**Exhibit 10.3**

** **

**Euro Tech (Far East) Limited**

**(Subscriber)**

 

 

**Jin Xinlie, Zhou Jianlu,Zhu Jinghua, Cheng Fusheng,**

**Zhang Huaqiang, Chen Jian,Zhang Zhenjiang, Jiang Qinglong**

**(Management Shareholders)**

 

 

**Zhejiang JiaHuan Limited**

**(the Company)**

 

 

**Share****Transfer and****SubscriptionAgreement**

**relating to the Company**

 

1

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**This Share****Transfer and****SubscriptionAgreement** is made the 18thday of July 2007between:

 

1.             **Zhejiang JiaHuan Limited**, a company incorporated inthe People’s Republic of China and whose registered office is situate at No.188, Jiang Jun Road, Jian Hua City, Zhejiang Province(hereinafter called ‘**the Company**’);

 

2.             **Euro Tech (Far East) Limited**, a company incorporated inthe Hong Kong Special Administration Region and whose registered office issituate at 18th Floor, Gee Chang Hong Centre, 65 Wong Chuk HangRoad, Hong Kong (hereinafter called ‘**theSubscriber**’); and

 

3.             The followingpersons: Jin Xinlie, Zhou Jianlu, Zhu Jinghua, ChengFusheng, Zhang Huaqiang, Chen Jian, Zhang Zhenjiang, and Jiang Qinglong (hereinaftercalled ‘**the Management Shareholders**’).

 

Whereas:

 

(A)          The Company is a company incorporated and registeredin the People’s Republic of China, with its registered office at No.188, Zhang Zhun Road, Jian Hua City, ZhejiangProvince.  At the date of signing of thisAgreement, the registered capital of the Company is RMB10,000,000.00.  All of the said capital isfully paid and held by the individualshareholders(including the Management Shareholders)and Zhejiang Province Technology Risk Investment Limited.  Details of the Company are set out inSchedule 1 hereto.

 

(B)           The Company is a keycorporation in the Chineseenvironmental business,and a major national enterprise in high and innovative technology, specializingin the research and development, manufactureand sale of dust removal electric energy.

 

(C)           The Subscriber is a company established in HongKong, with its registered office at 18th Floor, Gee Chang HongCentre, 65 Wong Chuk Hang Road, Hong Kong, and is a company listed on the USNASDAQ.  It specializes in dealing withall kinds of environmental protection products and equipments.

 

(D)          For further developing the business in MainlandChina, the Subscriber and the Company are agreeable that the Subscriber shall,subject to the terms and conditions of this Agreement, invest in the Companythrough equity transfer and subscription of

 

2

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newly increased capital of the Company.  Each of the Management Shareholders, as anoriginal Shareholder of the Company, is agreeable toprocure the original Shareholders to transfer theirequity, and to procure the Company to increase its capital for subscription by the Subscriber.

 

**1.****            ****Interpretation**

 

1.1           Unless otherwise specified in this Agreement, thefollowing expressions in this Agreement shall mean the following:

 
| “Financial  Statements” |   | Means  the financial statements of the Company and its Subsidiaries made up to the  Accounting Date and audited according to the international accounting  standards, including balance sheets and profit and loss accounts of those  companies;                                                                                                                                                                              |
|-----------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Accounting  Date”      |   | Means  31 October 2006;                                                                                                                                                                                                                                                                                                                                                                                                  |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “working  day”          |   | Means  a day when banks in the PRC are in business;                                                                                                                                                                                                                                                                                                                                                                           |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Completion”            |   | Means  completion of the procedures for Equity  Transfer and Equity Subscription in accordance with the provisions of  Clause 7;                                                                                                                                                                                                                                                                                              |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Completion  Date”      |   | Means  the date of Completion, namely the first working day after the completion of  all of the remittance of the Subscription Price of RMB9,000,000.00 by the Subscriber, verification of such payment and  modification of business registration, but in no event later than 14 working  days after the remittance of the Subscription Price of RMB9,000,000.00 by the Subscriber to the account specified by the  Company; |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Before  Completion”    |   | Means  from the date of signing of this Agreement up to the Completion Date;                                                                                                                                                                                                                                                                                                                                                  |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Conditions”            |   | Means  the conditions set out in Clauses  5 and 6;                                                                                                                                                                                                                                                                                                                                                                            |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Director(s)”           |   | Means  the director(s) of the Company;                                                                                                                                                                                                                                                                                                                                                                                   |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Hong  Kong”            |   | Means  the Hong Kong Special Administrative Region;                                                                                                                                                                                                                                                                                                                                                                           |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “Parties”               |   | Means  the signing parties to this Agreement, and a  “Party” means any one of the Parties;                                                                                                                                                                                                                                                                                                                          |
|                              |   |                                                                                                                                                                                                                                                                                                                                                                                                                          |
| “PRC”                   |   | Means  the People’s Republic of China, except Hong Kong;                                                                                                                                                                                                                                                                                                                                                                 |

 

3

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| “RMB”                              |   | Means  the lawful currency of the PRC;                                                                                                                                                                                                                       |
|----------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |   |                                                                                                                                                                                                                                                         |
| “Shareholders”                     |   | Means  the original shareholders of the Company as at the date of this Agreement,  and after Completion, the original shareholders and the Subscriber;                                                                                                       |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Original Individual Shareholders” |   | Means  the individual Shareholders amongst the  original Shareholders of the Company as  at the date of this Agreement;                                                                                                                                      |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Equity Subscription”              |   | Means  the subscription of the New registered  Capital of the Company;                                                                                                                                                                                       |
|                                         |   |                                                                                                                                                                                                                                                         |
| “New  Capital”                     |   | Means  the newly increased registered capital of the Company, namely the amount of RMB1,250,000.00 registered capital increased by  the Company on the Completion Date,  which takes up 11.11% of the registered capital of the Company after the  increase; |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Subscription  Price”              |   | Means  the price for subscribing the New Capital  as set out in Clause 4;                                                                                                                                                                                    |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Equity Transfer”                  |   | Means the transfer of 1,000,000 equity, which  takes up 10% of the original registered capital of the Company, by the  Original Individual Shareholders to the Subscriber;                                                                                   |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Equity Transfer Form”             |   | Means the agreement for Equity Transfer to the  Subscriber to be signed by each Original Individual Shareholder, in the form  set out in Schedule 4;                                                                                                         |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Transfer Price”                   |   | Means the price for Equity Transfer as set out in  Clause 3;                                                                                                                                                                                                 |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Subsidiaries”                     |   | Means  those companies in which the Company holds their  issues shares or equity, details of  which are set out in Schedule 2;  and                                                                                                                          |
|                                         |   |                                                                                                                                                                                                                                                         |
| “Warranties”                       |   | Means  the representations, warranties and covenants provided by the Company and  Management Shareholders, as set out in Clause 8 and Schedule  3.                                                                                                           |

 
| 1.2    |   | In  this Agreement (including the Recitals and Schedules), unless the context  specifies otherwise:           |
|--------|--------|---------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                          |
| 1.2.1  |   | References  to Recitals, Clauses and Schedules are to the recitals, clauses and schedules  of this Agreement; |

 

4

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| 1.2.2  |   | The  Recitals and Schedules are an integral part of this Agreement, and have the  same force and effect as the contents of this Agreement.                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.3  |   | References  to laws and regulations include the laws or regulations as may from time to  time be modified or reenacted.                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.4  |   | Headings  are for convenience only, and shall be disregarded when construing this Agreement;                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.5  |   | References  to the male gender shall include the female and neuter; and references to the  singular shall include the plural, and vice versa;                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.6  |   | References  to any person shall include a natural person, body corporate (wherever established),  body unincorporated, partnership and all governmental agencies, or any organization  or partnership of any two of the above;                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.7  |   | References  to this Agreement or any other contract or document shall include this  Agreement or other contract or document as may from time to time be revised,  modified, renewed or supplemented.                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.8  |   | References  to any document being “mutually agreed” shall mean a document the contents of  which have been approved by all the Parties and confirmed by each Party initialing  on that document, and includes any document agreed in writing by each Party  as a replacement or modification of the aforesaid document. |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.9  |   | The  *ejusderm generis* rule shall  not apply to the construction of this Agreement. Hence, expressions such as “any  other”, “including”, or “in particular” shall not limit the interpretation of  the provisions herein.                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                              |
| 1.2.10 |   | All  warranties, representations, covenants, indemnities, deeds and agreements  made by more than one person shall be regarded as having been made by these  persons jointly and severally.                                                                                                                                       |

 
| **2**  |   | **Investment Plan**                                                                                                                                                           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                          |
| 2.1    |   | Pursuant to the  conditions of this Agreement, and in reliance on the representation and  warranty by the Management Shareholders that the net asset value of the Company  as |

 

5

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|   |   | at the Accounting Date  and up to the Completion Date is not and will not be less than  RMB53,674,838.00, the Subscriber agrees to invest RMB18,000,000.00 in the  Company, of which RMB9,000,000.00 is for the acquisition of 1,000,000 equity  (10% of the original registered capital) from the Original Individual  Shareholders; and the remaining RMB9,000,000.00 is for the subscription of  the New Capital of the Company. On completion of the aforesaid investment,  the registered capital of the Company shall be modified to RMB11,250,000.00,  and the Subscriber shall hold and has fully paid up 20% of the registered  capital of the Company. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 2.2    |   | On Completion,  according to the conditions of this Agreement, the Original Individual  Shareholders shall complete the Equity Transfer with the Subscriber.  Immediately thereafter, the Subscriber shall complete the Equity Subscription  with the Company.                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 2.3    |   | The Company and the  Management Shareholders warrant that after the Equity Transfer and increase  of capital, they will procure the Company to complete all procedures for  business registration modification in relation to the registered capital and  change of shareholders as required and in accordance with the law and regulations.                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 2.4    |   | The newly increased  capital shall be subscribed by the Subscriber on a fully paid basis in  accordance with this Agreement, which shall after Completion rank pari passu  and enjoy the same rights and benefits with the equity held by the original  Shareholders (the commencement date when it shall enjoy the rights and  benefits is the date when the Subscription Price is remitted to the account  of the Company).                                                                                                                                                                                                                                    |

 
| **3**  | ** ** | **Transfer Price and its Payment**                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.1    |       | The Transfer Price for  the purchase by the Subscriber of 1,000,000 equity from the Original  Individual Shareholders shall be RMB9.00 for each share. The total amount  payable to the Original Individual Shareholders by the Subscriber for  purchasing the equity shall be RMB9,000,000.00.                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.2    |       | The amount of the  Transfer Price shall be paid to the Original Individual Shareholders on  Completion according to the amount of equity sold by each Original Individual  Shareholder. The Subscriber shall enjoy the same rights and benefits with the  equity as those held by the original Shareholders (the commencement date when  it shall enjoy the rights and benefits is the date when the transferors  receive the Transfer Price |

 

6

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|   |   | from the Subscriber).                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                    |
| 3.3    |   | For the avoidance of doubt, the equity to be  transferred by the Original Individual Shareholders to the Subscriber shall  not include any “bonus equity for technical excellence”; and shall be at the  ratio in which each holds equity in the Company. The total amount of equity  to be transferred to the Subscriber shall be 1,000,000. |

 
| **4**  | ** ** | **Subscription Price and Payment**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1    |       | The  Subscription Price for the New Capital shall be RMB9,000,000.00. Of the  Subscription Price, an amount of RMB1,250,000.00 shall be recorded as the  registered capital of the Company. The surplus premium of RMB7,750,000.00  shall be included as the capital reserve.                                                                                                                                                                                                                                                                                                                                  |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.2    |       | The  Subscriber shall pay the Subscription Price in full in one lump sum, that is,  RMB9,000,000.00 shall be paid within 10 working days after this Agreement has  been signed and the relevant Equity Transfer and Equity Subscription have  been approved by the Foreign Economic and Trade Bureau, the Foreign Economic  and Trade Department (if necessary) and other relevant departments.                                                                                                                                                                                                                |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| **5**  | ** ** | **Conditions Precedent**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 5.1    |       | This  Agreement shall be conditional on and shall not take effect unless all but  not some only of the following conditions precedent are satisfied:                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 5.1.1  |       | All  consent of the Shareholders and Directors of the Company required for  completing the Equity Transfer and Equity Subscription having been obtained.  For this purpose, the Management Shareholders shall on or before the signing  of this Agreement provide to the Subscriber a certified copy of resolutions of  all of the Shareholders and Directors of the Company approving the transfer  of 1,000,000 equity by the Original Individual Shareholders to the  Subscriber, and authorizing the Company to increase its capital and approving  the subscription of the New Capital by the Subscriber; |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 5.1.2  |       | The  Original Individual Shareholders have acknowledged in writing their waiver of  all of their pre-emptive rights to purchase the equity to be transferred by  other Shareholders pursuant to the Articles of the Company; and                                                                                                                                                                                                                                                                                                                                                                               |

 

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| 5.1.3  |       | All  of the Original Individual Shareholders having executed the Equity Transfer  Forms, and having delivered the Equity Transfer Forms duly executed to the  Subscriber’s lawyers for custody until Completion.                                                                                                                                           |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| **6**  | ** ** | **Conditions for Completion**                                                                                                                                                                                                                                                                                                                                   |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.1    |       | Completion  of the Equity Transfer and Equity Subscription shall be conditional upon fulfillment  of all but not some only of the following conditions:                                                                                                                                                                                                         |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.1.1  |       | All  Warranties remain true and accurate at Completion; and there does not exist  any misrepresentation and no misrepresentation occurs in any material aspect,  whether on Completion or at any time between the date of this Agreement and  the Completion Date;                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.1.2  |       | The  Management Shareholders having delivered to the Subscriber on or before the  Completion Date the latest financial statements of the Company made up to the  closest possible date to the Completion Date, and such financial statements  indicate that the net asset value of the Company as at the Completion Date is  not less than RMB53,674,838.00;    |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.1.3  |       | The  Shareholders and the Subscriber having not later than the Completion Date (or  such other date as the Parties may mutually agree) signed a shareholders  agreement mutually acceptable to all Parties; or having approved and adopted  a new constitution of the Company mutually acceptable to all Parties by a  valid Shareholders’ resolution; and |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.1.4  |       | This  Agreement and the relevant Equity Transfer and Equity Subscription having  been approved by the relevant departments.                                                                                                                                                                                                                                     |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.2    |       | The  Subscriber may waive any or all of the above Conditions at any time by  written notice to the Management Shareholders.                                                                                                                                                                                                                                     |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.3    |       | The  Original Individual Shareholders shall use their best endeavours to fulfil the  above Conditions on or before the date stipulated by Clause 6.4.                                                                                                                                                                                                           |
|   |       |                                                                                                                                                                                                                                                                                                                                                            |
| 6.4    |       | If  the above Conditions cannot be fulfilled on or before the Completion Date,  unless the Subscriber waives such Conditions in accordance with Clause 6.2,  otherwise the                                                                                                                                                                                      |

 

8

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|   |       | Subscriber  shall no longer have any obligation to purchase the equity to be transferred  and to subscribe for the New Capital. All payments made by the Subscriber to  the Company (as Completion has not taken place no payment is payable to the  Original Individual Shareholders), including the Subscription Price mentioned  in Clause 4.2, shall forthwith be repaid to the Subscriber in full. This  Agreement shall also terminate and be of no further effect, except the provisions  of Clause 1 (Interpretation); Clauses 5 and 6 (Conditions); Clause 12  (Notice); Clause 13 (General); Clause 15 (Governing Law); and all claims for  antecedent breach which shall all remain in effect. |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 6.5    |       | The  agreement to waive any Condition by written notice from the Subscriber shall  not mean or imply that the Subscriber does not rely on the Warranties. The  Subscriber still proceeds with the Equity Transfer and Equity Subscription in  reliance on the Warranties.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **7**  | ** ** | **Completion**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 7.1    |       | Within  3 working days after receipt of the Subscription Price, the Company shall  issue a certificate in writing confirming receipt of the payment and  acknowledging that the Subscriber holds 20% of the registered capital of the  Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 7.2    |       | On  compliance with Clauses 5 and 6, procedures for Completion shall take place  on the Complete Date at the place of registration of the Company to complete  all (but not part only) of the matters prescribed in Clause 7.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 7.3    |       | On  Completion, the Original Individual Shareholders of the Company shall:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 7.3.1  |       | procure  that the Original Individual Shareholders shall transfer a total of 1,000,000  equity to the Subscriber; and for this purpose, the Original Individual  Shareholders agree that the Subscriber’s lawyers may deliver the Equity  Transfer Forms duly executed by the Original Individual Shareholders to the  Subscriber for its execution;                                                                                                                                                                                                                                                                                                                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 7.3.2  |       | procure  that the Subscriber shall hold the New Capital issued by the Company, which  together shall represent 20% of the total registered capital of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 7.3.3  |       | deliver  to the Subscriber certified copies of (i) the resolutions of the  Shareholders and Directors of the Company approving the Equity Transfer and  approving and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

9

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|   |       | authorizing  the increase of the New Capital and Equity Subscription thereof; and (ii) information  relating to the change of Shareholders from the Industry and Commerce Bureau;  and that in accordance with Clause 9.2, a person nominated by the Subscriber  shall be appointed as a non-executive Director and supervisor of the Company;  such Director shall not participate in the day-to-day management of the  Company; and |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 7.3.4  |       | after  the Equity Transfer and Equity Subscription, the Subscriber shall hold 20% of  the total registered and issued capital of the Company.                                                                                                                                                                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 7.4    |       | On  Completion, the Subscriber shall:                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 7.4.1  |       | execute  the Equity Transfer Forms duly executed by the Original Individual  Shareholders, and deliver the same to the Company for recordal of the  relevant Equity Transfer;                                                                                                                                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 7.4.2  |       | pay  the Transfer Price to the Original Individual Shareholders in accordance with  Clause 3;                                                                                                                                                                                                                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 7.4.3  |       | deliver  to the Company such documents as may be required to apply for the Equity  Subscription; and                                                                                                                                                                                                                                                                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 7.4.4  |       | deliver  to the Company a certified copy of the resolution of the board of directors  of the Subscriber approving and authorizing the Equity Transfer and Equity  Subscription herein.                                                                                                                                                                                                                                                     |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **8**  | ** ** | **Warranties**                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 8.1    |       | In  this Clause 8, unless the context otherwise requires, all Warranties provided  in respect of the Company shall be deemed to be repeated, and modified where necessary  as to details, in relation to each of the Subsidiaries of the Company.                                                                                                                                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 8.2    |       | The  Management Shareholders warrant with the Subscriber that the copy Financial  Statements provided by the Company to the Subscriber are true and complete.  (A copy of the Financial Statements is annexed hereto as Schedule 5).                                                                                                                                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 8.3    |       | The  Company and Management Shareholders warrant that they each have obtained all  necessary approval and authorization for the signing of this Agreement; and  that once                                                                                                                                                                                                                                                                  |

 

10

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|   |   | signed,  this Agreement will constitute legal, valid, binding and enforceable  obligations on the part of the Company, the Original Individual Shareholders  and the Management Shareholders.                                                                                                                                                                                                                                                                      |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 8.4    |   | The Company and Management  Shareholders covenant to not directly or indirectly engage or be interested  in any way in any business or activity that competes or may compete with the  Company’s business.                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 8.5    |   | The Management  Shareholders warrant with the Subscriber that the all the representations,  Warranties and covenants set out in Schedule 3 are true and accurate at all  times. If any Management Shareholder discovers or becomes aware of any  circumstances or matter that may reasonably cause any of the Warranties to  become untrue or misrepresented or breached, he shall notify the Subscriber  immediately.                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 8.6    |   | If any of the Warranties  is found to be untrue or misrepresented in any aspect at any time, or if any  Management Shareholder breaches any of the Warranties, the Company and/or the  defaulting Management Shareholder shall indemnify the Subscriber from and  against all losses that it may suffer by reason thereof. The said indemnity  shall not prejudice any other right or remedy that the Subscriber may have  according to this Agreement or the law. |

 
| **9**  | ** ** | **Obligations Before and After Completion**                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 9.1    |       | Before  Completion, the Management Shareholders shall carry on the normal operations  of the Company and its Subsidiaries, and shall consult the Subscriber and not  without obtaining the prior written consent of the Subscriber carry out any  dealings beyond the normal course of business of the Company. Unless pursuant  to the express provisions of this Agreement, the following matters shall  require the prior written consent of the Subscriber: |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |       | (A)                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | allowing  any other person to become a member of the Company or Subsidiaries, whether  through subscription or transfer; |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |
|   |       | (B)                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | selling,  pledging or dealing with any undertakings or assets of the Company (sale of  stock, borrowing or pledging with bank in the normal course of business  excepted); |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |
|   |       | (C)                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | distributing  or declaring dividend out of any distributable profits after the Accounting  Date; |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |
|   |       | (D)                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | altering  the Company’s constitution; |

 

11

----

 
|   |       | (E)                                                                                                                                                                                                                                                                                                                                                                                                                              |   | providing  any warranty, surety, promise or other guarantee for any other person;                                                         |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                      |
|   |       | (F)                                                                                                                                                                                                                                                                                                                                                                                                                              |   | carrying  out any transaction or dealing which has a material effect on the financial  status or outlook of the Company or Subsidiaries;  |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                      |
|   |       | (G)                                                                                                                                                                                                                                                                                                                                                                                                                              |   | appointing  Director(s);                                                                                                                  |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                      |
|   |       | (H)                                                                                                                                                                                                                                                                                                                                                                                                                              |   | dismissing  Director or managerial personnel of the Company or Subsidiaries, or revising  their remuneration or employment conditions; or |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                                                                                                      |
|   |       | (I)                                                                                                                                                                                                                                                                                                                                                                                                                              |   | winding  up the Company or Subsidiaries voluntarily.                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 9.2    |       | After  Completion, the Subscriber shall have the right to appoint a non-executive  Director and supervisor, who shall not participate in the day-to-day  management of the Company. The Company shall be notified in writing of the  person nominated on the signing of this Agreement, in order that the  appointment may be made when completing the procedures for Completion set out  in Clause 7.                           |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 9.3    |       | After  Completion, if the Company will increase its capital or take in new  shareholder, the Subscriber shall have the absolute first right to increase  its equity at the same price so to maintain its 20% holding of the equity in  the Company.                                                                                                                                                                              |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 9.4    |       | After  Completion, if the net asset value of the Company up to the Completion Date  is not less than RMB53,674,838.00, the Subscriber agrees that a sum of  RMB5,000,000.00 may be taken out and deducted from the distributable profits  of the Company accrued from 1 January 2007 up to the Completion Date for  payment of dividend.                                                                                    |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 9.5    |       | After  Completion, the Subscriber and other Shareholders of the Company shall  negotiate the dividend policy of the Company for the financial year of 2007  and thereafter from the point of view of the interest of the Company, and  upon unanimous agreement shall make distribution of not less than 20% of the  distributable profits.                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **10** | ** ** | **Confidentiality and Announcement**                                                                                                                                                                                                                                                                                                                                                                                             |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.1   |       | Unless  with the prior written consent of all Parties, the terms and conditions of  this Agreement, the Equity Transfer and Equity Subscription, and all related  matters shall not be disclosed to any third party, including the public or  the media (Chinese or English), save and except announcement or disclosure by  the Original Individual Shareholders or the Subscriber as required by law or  regulating authority. |

 

12

----

 
| 10.2   |       | All  information relating to the other Parties that any Party may obtain in the course  of negotiation of this Agreement and the Equity Transfer and Equity  Subscription shall be kept confidential. All Parties shall be obliged to  ensure that there will not be any disclosure, and unless with the prior  written consent of the other Party, there shall not be any disclosure to any  third party, except as required by law or regulating authority. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **11** | ** ** | **Costs**                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 11.1   |       | Each  Party shall bear its own costs and expenses, including legal costs, for the  preparation, signing, completion and execution of this Agreement and all  documents incidental thereto.                                                                                                                                                                                                                                                                    |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **12** | ** ** | **Notices**                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 12.1   |       | All  notices issued pursuant to this Agreement shall be in writing and in Chinese,  and be served by hand delivery, prepaid post (by airmail if address is  overseas) or facsimile. A notice must state the name of the recipient and be  sent according to the following address or facsimile number, or such other  address or facsimile number as a Party may from time to time notify the other  Parties.                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 12.2   |       | A  notice shall be sent to the Parties as follows:                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |       | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | To  the Management Shareholders: |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Address:  No.188,  Jiang Jun Road, Jin Hua City, Zhejiang Province |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Facsimile: | 0579-82321994 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Recipient: | Mr. Jin  Xinlie |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
|   |       | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | To  the Subscriber: |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Address:  18th  Floor, Gee Chang Hong Centre, 65 Wong Chuk Hang Road, Hong Kong |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Facsimile: | (852)2873  4887 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Recipient: | Mr. Leung  Tak Chun |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |
|   |       | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | To  the Company: |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Address:  No.188,  Jiang Jun Road, Jin Hua City, Zhejiang Province |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Facsimile: | 0579-82321994 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Recipient: | Mr. Jin  Xinlie |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |
| 12.3   |       | A  notice shall be deemed to be served in the following circumstances:                                                                                                                                                                                                                                                                                                                                                                                        |

 

13

----

 
|       |       | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | on  delivery if by hand delivery;                         |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|
|       |       | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 5  working days if by post; and                           |
|       |       | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | on  transmission with correct answerback if by facsimile. |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                      |
| **13**     | ** ** | **General**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 13.1       |       | Further  Assurance:  All Parties agree to carry out (or  procure to be carried out) all further steps or actions, and to execute and  deliver (or procure to be executed and delivered) all further documents as  may reasonably be required or ought to be carried out and/or executed by or  in law or for fully and effectually completing the transactions contemplated  by the terms of this Agreement.                                                                                                                                                          |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 13.2       |       | Cumulative  Remedies:  All rights, powers and remedies of  any Party under this Agreement are cumulative and not mutually exclusive, and  shall not prejudice any right, power or remedy not expressed herein but  available in law. All such rights, powers and remedies may be exercised  without limit as and when necessary.                                                                                                                                                                                                                                      |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 13.3       |       | Waiver:  The  waiver, indulgence or delay in exercising of any right or remedy prescribed  by law or this Agreement by any Party shall not be deemed a waiver of any  other right or remedy. Any such waiver or delay shall not constitute any  waiver or modification of any other right or remedy. Any single or partial  exercise of any right or remedy shall not prevent any other or further  exercise, or prevent the exercise of any other right or remedy.                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 13.4       |       | Severance:  If  any provision of this Agreement or part thereof shall be adjudged void or  unenforceable, such provision or part thereof shall be deemed to have been  severed from this Agreement, but without prejudice to the remaining provisions  or remaining part of the relevant provision and shall not render the same  void or unenforceable. All Parties shall use their best endeavours to replace  the void or unenforceable provision with a valid and enforceable provision  with the nearest possible effect to the void or unenforceable provision. |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 13.5       |       | Modification:  Any  modification to this Agreement shall not be regarded as valid or become a  part of this Agreement unless in writing and signed by all Parties. “Modification”  shall include any form of change, supplement, deletion or replacement.                                                                                                                                                                                                                                                                                                   |

 

14

----

 
| 13.6       |       | Assignment:  This  Agreement shall be equally binding on all Parties hereto. Any Party may not,  without the prior written consent of the other Parties, assign or pledge in  any way, or otherwise deal with its rights and/or obligations under this  Agreement in any other way. This Agreement is not assignable.                                                                                                                                                                                    |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 13.7       |       | Relationship:  The  Parties to this Agreement are independent contractors. Any Party is not and  may not hold out as the agent or partner of any of the other Parties, and no  Party shall have the right to bind or cause any legal liability for any other  Party.                                                                                                                                                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| 13.8       |       | Time: Time shall  be of the essence of this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| 13.9       |       | Survival: Notwithstanding  the completion of the transactions contemplated by this Agreement, if any  provision shall continue to be performed after Completion, such provision  shall remain in full force and effect.                                                                                                                                                                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| **14**     | ** ** | **Constitution**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| 14.1       |       | Subject  to compliance with the relevant laws of the PRC, all Parties shall cooperate  to amend the Constitution of the Company to provide for and to give force and  effect to the conditions of this Agreement.                                                                                                                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| **15**     | ** ** | **Law and Jurisdiction**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| 15.1       |       | This  Agreement and the Schedules shall be governed by the laws of the PRC.                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| 15.2       |       | The  Parties agree that the courts of the place of registration of the Company  shall have jurisdiction over any question, dispute, lawsuit or legal  proceedings caused by or arising out of this Agreement.                                                                                                                                                                                                                                                                                                      |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
| **16**     | ** ** | **Termination of Agreement**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| ** ** | ** ** | If  this Agreement and the relevant Equity Transfer and Equity Subscription are  not approved by the relevant departments for any reason beyond the scope of  abilities of the Company and/or the Management Shareholders, this Agreement  and the relevant Equity Transfer and Equity Subscription shall terminate immediately  on the date of non-approval. If this Agreement shall not be approved by the  relevant departments on 30 September 2007, then regardless of the  reason, this Agreement shall |

 

15

----

 
| ** ** | ** ** | immediately  terminate. The Parties may agree to extend such date to a date mutually  acceptable to all Parties. |
|------------|------------|------------------------------------------------------------------------------------------------------------------|

 

16

----

 

**Schedule 1**

 

**Details of the Company**

 
| 1.     |   | Name                       | :      | Zhejiang  JiaHuan Limited                                                   |
|--------|--------|----------------------------|--------|-----------------------------------------------------------------------------|
|   |   |                       |   |                                                                        |
| 2.     |   | Date  of Incorporation     | :      | 28  April 1994                                                         |
|   |   |                       |   |                                                                        |
| 3.     |   | Place  and Type of Company | :      | Limited  Liability Company registered in the PRC                            |
|   |   |                       |   |                                                                        |
| 4.     |   | Registration  No.          | :      | 3307001000578                                                               |
|   |   |                       |   |                                                                        |
| 5.     |   | Registered  Office         | :      | No.188  Jiang Jun Road, Jin Hua City, Zhejiang Province                     |
|   |   |                       |   |                                                                        |
| 6.     |   | Registered  Capital        | :      | RMB10,000,000.00,  divided into 10,000,000 ordinary shares  of RMB1.00 each |
|   |   |                       |   |                                                                        |
| 7.     |   | Registered  Shareholders   | :      |                                                                        |

 
| **Name of Shareholder** |   | **Amount of Equity  Contribution** |   |
|-----------------------------------|--------|----------------------------------------------|--------|
|                              |   |                                         |   |
| Jin Xinlie                        |   | RMB1,000,000                                 |   |
| Zhang Huaqiang                    |   | RMB1,270,000                                 |   |
| Chen Jian                         |   | RMB790,000                                   |   |
| Zhou Jianlu                       |   | RMB710,000                                   |   |
| Zhu Jinghua                       |   | RMB700,000                                   |   |
| Zhang Zhenjiang                   |   | RMB680,000                                   |   |
| Cheng Fusheng                     |   | RMB670,000                                   |   |
| Jiang Qinglong                    |   | RMB530,000                                   |   |
| Zheng Jun                         |   | RMB430,000                                   |   |
| Cai Tingbin                       |   | RMB390,000                                   |   |
| Ye Wenyao                         |   | RMB250,000                                   |   |
| Zhu Weihong                       |   | RMB250,000                                   |   |
| Wang Jinhui                       |   | RMB250,000                                   |   |
| Wang Minghua                      |   | RMB240,000                                   |   |
| Liu Yeuping                       |   | RMB240,000                                   |   |
| Zhu Yongjun                       |   | RMB220,000                                   |   |
| Dan Xiaolong                      |   | RMB210,000                                   |   |
| Song Rongqun                      |   | RMB200,000                                   |   |
| Wang Ronghua                      |   | RMB200,000                                   |   |

 
| 8.     |   | Members  of the Board of Directors :                                                         |
|--------|--------|----------------------------------------------------------------------------------------------|
|   |   |                                                                                         |
|   |   | Jin  Xinlie, Zhou Jianlu, Zhu Jinghua, Zhang Huaqiang, Cheng Fusheng, Chen Jian,  Wang Hejun |
|   |   |                                                                                         |
| 9.     |   | Legal  Representative :                                                                      | Jin  Xinlie |

 

17

----

 

**Schedule 2**

 

**Details of the Subsidiaries**

 

**I. Jinhua City Guo Xin Investment Limited**

 
| 1.     |   | Name                       | :      | Jinhua  City Guo Xin Investment Limited                         |
|--------|--------|----------------------------|--------|-----------------------------------------------------------------|
|   |   |                       |   |                                                            |
| 2.     |   | Date  of Incorporation     | :      | 3  July 2003                                               |
|   |   |                       |   |                                                            |
| 3.     |   | Place  and Type of Company | :      | Limited  Liability Company registered in the PRC                |
|   |   |                       |   |                                                            |
| 4.     |   | Registration  No.          | :      | 3307001901668                                                   |
|   |   |                       |   |                                                            |
| 5.     |   | Registered  Office         | :      | 8th  Floor, No.1223, Danxi Road, Jinhua City, Zhejiang Province |
|   |   |                       |   |                                                            |
| 6.     |   | Registered  Capital        | :      | RMB12,700,000.00                                                |
|   |   |                       |   |                                                            |
| 7.     |   | Registered  Shareholder    | :      |                                                            |

** **
| **Shareholder**                                |   | **Amount of Equity  Contribution** |   |
|------------------------------------------------|--------|----------------------------------------------|--------|
| Jinhua  City National Asset Management Limited |   | RMB2,000,000                                 |   |
| Jinhua  City Guo Xin Enterprise Limited        |   | RMB1,500,000                                 |   |
| Zhejiang  JiaHuan Limited                      |   | RMB1,500,000                                 |   |
| Ji  Weijun and others being 15 individuals     |   | RMB7,700,000                                 |   |

 
| 8.     |   | Members  of the Board of Directors:                          |
|--------|--------|--------------------------------------------------------------|
|   |   |                                                         |
|   |   | Ji  Weijun, Wang Guoqin, Cheng Lixian, Yan Zhhua, Jin Xinlie |
|   |   |                                                         |
| 9.     |   | Legal  Representative:                                       | Ji  Weijun |

 

18

----

 

**II.    JinhuaZhonghe Environmental Technology Limited**

 
| 1.     |   | Name                       | :      | Jinhua  Zhonghe Environmental Technology Limited                                          |
|--------|--------|----------------------------|--------|-------------------------------------------------------------------------------------------|
|   |   |                       |   |                                                                                      |
| 2.     |   | Date  of Incorporation     | :      | 13  August 2004                                                                      |
|   |   |                       |   |                                                                                      |
| 3.     |   | Place  and Type of Company | :      | Limited  Liability Company registered in the PRC                                          |
|   |   |                       |   |                                                                                      |
| 4.     |   | Registered  No.            | :      | 3307002904306                                                                             |
|   |   |                       |   |                                                                                      |
| 5.     |   | Registered  Office         | :      | 2/F,  YaTai Consolidated Building, No.697 Yongkang Street, Jinhua City, Zhejiang Province |
|   |   |                       |   |                                                                                      |
| 6.     |   | Registered  Capital        | :      | RMB1,000,000.00.00                                                                        |
|   |   |                       |   |                                                                                      |
| 7.     |   | Registered  Shareholders   | :      |                                                                                      |

 
| **Shareholder**          |   | **Amount of Equity  Contribution** |   |
|--------------------------|--------|----------------------------------------------|--------|
|                     |   |                                         |   |
| Zhejiang JiaHuan Limited |   | RMB480,000                                   |   |
| Yan Keping               |   | RMB260,000                                   |   |
| Wang Ronghua             |   | RMB260,000                                   |   |

 
| 8.     |   | Members  of the Board of Directors:   |
|--------|--------|---------------------------------------|
|   |   |                                  |
|   |   | Yan  Keping, Wang Ronghua, Jin Xinlie |
|   |   |                                  |
| 9.     |   | Legal  Representative :               | Yan  Keping |

 

**III.     ZhejiangJiaHuan Xinyu Environmental Protection Limited**

** **
| 1.     |   | Name                       |   | Zhejiang  JiaHuan Xinyu Environmental Protection Limited |
|--------|--------|----------------------------|--------|----------------------------------------------------------|
|   |   |                       |   |                                                     |
| 2.     |   | Date  of Incorporation     | :      | 30  April 2007                                      |
|   |   |                       |   |                                                     |
| 3.     |   | Place  and Type of Company | :      | Limited  Liability Company registered in the PRC         |
|   |   |                       |   |                                                     |
| 4.     |   | Registration  No.          | :      | 3307002906094                                            |

 

19

----

 
| 5.     |   | Registered  Office      | :      | No.333  Xianhua North Street, Jinhua City, Zhejiang Province |
|--------|--------|-------------------------|--------|--------------------------------------------------------------|
|   |   |                    |   |                                                         |
| 6.     |   | Registered  Capital     | :      | RMB5,000,000.00                                              |
|   |   |                    |   |                                                         |
| 7.     |   | Registered  Shareholder | :      |                                                         |

 
| **Shareholder**          | ** ** | **Amount of Equity  Contribution** | ** ** |
|--------------------------|------------|----------------------------------------------|------------|
|                     |       |                                         |       |
| Zhejiang JiaHuan Limited |       | RMB3,500,000                                 |       |
| Yan Yigao                |       | RMB500,000                                   |       |
| Xu Chengfu               |       | RMB250,000                                   |       |
| Xu Hongbin               |       | RMB250,000                                   |       |
| Fu Wenxiao               |       | RMB250,000                                   |       |
| Zhu Weijun               |       | RMB250,000                                   |       |

 
| 8.     |   | Members  of the Board of Directors:    |
|--------|--------|----------------------------------------|
|   |   |                                   |
|   |   | Zhu Jinghua, Zhang Huaqiang, Yan Yigao |
|   |   |                                   |
| 9.     |   | Legal  Representative :                | Zhu  Jinghua |

 

20

----

 

**Schedule 3**

 

TheCompany and the Management Shareholders jointly and severally represent to,warrant and covenant with the Subscriber as follows:

 
| 1.     |   | About  the Company and Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 1.1    |   | All details of the Company and the Subsidiaries set out in Schedules  1 and 2 are completely true and correct.                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 1.2    |   | The  Company and the Subsidiaries are all duly registered and incorporated in the  PRC according to law, are limited liability companies valid and subsisting,  and are independent legal entities.                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 1.3    |   | The  Company and the Subsidiaries have at all times fully observed and complied  with all laws and regulations applicable to them and their business. All  documents, records or fees required by law have been filed and paid at the  times and in accordance with the regulations prescribed by law. All consents,  permits, certificates etc. necessary for their operation have been timely  obtained in accordance with the requirements of law, and are kept valid. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.     |   | Financial  Status                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.1    |   | All  books and financial records have been prepared and kept according to proper  operating methods and accounting standards; and accurately record all  operating activities of the Company and the Subsidiaries.                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.2    |   | The  Financial Statements:                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (I)                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | correctly  reflect the true financial and operating status of the Company and the  Subsidiaries as at the Accounting Date, and the results of the relevant  period; |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |
|   |   | (II)                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | include  the true and complete picture of all liabilities and capital commitments  undertaken by the Company and the Subsidiaries as at the Accounting Date. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |
| 2.3    |   | All  assets of the Company and the Subsidiaries have been truly and completely  shown in the Financial Statements.                                                                                                                                                                                                                                                                                                                                                        |

 

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| 2.4    |   | Since  the Accounting Date:                                                                                                                                                                                                                                                                       |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                              |
|   |   | (I)                                                                                                                                                                                                                                                                                               |   | the  Company and the Subsidiaries have been operating lawfully in the normal  course of business, and their operation has not been suspended or altered; |
|   |   |                                                                                                                                                                                                                                                                                              |   |   |
|   |   | (II)                                                                                                                                                                                                                                                                                              |   | there  is no material change to the trading condition or customer relation of the  Company and the Subsidiaries as compared to the position disclosed by the  Financial Statements; nor is there any material change to their financial  conditions, financial status, outlook, asset or obligations; nor has any loss  or damage to their operation or assets occurred. |
|   |   |                                                                                                                                                                                                                                                                                              |   |   |
| 2.5    |   | According  to the Valuation Report No. JinAn Appraisal (2007) No.015 dated 28 June 2007  and prepared by Jin Hua An Tai Asset Appraisal Limited Liability Company:                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                              |
|   |   | (I)                                                                                                                                                                                                                                                                                               |   | the  Subsidiary Zhejiang JiaHuan Xinyu Environmental Protection Limited has a net  asset value of not less than RMB391,178.91 as at 30 April 2007; |
|   |   |                                                                                                                                                                                                                                                                                              |   |   |
|   |   | (II)                                                                                                                                                                                                                                                                                              |   | after  appraisal, the actual value of the assets of the said Subsidiary is less than  the book value of its assets after adjustment, but the difference shall not  be more than RMB908,816.42; and |
|   |   |                                                                                                                                                                                                                                                                                              |   |   |
|   |   | (III)                                                                                                                                                                                                                                                                                             |   | all  of the assets and liabilities of the said Subsidiary have been completely and  accurately set out in the said Valuation Report. |
|   |   |                                                                                                                                                                                                                                                                                              |   |   |
| 3.     |   | Equity                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                              |
| 3.1    |   | Except as disclosed, there does not exist any agreement or  arrangement for the issuance of any share option, or the right to any third  party to subscribe for ordinary or preference shares or equity of the  Company, or any encumbrance that may affect the shares or equity of the  Company. |
|   |   |                                                                                                                                                                                                                                                                                              |
| 3.2    |   | The equity transferred by the Original Individual Shareholders to the  Subscriber is owned by the Original individual Shareholders, the title  thereof is good and is free of any encumbrance, pledge, difference or dispute.                                                                     |
|   |   |                                                                                                                                                                                                                                                                                              |
| 3.3    |   | The Original Individual Shareholders are entitled to transfer the  said equity without the consent of any third party; and there exists no  agreement or arrangement that may prevent the complete and valid transfer of  the said equity to the Subscriber.                                      |

 

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| 4.     |   | Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.1    |   | The  Company and the Management Shareholders covenant not to directly or  indirectly engage or be interested in any way in any business or activity  that competes or may compete with the Company’s business.                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 5.     |   | Material  Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 5.1    |   | At  the date of this Agreement or the Completion Date, there does not exist any  contract that is outside of the normal course of business, or which contains  unusual or onerous terms.                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 5.2    |   | There  does not exist any circumstances or event that may cause the material  contracts of the Company to be terminated, cancelled or not be enforced.                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 6.     |   | Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 6.1    |   | Except  as has been disclosed, the Company or the Subsidiaries is not involved in any  litigation, arbitration, administrative or criminal legal proceedings  (whether as the plaintiff, defendant or third party). There does not exist  any litigation or legal proceedings involving the Company or the Subsidiaries  that are not yet concluded; or any circumstances or event that will cause or  result in any dispute, litigation or legal proceedings for the Company or the  Subsidiaries. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 7.     |   | Tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 7.1    |   | The  tax registrations of the Company and the Subsidiaries are in compliance with  all applicable laws and regulations.                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 7.2    |   | At  all times, the Company and the Subsidiaries have reported and paid all taxes  timely and in accordance with law. There does not exist any circumstances or  activities of tax theft, non-payment of tax or tax avoidance.                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 7.3    |   | All  tax benefits and/or concessions, including the policy of “two free three  discount half”, that the Company and Subsidiaries have been enjoying at all  material times are in compliance with all applicable laws and regulations; and  there are no circumstances that will give rise to or result in any breach of  law or regulation, recovery of tax or tax penalty etc.                                                                                                          |

 

23

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| 8.     |   | Intellectual  Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 8.1    |   | The  intellectual property of the Company or the Subsidiaries, including patent  inventions, technical know-how, trade marks and copyrights etc., and whether  registered or being registered or not yet registered, are all owned by the  Company or the Subsidiaries; are legally valid and effective, and not  obtained by the licence of any third party. The patent inventions, technical  know-how, trade marks and copyrights etc. owned by the Company or the  Subsidiaries may not be assigned or used by any third party without payment. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 8.2    |   | The  Company or the Subsidiaries has not committed any infringement; and has not  received any claim or demand for infringement from any third party.                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 9.     |   | Properties  and Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 9.1    |   | Except  as disclosed in the Financial Statements, the Company does not own any other  property or asset.                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 9.2    |   | All  properties and assets of the Company are the sole and absolute property of  the Company. The Company has obtained all relevant certificates of ownership  and all other necessary documents and proofs in accordance with law. Except  as disclosed, there does not exist any other charges or encumbrances.                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 9.3    |   | All  taxes and fees payable in respect of the properties and assets of the Company  have been fully paid in time in accordance with law.                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 9.4    |   | All  relevant leases for properties leased by the Company are valid and  subsisting. There does not exist any circumstances that will cause such  contracts to be terminated, cancelled or not enforced. There does not exist  any dispute, non-payment or other unfulfilled liabilities between the Company  and the owners of the relevant properties.                                                                                                                                                                                            |

 

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**Schedule 4**

 

**EquityTransfer Form**

** **

**Zhejiang JiHuan Limited**

**Equity Transfer Agreement**

 

Transferor:

IdentityCard No.:

 

Transferee:      Euro Tech (Far East) Limited

RegisteredOffice:  18th Floor, Gee Chang Hong Centre, 65 Wong ChukHang Road, Hong Kong

 
| 1.     |   | Upon  friendly negotiation, Transferor agrees to transfer the             shares/equity he  holds in Zhejiang JiaHuan Limited (the ‘Company’) to Euro Tech (Far East)  Limited at the price of RMB1:9 (RMB9.00) (RMB9.00 each share/equity).  Transferee agrees to purchase such shares/equity at the aforesaid price from  the Transferor. Both parties agree to proceed with and complete the transfer  in accordance with the terms, procedures and time contained in a Share  Transfer and Subscription Agreement relating to the Company and signed  between the Transferee and the Management Shareholders of the Company. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| 2.     |   | The  transfer price shall be paid to the Transferor on completion according to the  amount of equity transferred by the Transferor. Thereafter, Transferee shall  enjoy the same rights and benefits with the equity held by the original  shareholder. The commencement date when it shall enjoy such rights and  benefits shall be the date when the Transferor receives the transfer price  from the Transferee, that is the time of complete transfer of the equity is  the date when the Transferor receives the transfer price from the Transferor.                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |
| 3.     |   | Transferor  warrants with the Transferee that the equity transferred to the Transferee is  owned by the Transferor; the title is good, and free from any encumbrance,  pledge, difference or dispute; that the transfer does not require the consent  of any third party (and if such need exists, he must complete all relevant  procedures for obtaining such consent before the transfer of equity); and  that there exists no agreement or arrangement that may prevent the complete  and valid transfer of the said equity to the                                                                                                                                                       |

 

25

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|   |   | Transferee.  For the avoidance of doubt, the equity transferred by the Transferor to the  Transferee does not include any “bonus shares for technical excellence”.                                                                                                                                 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                         |
| 4.     |   | If  any dispute arises in relation to the signing or performance of this  agreement, both parties shall negotiate for a resolution, failing which either  party may seek to resolve the dispute through judicial means by commencing legal  proceedings at the jurisdiction where the Transferor is located. |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 5.     |   | Transferor  acknowledges that he waives any pre-emptive right to purchase the equity to  be transferred by other shareholders of the Company or to subscribe for any  new capital increased by the Company.                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 6.     |   | This  agreement shall be signed in quadruplicates. Transferor and Transferee shall  each hold one part; the Company shall hold one part for record; and the  remaining part shall be used for modification of business registration.                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 7.     |   | The  place of signing of this Agreement shall be at Jin Hua City, Zhejiang  Province. The agreement shall take effect upon signing by both the Transferor  and Transferee.                                                                                                                                   |

 

 
| Date:                 |   | Date:                 |
|-----------------------|--------|-----------------------|
|                  |   |                  |
|                  |   |                  |
|                  |   |                  |
| Signed  by Transferor |   | Signed  by Transferee |
| Witness:              |   | Witness:              |

 

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**Schedule 5**

 

**Financial Statements**

(attached)

 

27

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