially breaches a provision of this Contract;

        (b)     the documents set out in Article 4 of Schedule 6 have not been
                provided in full to the Escrow Agent on or before the
                Cancellation Date; or

        (c)     an event of Force Majeure (as defined in Article 5 hereof)
                continues for more than 3 months and the Parties cannot agree in
                writing as to how the rights and obligations of the Parties
                hereunder can be adjusted.



                                       7
<PAGE>   21

        in which case the Parties shall immediately instruct the Escrow Agent to
        release the Escrowed Funds and the accrued interest in the Escrow
        Account to Party B; provided however that Party B shall be entitled to
        all remedies under PRC law and reserve the right to claim against Party
        A if this Contract is terminated as a result of any of the events stated
        in sub-paragraphs 5.1(a) and (b) of these Supplementary Provisions.

5.2     Upon termination of this Contract by Party B in accordance with Articles
        4.4 and 5.1 of these Supplementary Provisions, if Party B already has
        obtained possession of the Transfer Portion in accordance with Article 7
        of this Contract, Party B shall return possession of the Transfer
        Portion at the then existing state to Party A without further liability
        to Party B.

6.      REPRESENTATIONS, WARRANTIES, UNDERTAKINGS AND INDEMNITIES

6.1     Party A hereby represents, warrants and undertakes to Party B that:

        (a)     immediately prior to the issue of the Real Estate Title
                Certificate to Party B WFOE (or Party B, as the case may be), it
                will be the sole and duly registered owner of the granted land
                use rights and the building ownership rights of the Transfer
                Portion, and there is no lien, charge or other encumbrances on
                such rights as of the date hereof, and upon the issue of the
                Real Estate Title Certificate to Party B WFOE (or Party B, as
                the case may be), and if the Option is exercised by Party B,
                then immediately prior to the transfer of the Leased Portion and
                the STS Portion to Party B WFOE (according to Section 4 of these
                Supplementary Provisions), Party A shall be the sole and
                registered owner of the granted land use rights and building
                ownership rights of the Leased Portion and STS Portion and there
                will be no lien, charge or other encumbrances on such rights as
                of the effective date of the transfer thereof;

        (b)     it has all requisite power, authority and approval required to
                enter into this Contract and has all requisite power, authority
                and approval to perform fully each of its obligations hereunder;

        (c)     it has taken all action necessary to authorize it to enter into
                this Contract and its representative whose signature is affixed
                hereto is fully authorized to sign such documents;

        (d)     the provisions of this Contract shall constitute its legal and
                binding obligations;

        (e)     there is no lawsuit, arbitration, or legal, administrative or
                other proceeding or governmental investigation pending or, to
                the best of its knowledge, threatened against it with respect to
                the subject matter of this Contract or that would affect in any
                way its ability to enter into or perform this Contract;



                                       8
<PAGE>   22

        (f)     the transactions contemplated hereunder can be lawfully and
                effectively carried out by the Parties and Party B WFOE under
                the PRC laws and regulations without undue or unreasonable costs
                to the Parties or Party B WFOE;

        (g)     the Transfer Portion shall meet the following specifications:

                (i)     term of granted land use rights: 50 years, commencing
                        from 29 September 1997 until 28 September 2047

                (ii)    use: industrial

                (iii)   plot ratio: 2.62

                (iv)    site coverage: 33%

                (v)     maximum height of building: 31.9 meters

                (vi)    assignability and transferability: Party B may at any
                        time freely sell, lease, transfer or mortgage the
                        granted land use rights and the building ownership of
                        the Transfer Portion to any legal person

                (vii)   environmental fitness: compliance with PRC legal
                        requirements

                (viii)  water and power supply: power supply of 2,000 KVA; water
                        supply from the local government network and
                        self-equipped water pumping station

                (ix)    communications: each unit is equipped with 5 to 10
                        telephone lines

                (x)     other building specifications (including fixtures) as
                        listed in Attachment 4 hereof.

        (h)     site formation works and connection of electricity and water
                supplies to the boundary of Land Parcel will be completed before
                delivery of vacant possession of the Transfer Portion;

        (i)     upon issuance of Real Estate Title Certificate for the Transfer
                Portion to Party B WFOE, Party B WFOE will acquire unencumbered
                ownership of the Transfer Portion;

        (j)     there is no existing or latent environmental damage or hazard on
                the Land Parcel or in the areas surrounding the Land Parcel, and
                that Party B and Party B WFOE shall not be liable for any
                environmental liability in connection with the Land Parcel or
                the surrounding areas of the Land Parcel, including, without
                limitation, liability arising out of the disposal of polluted
                wastes on or in the area surrounding the Land Parcel or
                elsewhere to the extent the cause of such environmental



                                       9
<PAGE>   23

                liability occurred prior to the Transfer Date;

        (k)     the layout, design, construction and operation of the Transfer
                Portion, the Leased Portion and the STS Portion are in full
                compliance with all requirements of relevant governmental
                authorities for land administration, water and soil
                conservation, construction standards, fire prevention and work
                safety;

        (l)     prior to and including the Transfer Date, Party A shall pay and
                discharge all taxes and fees related to the Land Parcel and the
                Transfer Portion, including but not limited to, effecting or
                otherwise relating to, their transfer to Party B WFOE so that no
                payments of any such taxes and fees are required from Party B
                WFOE or any third party regarding the transfer of the Transfer
                Portion;

        (m)     STS Lease represents the only and the complete lease agreement
                between STS and Party A with respect to the STS Portion, and
                STS's right to lease the STS Portion shall expire on 1 April
                2002, at which time STS shall be required to vacate the STS
                Portion under the STS Lease, subject to the terms of the STS
                Lease;

        (n)     Party A shall not amend, extend or agree to amend or extend the
                terms of the provisions of STS Lease without Party B's prior
                written consent;

        (o)     the Building has remained in the same state and condition since
                the date of joint inspection by both Parties referred to in
                Article 3.1 of these Supplementary Provisions and up to the
                Delivery Date; and

        (p)     save for an existing mortgage created over the first and third
                floor of the Building in favour of the Mortgagee, the Building
                is not currently subject to any other mortgages, charges,
                encumbrances and third party rights.

6.2     Party A hereby indemnifies fully and holds harmless Party B and Party B
        WFOE from and against all claims, demands, actions, damages, losses
        (including loss of profit), liabilities, penalties and expenses
        sustained by Party B or Party B WFOE directly or indirectly in respect
        of any breach by Party A of any of the above provisions of this
        Contract, particularly this Article 6.

7.      GOVERNING LAW AND DISPUTE RESOLUTIONS

7.1     This Contract and these Supplementary Provisions shall be governed by
        and construed in accordance with the laws of the PRC.

7.2     Article 23 of this Contract shall be amended and replaced as follows:

        "Article 23.(i) In the event any dispute arises in connection
                        with the interpretation or implementation of this
                        Contract, the Parties shall attempt in the first
                        instance to resolve such



                                       10
<PAGE>   24

                        dispute through friendly consultations. If the dispute
                        is not resolved in this manner within sixty (60) days
                        after the date on which one Party has served written
                        notice on the other Party for the commencement of
                        consultations, then either Party may refer the dispute
                        to arbitration in accordance with the provisions of
                        Article 23 of this Contract.

                (ii)    With respect to any disputes which have not been
                        resolved through consultations, they shall be submitted
                        for arbitration to the China International Economic And
                        Trade Arbitration Commission (hereinafter referred to as
                        ARBITRATION INSTITUTE) in Shanghai, for final decision
                        pursuant to the provisions of its arbitration rules.

                        The arbitration shall also be conducted in accordance
                        with the following provisions:

                        (a)     the arbitrators shall refer to the Chinese and
                                English texts of this Contract and the
                                Supplementary Provisions;

                        (b)     all proceedings in any arbitration shall be
                                conducted in English and Mandarin Chinese; and

                        (c)     there shall be three (3) arbitrators. Party A
                                and Party B shall each select one (1)
                                arbitrator. The third arbitrator shall be
                                appointed by the Arbitration Institute and shall
                                serve as chairman of the arbitration tribunal."

                (iii)   The arbitration award shall be final and binding on the
                        Parties, and the Parties agree to be bound thereby and
                        to act accordingly.

                (iv)    The costs of arbitration shall be borne by the Party or
                        Parties as designated in the arbitration award.

                (v)     When any dispute occurs and when any dispute is under
                        arbitration, except for the matters under dispute, the
                        Parties shall continue to exercise their remaining
                        respective rights, and fulfil their remaining respective
                        obligations under this Contract and the Supplementary
                        Provisions."

8.      FORCE MAJEURE

8.1     Article 9 of this Contract shall be replaced as follows:

        "Article 9. (i) In the event that Party A or Party B shall be
                        rendered unable to



                                       11
<PAGE>   25

                        perform or perform within the stipulated time the whole
                        or any part of its obligations under this Contract by
                        reason of force majeure, including serious fires not
                        originating in the Transfer Portion, severely bad
                        weather, floods, earthquakes, plagues or other
                        contagious diseases, wars, acts of government, and any
                        other causes of such nature (the occurrence or result of
                        which being unforeseeable and unavoidable, as well as
                        insurmountable by human efforts), the time limit for the
                        performance of this Contract or any provision thereof
                        should be extended for a period corresponding to the
                        effects of such cause.

                (ii)    The Party affected by the event of force majeure shall
                        inform the other Party in the shortest possible time
                        after the occurrence of such event and provide the other
                        party with documents sufficiently evidencing the cause,
                        nature and severity of the occurrence of such event as
                        soon as possible.

                        Upon the occurrence of an event of force majeure, the
                        Parties shall use their best endeavours to reduce the
                        effects of such event on the performance of this
                        Contract to a minimum."

9.      NOTICE

9.1     Any notice or written communication provided for in this Contract from
        one Party to the other Party shall be made in writing in English and
        Chinese and sent by courier service delivered letter, or by facsimile or
        electronic mail with a confirmation copy sent by courier service
        delivered letter. The date of a notice or communication hereunder shall
        be deemed to the date when the notice is sent or dispatched, whether by
        courier service, facsimile or electronic mail. All notices and
        communications shall be sent to the appropriate address set forth below,
        until the same is changed by notice given in writing to the other Party.

        SHENZHEN LIBAOYI INDUSTRY DEVELOPMENT CO., LTD.
        No.2 Feng Huang Road,
        Futian Free Trade Zone,
        Shenzhen, PRC

        Facsimile No:        (86755) 359-2282
        Attention:           Mr. Wang Bao Cheng / Mr. Wang Jin Cheng


        NEW FOCUS INC.
        c/o New Focus Pacific Co., Ltd.
        Building R3-B, Unit A, 1st Floor,
        Shenzhen High-Tech Industrial Park,
        Nanshan District, Shenzhen, PRC

        Facsimile No:        (86755) 652-5150



                                       12
<PAGE>   26

        Attention:       Mr. Hui (Tom) Tang
        Email Address:   htang@newfocus.com

10.     DUTIES AND FEES

10.1    All duties, fees and taxes associated with the transfer of the Transfer
        Portion as contemplated under this Contract shall be borne by Party A
        and Party B WFOE as stipulated and listed in Schedule 8 hereof.

11.     EXCLUSIVITY AND NON ASSIGNABILITY

11.1    Upon execution of this Contract, Party A shall be bound to deal
        exclusively with Party B and Party B WFOE, and Party A shall be
        prohibited from contacting, approaching, liaising or otherwise
        communicating with any other party or person or signing any contract and
        agreement, letter of intent, memorandum of understanding or any written
        document in any manner and in any form whatsoever in relation to the
        lease and/or the transfer of the Transfer Portion, the Leased Portion
        and the STS Portion, save as provided herein or under the Tenancy
        Agreement.

11.2    Upon execution of this Contract until the expiration or early
        termination of the Tenancy (as the case may be), Party A undertakes with
        Party B that it shall not assign, lease, transfer, or otherwise charge,
        mortgage or encumber or use as a security for indebtedness the aggregate
        of which is in excess of the Option Price the Transfer Portion, Leased
        Portion and the STS Portion, its interests in this Contract and the
        Tenancy Agreement respectively, except for this Contract, the Tenancy
        Agreement and the STS Lease.

12.     CONFIDENTIALITY

12.1    The Parties shall agree to keep this Contract and all information
        exchanged in connection therewith confidential at all times.

12.2    The Parties shall further agree to co-ordinate with each other on all
        press releases and other public announcements to be made in connection
        with this Contract.

13.     MISCELLANEOUS

13.1    Article 24 of this Contract shall be deleted in its entirety and
        replaced as follows:

        "Article 24. The Schedules and Attachments attached hereto are an
        integral part of this Contract and have the same binding force of this
        Contract. This Contract, including the Supplementary Provisions, the
        Schedules and the Attachments attached hereto constitute the entire
        agreement between the Parties with respect to the subject matter hereof
        and supersede all prior discussions, negotiations and agreements between
        them. In the event of any discrepancy between the Supplementary
        Provisions and other provisions of this Contract, the provisions of
        these Supplementary Provisions shall prevail."



                                       13
<PAGE>   27

13.2    To the extent permitted by Chinese law, failure or delay on the part of
        any of the Parties hereto to exercise a right, power or privilege under
        this Contract shall not operate as a waiver thereof; nor shall any
        single or partial exercise of a right, power or privilege preclude any
        other future exercise thereof.

13.3    This Contract may not be assigned in whole or in part by any Party
        without the prior written consent of the other Party hereto, except that
        Party B may assign its interests in this Contract to its Affiliate
        without prior written consent from Party A. In the latter case, Party B
        shall provide an advance written notice to Party A and shall procure its
        Affiliate to comply with and perform all the obligations imposed upon
        Party B in this Contract.

13.4    This Contract are made for the benefit of the Parties and their
        respective lawful successors and assignees and are legally binding on
        them. This Contract may not be changed orally, but only by a written
        instrument signed by the Parties.

13.5    The invalidity of any provision of this Contract shall not affect the
        validity of any other provision of this Contract.

13.6    Article 25 of this Contract shall be replaced as follows:

        "This Contract is executed in the Chinese language in five (5) originals
        and in the English language in five (5) originals. Both language
        versions shall be equally authentic. In the event of any discrepancies
        between the two versions, the Chinese version shall prevail. Party A,
        Party B, the notary public's office (in the case of a real estate sales
        and purchase contract with a foreign element) and the Shenzhen Futian
        Free Trade Zone Administration shall each hold at least one copy of each
        language version of this Contract."



                                       14
<PAGE>   28

IN WITNESS WHEREOF, each of the Parties hereto have caused these Supplementary
Provisions to be executed by their duly authorized representatives on the date
first set forth above.

SHENZHEN LIBAOYI INDUSTRY                   NEW FOCUS INC.
DEVELOPMENT CO.,LTD.                        (FOR ITSELF AND ON BEHALF OF ITS
                                            WHOLLY FOREIGN-OWNED ENTERPRISE TO
                                            BE ESTABLISHED IN FUTIAN FREE TRADE
                                            ZONE, SHENZHEN)




By: /s/ WANG BAO CHENG                      By: /s/ BOB MA
   ---------------------------------           ---------------------------------
Name: Wang Bao Cheng                        Name: Bob Ma
Title: Chairman                             Title: General Manager
Nationality: China                          Nationality: USA


Adopted and ratified by the Board of Directors of Party B WFOE upon its
establishment

[NAME OF PARTY B WFOE]



------------------------------------

By:
   ---------------------------------
Name:
Title:
Nationality:



                                       15
<PAGE>   29

                                   SCHEDULE 6

                        TERMS GOVERNING THE ESCROW FUNDS


1.      Party B shall pay the Escrowed Funds to the Escrow Agent in accordance
        with this Contract.

2.      The Escrow Agent shall agree to hold the Escrowed Funds and any moneys
        arising from interest accrued in respect of the Escrowed Funds in escrow
        on the terms and subject to the conditions of this Schedule 6.

3.      The Escrowed Funds shall be placed in a fixed term seven daysi
        interest-bearing or a similar interest bearing US Dollar deposit account
        (i.e. the Escrow Account) and on each occasion when the deposit matures,
        it shall be renewed for the same maturity period unless and until the
        Escrow Agent receives further instructions as herein provided.

4.      Subject to Article 5 and Article 6 of this Schedule 6, the Escrow Agent
        shall release and pay the Escrowed Funds and all the accrued interests
        in the Escrow Account to Party A only upon the satisfaction of all the
        following conditions:-

        (i)     this Contract has been duly registered with by the FFTZ Land
                Planning Department, the Real Estate Title Certificate in
                respect of the Transfer Portion has been issued by the FFTZ Land
                Planning Department in the name of Party B WFOE (or Party B, in
                which case Party B shall notify the Escrow Agent in writing of
                its intention to take title of the Transfer Portion in Party B's
                own name), and certified copies of this Contract and the Real
                Estate Title Certificate, as well as evidence of the
                registration of this Contract have been provided by the Parties
                to the Escrow Agent;

        (ii)    the Real Estate Title Certificate and Lease Registration
                Certificates in respect of the Lease Portion and STS Portion has
                been issued by FFTZ Land Planning Department in the name of
                Party A, certified copies of which have been forwarded by Party
                A to Party B and to the Escrow Agent;

        (iii)   the Tenancy Agreement in respect of the Leased Portion is duly
                executed simultaneously with this Contract and is duly
                registered, and a copy of the Tenancy Agreement and evidence of
                its registration have been provided to the Escrow Agent by the
                Parties;

        (iv)    Party B has obtained a satisfactory written undertaking issued
                by the Mortgagee acknowledging (1) its consent to the leasing of
                the Leased Portion by Party A to Party B in accordance with the
                Tenancy Agreement and the granting by Party A to Party B of the
                Option to purchase the Leased Portion in accordance with this
                Contract; and (2) its agreement to enable Party B to exercise
                the Option in accordance



                                       16
<PAGE>   30

                with this Contract, and a copy of such written undertaking has
                been forwarded to the Escrow Agent;

        (v)     Party B has obtained a satisfactory legal opinion from its PRC
                legal counsel confirming the validity, legality and
                enforceability of the sale of the Transfer Portion, the Waiver
                and the Option contemplated in this Contract and the
                Supplementary Provisions and the lease transaction contemplated
                in the Tenancy Agreement, and a copy of the legal opinion has
                been forwarded to the Escrow Agent;

        (vi)    Party B has informed the Escrow Agent in writing that Party A
                has delivered possession of the Transfer Portion to Party B WFOE
                (or Party B, as the case may be) in accordance with Article 7 of
                this Contract; and

        (vii)   Both Parties have informed the Escrow Agent that the
                representations and warranties made by Party A under this
                Contract (including those contained in the Supplementary
                Provisions) remain true and accurate as of the Transfer Date.

5.      The Escrow Agent shall release and pay the Escrowed Funds and the
        accrued interests in the Escrow Account to Party B:

        (i)     on the first business day after the Cancellation Date if the
                Escrow Agent has not received all the documents set out in
                Article 4 of this Schedule 6, or the conditions therein have not
                been fulfilled.

6.      Save as otherwise provided in this Contract, the Escrowed Funds shall be
        dealt with only upon the joint written direction of Party B and Party A.

7.      Party A and Party B agree to equally share any fees which may be payable
        to the Escrow Agent for the performance of its obligations and duties
        under the escrow arrangement described in this Schedule 6.

8.      Both Parties shall not unreasonably withhold or delay the production of
        the relevant documents to the Escrow Agent set out in Article 4 of this
        Schedule 6.



                                       17
<PAGE>   31

                                   SCHEDULE 7

         DESCRIPTION OF TRANSFER PORTION, LEASED PORTION AND STS PORTION

A.      DESCRIPTION OF LAND PARCEL AND BUILDINGS

1.      Location

        No.2 Feng Huang Road, Futian Free Trade Zone, Shenzhen, PRC.

2.      Land Plot

        Lot No. B105-93(2). Approximately 9,520.8 square meters, subject to
        final survey.

3.      Gross Floor Area of Building

        Approximately 24,947.37 square meters, subject to final survey.

4.      Physical Completion

        Shenzhen Libaoyi Industry Development Co., Ltd. is the owner of Wanli
        Industrial Building with 100% title to it, all of which can be provided
        for New Focus Inc.'s use.

B.      PORTION OF BUILDING TO BE TRANSFERRED

        43.27% of the whole of Wanli Industrial Building

1.      Land Plot

        Approximately 4,119.65 square meters, subject to final survey.

2.      Gross Floor Area of Transfer Portion

        Approximately 10,796.31 square meters, subject to final survey.

3.      Physical Completion

        Completed building, ready for immediate use.

C.      PORTION OF BUILDING TO BE LEASED

1.      Location

        50.27% of the whole of Wanli Industrial Building.

2.      Land Plot



                                       18
<PAGE>   32

        Approximately 4,786.10 square meters, subject to final survey.

3.      Gross Floor Area of Leased Portion

        Approximately 12,537.06 square meters, subject to final survey.

4.      Physical Completion

        Completed building, ready for immediate use.

D.      PORTION CURRENTLY OCCUPIED BY STS

1.      Location

        Units A and B on the first floor of Wanli Industrial Building,
        comprising a 6.46% of the whole of Wanli Industrial Building.

2.      Land Plot

        Approximately 615.04 square meters, subject to final survey.

3.      Gross Floor Area of STS Portion

        Approximately 1,614 square meters, subject to final survey.

4.      Physical Completion

        Completed building, ready for immediate use.



                                       19
<PAGE>   33

                                   SCHEDULE 8

                            LIST OF FEES AND CHARGES

                   TAXES AND FEES TO BE LEVIED IN THE COURSE
                     OF THE TRANSFER OF THE TRANSFER PORTION

<TABLE>
<CAPTION>
                                                                            Party subject
                                                            Basis for       to levy of tax
                             Tax and fee rate (amount)      calculation     & fee
                             -------------------------      -----------     --------------
<S>                          <C>                            <C>             <C>
  1      Business tax        5%                             Transfer        Party A
                                                            price

  2      Land                According to the tax rate      Rise in         Party A
         Value-added Tax     specified in the               value
                             iDetailed Implementing
                             Rules of the Interim
                             Provision on Land
                             Value-added taxi

  3      Stamp               Seller and buyer will          Transfer        Party A and
                             each have to pay 0.05%         price           Party B / Party
                                                                            B WFOE will
                                                                            each pay 0.05%

  4      Notarisation        0.2 - 0.3%                     Transfer        Party B / Party
         fee                                                price           B WFOE

  5      Deed tax            1%                             Transfer        Party B / Party
                                                            price           B WFOE
  6      Construction        0.05%                          Business        Party A
         tax                                                tax
  7.     Registration        0.1%                           Transfer        Party B / Party
         fee                                                price           B WFOE
</TABLE>



                                       20
<PAGE>   34

                                  ATTACHMENT 1

                                TENANCY AGREEMENT



                                       21
<PAGE>   35

                                  ATTACHMENT 2

                                  WAIVER BY STS

         [on the letterhead of Shenzhen STS Microelectronics Co., Ltd.]

[Date]

To:     1. Shenzhen Libaoyi Industry Development Co., Ltd. ("LiBaoYi")

        2. New Focus Inc. ("NF")

Dear Sirs,

RE:     WAIVER OF FIRST RIGHT OF REFUSAL TO PURCHASE/LEASE

We refer to the Premises Lease Contract ("Lease") executed between us and
LiBaoYi on 9 March 1999 for the lease of certain premises ("Property") at Wanli
Industrial Building as described in the Lease, a copy of which is attached
hereto.

Pursuant to Article 15 of the Lease and under PRC law, we have the first right
of refusal to purchase the Property in the event that LiBaoYi intends to
transfer part or the whole of the same. In this regard, we hereby irrevocably
and unconditionally waive our said first right of refusal against and over NF in
respect of NF's purchase of the Property now and in the future.

Also, pursuant to Article 4 of the Attachment to the Lease, we have the first
right of refusal to lease and purchase 516.48m(2) of floor space being Unit C on
the first floor of Wanli Industrial Building. We hereby irrevocably and
unconditionally waive our said first right of refusal against and over NF in
respect of NF's lease or purchase of the said floor space now and in the future.

In addition, we hereby waive any other prior rights that we may have under
relevant PRC laws and regulations against and over NF in respect of the purchase
of the Property from LiBaoYi now and in the future.



                                       22
<PAGE>   36

Finally, we confirm that the term of the Lease shall expire on 1 April 2002 and
we agree to vacate the premises on or before that date.


Yours faithfully,


                                    (chop)
------------------------------------
[Shenzhen STS Microelectronics Co., Ltd.]



                                       23
<PAGE>   37

                                  ATTACHMENT 3

                                    STS LEASE



                                       24
<PAGE>   38

                                  ATTACHMENT 4

                   BUILDING SPECIFICATION (INCLUDING FIXTURES)



1.      Two 3-tonne goods elevator and two 2-tonne goods elevators

2.      Automatic sprinkler system, fire hydrant system

3.      Hi-and-low Voltage Electricity Supply System and Equipment (including
        self-equipped electricity system)

4.      Equipment inside the water pump room:

<TABLE>
<CAPTION>
        Names                        Output       Pipe width       m2/h        Quantity
        -----                        ------       ----------       ----        --------
<S>                                  <C>          <C>              <C>         <C>

        Living water pump            7.5 kW          100            33            2

        Fire hydrant pump             30 kW          150            108           2

        Sprinkler pump                37 kW          150            108           2

        Water discharge pump         2.2 kW
</TABLE>

5.      Diesel generator:            150 kW

6.      There are power distribution boxes in the Building. Each of floors 1-7
        has four distribution boxes, and each unit has one box. Each box has a
        three-phase, five-wire power source, of which the ground wire has been
        substituted by a steel bar.



                                       25