On the date hereof, Tianming Du, Liangdong Du and Changsha Xingchen are the legal shareholdersof Cartoon Digital. Tianming Du contributes RMB4,634,200 to Cartoon Digital, representing 66% ofits registered capital; Liangdong Du contributes RMB1,985,800, representing 28.3% of its registeredcapital; Changsha Xingchen contributes RMB397,203, representing 5.7% of its registered capital.On the basis of the principles of equality and mutual benefits and in accordance with therequirements of the PRC laws, the Acquired Parties and the Acquiring Party have agreed as followsin respect of the acquisition of equity interests after friendly consultation:**ARTICLE 1. DEFINITIONS**1.1 Unless otherwise required or agreed by laws and this Agreement, the definition and meaning ofthe terms and expressions used herein shall be based as follows:   PRC or China means, for the purpose of thisAgreement, the People’s Republic ofChina, excluding Hong Kong, Macau andTaiwan.   Equity means the equity interests owned asto 66%, 28.3% and 5.7% by TianmingDu, Liangdong Du and ChangshaXingchen (all of whom are theAcquired Parties), respectively, inCartoon Digital, amounting to 100% ofits equity interest.   Approval Authority means the Ministry of Commerce of thePRC or any local competentdepartments in charge of commerceauthorized by it for the approval ofequity acquisition of companies.   Registration Authority means the State Administration forIndustry and Commerce or any localbranches authorized by it for theregistration of companies.   Foreign Exchange Authority means the State Administration ofForeign Exchange or any localdepartments in charge of foreignexchange.   PRC Law means any laws and regulations of thePRC promulgated prior to (andincluding) the effective date hereofand currently in effect, and anyrules, regulations and measurespromulgated by the PRC government andits departments that are legallybinding, as well as the standardizeddocuments in other forms.   Effective Date means the date on which thisAgreement becomes effective after itis approved by the relevant ApprovalAuthority.   Closing Date means the date on which the equityacquisition is approved by theApproval Authority, the change ofregistration in respect thereof isapproved by the RegistrationAuthority and a new business licenseis issued to Cartoon Digital.   Transaction Completion Date means the date on which theconsideration for equity acquisitionprescribed herein has been paid tothe Acquired Parties.
 
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   Little Star Group’s Profit means all cumulative undistributedprofits of each member of Little StarGroup for the period from the date ofits establishment to 31 May 2009 ascalculated according to thecalculation of undistributed profitsrecognized by the Acquiring Party andthe Acquired Parties.   Original Articles means the Articles of Association ofChangsha Little Star Cartoon DigitalTechnology Ltd. signed by theshareholders of Cartoon Digital on 5June 2008.   Target Business means any businesses conducted byLittle Star Group prior to theClosing Date, regardless of whetherLittle Star Group is still in theconduct of such businesses on theClosing Date.   Little Star Group means Cartoon Digital, ChangshaLittle Star Cultural ProductsDevelopment Company Limited, as wellas New Star English Training Schoolin Tianxin District, Changsha City,Little Star English School in YuetangDistrict, Xiangtan City, Little StarForeign Language School in DatongCity, Shanxi, and Little Star EnglishSchool in Tianxin District, ChangshaCity.   Accounting Reference Date means 31 December 2008.**ARTICLE 2. ACQUISITION OF EQUITY**2.1 The Acquired Parties agree to transfer the Equity to the Acquiring Party, and the AcquiringParty agrees to accept such transfer from the Acquired Parties on the terms and conditions setforth herein.2.2 With effect from the Closing Date, the Acquiring Party will become a shareholder of CartoonDigital. Its liabilities to Cartoon Digital shall be limited to the capital contributionsubscribed by it. All the Acquired Parties will lose all their equity interests in Cartoon Digitaland will cease to enjoy or bear any rights and obligations of shareholders in Cartoon Digital,unless otherwise required herein.**ARTICLE 3. CONSIDERATION FOR EQUITY ACQUISITION AND ITS PAYMENT**3.1 The Acquired Parties and the Acquiring Party agree that the consideration for the Equityacquisition shall be RMB18.2 million (hereinafter referred to as the “**Acquisition Consideration**”).The Acquisition Consideration shall be paid in US dollar at an exchange rate which is the middleprice of the conversion of US dollar to Reminbi announced by the People’s Bank of China on the dateof payment. Regardless of any increase or decrease in the net assets of Cartoon Digital up to theTransaction Completion Date, the Acquisition Consideration will remain unchanged.3.2 The Acquiring Party shall pay the consideration in full to the Acquired Parties within threemonths from the Closing Date.
 
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3.3 The Acquired Parties shall issue to the Acquiring Party a receipt for payment of theAcquisition Consideration on the date when the Acquisition Consideration is paid. Moreover, theAcquired Parties shall accept the entrustment from the Acquiring Party to apply for theregistration of foreign investment, foreign exchange and receipts of foreign exchange in connectionwith equity transfer to the Foreign Exchange Authority at the place where the Acquired Parties arelocated with two working days of the receipt of the Acquisition Consideration, and shall providethe Acquiring Party with the documentations showing the completion of the registration of foreigninvestment, foreign exchange and receipts of foreign exchange in connection with equity transfer assoon as possible after the completion of the formalities in relation to the registration of foreignexchange mentioned above.**ARTICLE 4. SPECIAL AGREEMENT**4.1 The Acquired Parties and the Acquiring Party agree that any profits of Little Star Group shallbelong to the Acquired Parties.**ARTICLE 5. REPRESENTATIONS AND WARRANTIES**5.1 Save as disclosed to the Acquiring Party, the Acquired Parties jointly and severally representand warrant to the Acquiring Party as follows (1) all the warranties made by them in Appendix 5.1 are accurate and not misleadingin all respects on the date hereof; (2) all the warranties made by them in Appendix 5.1 will continue to be accurateand not misleading in all respects until and including the Closing Date, as if theywere made again immediately before the Closing Date based on the facts andcircumstances on that day.The Parties agree that the Acquired Parties shall be jointly liable for the representationsand warranties set forth in Appendix 5.15.2 The Acquiring Party hereby represents and warrants to the Acquired Parties as follows: (1) the Acquiring Party meets the conditions for the acquisition of Cartoon Digitalas required by laws, and will not affect the normal operation of legal proceedings foracquisition of the Equity due to the limitation of its own conditions; (2) the acquisition of the Equity has been approved by the board of directors ofthe Acquiring Party; (3) the Acquiring Party has sufficient funds to acquire Cartoon Digital andwarrants that it is able to pay the Acquisition Consideration pursuant to therequirements of this Agreement.
 
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5.3 Notwithstanding any potential investigation by any other Parties and their respective agents oradvisers, the Parties confirm and accept that the Acquiring Party executes this Agreement inreliance on all representations and warranties made by the Acquired Party. The Acquired Partieswarrant that they will be liable for and fully indemnify the Acquiring Party against any losses,damages, liabilities, costs or expenses arising from the following circumstances: (1) any representations and warranties being untrue, misleading or involvingomission to state material facts or being violated; (2) any claims in connection with the settlement of any situation whererepresentations and warranties are untrue or misleading, omit to state material factsor have been violated; (3) any arbitrations or legal proceedings arising from any claims made by otherParties in respect of any situation where representations and warranties are untrue ormisleading, omit to state material facts or have been violated; and (4) the implementation of any such settlement or arbitral award or judgment and theamount therefor, including legal and other costs, and any possible tax liabilities.5.4 Each of the representations and warranties stated in Appendix 5.1 shall be construed as aseparate and independent warranty, and shall, unless expressly provided to the contrary, not belimited or bound by the terms of any other representation and warranties or the application of anyother terms hereof or the inference made from such other terms. If there is any conflict betweenany representations and warranties stated in Appendix 5.1 and the information disclosed by theAcquired Parties to the Acquiring Party, the information disclosed by the Acquired Parties to theAcquiring Party shall prevail.5.5 Each Party hereby warrants that he/it shall, prior to the Closing Date, immediately disclose tothe other Parties in writing on a voluntary basis and upon request any events, facts orcircumstances that may be known to him/it after the execution hereof to be inconsistent with anywarranties, or may reasonably expect to have material effects on the valuation of Cartoon Digital,or may enable other Parties to make claims against him/it in accordance with this Agreement.5.6 If any of the representations and warranties set forth in Appendix 5.1 is false or incorrect oromits to state material facts due to the reasons of the Acquired Parties, the Acquired Partiesshall immediately indemnify and hold Cartoon Digital harmless from and against any losses, damages,costs, and all other adverse circumstances of any kind and nature that would not be resulted ifsuch warranties were true or correct or did not omit any material facts.5.7 If the Acquiring Party discovers any breach by the Acquired Parties of Article 5.1 hereofwithin 18 months after the Closing Date, it shall have the right to pursue the liabilities from theAcquired Parties in accordance with the relevant requirements of this Agreement.
 
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**ARTICLE 6. RIGHTS AND OBLIGATIONS OF THE PARTIES**6.1 Within five days after the execution hereof, the Acquiring Party shall make an application tothe relevant government departments (including the Approval Authority and Registration Authority)for the approval and registration of the Equity acquisition and the Acquired Parties shall providethe Acquiring Party with the information in relation thereto and offer full cooperation. TheAcquiring Party shall, within one month after the execution hereof or such period as extended bythe Parties through separate consultation, obtain an approval from the Approval Authority inrespect of the Equity acquisition and the business license of Cartoon Digital from the RegistrationAuthority for its transformation into a wholly foreign-owned enterprise.6.2 The Acquired Parties shall procure the original legal representative of Cartoon Digital to handover the chop, account books, relevant permits or licenses (including but not limited to documentssuch as all government licenses, approvals, authorizations, filings and registration, orcertificates, credentials, copyrights, certificates for trademarks and patents, real estateownership certificates and any documents relating to the above permits or licenses) and otherbusiness documents of Cartoon Digital to the legal representative of Cartoon Digital after itstransformation or any personnel designated by him within three days from the Closing Date. Uponcompletion of the handover, the Acquiring Party and the Acquired Parties shall sign a confirmationdocument for the handover.6.3 The Acquired Parties shall have the right to receive the Acquisition Consideration from theAcquiring Party and shall issue a receipt of payment to the Acquiring Party pursuant to Article 3.3hereof.6.4 The Acquiring Party shall pay the Acquisition Consideration to the Acquired Parties pursuant tothe requirements hereof.6.5 The Acquiring Party shall have the right to formulate a new articles of association.6.6 The Parties shall bear all of their taxes and expenses hereunder, respectively according tolaws. With regard to the costs involved in the payment of the Acquisition Consideration, theAcquiring Party shall bear those costs incurred in China while the Acquired Parties shall bearthose costs incurred outside of China.6.7 The Acquired Parties shall procure Little Star Group to develop the businesses conducted by itwithin the normal business scope during the period from the date hereof to the Closing Date(hereinafter referred to as the “**Transition Period**”). During the Transition Period, the AcquiredParties shall procure Little Star Group to meet the following requirements: (1) to prevent its existing business structure and reputation from being infringed,unless the change of the business structure has been approved in writing by theAcquiring Party in advance; (2) to protect the assets and properties of Little Star Group and to maintain theirgood working condition so as to enable the normal operation of such assets andproperties, and to make foreseeable depreciation to them in reasonable circumstances;
 
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 (3) to maintain the services provided to it by its customers, suppliers and otherunits or individuals or its cooperation with them, and to preserve the good reputationof Little Star Group; (4) unless with the prior written consent from the Acquiring Party, to continue allproduction, sale, marketing and promotion activities in connection with the businessbeing operated by Little Star Group; (5) to keep the accounts and accounting records of Cartoon Digital in a normal orusual manner without making any significant changes to the following: financial year,pricing, investment, accounting, financial statement, inventory, bank deposit,government subsidies, taxation practices; the method of calculation of doubtful debtand reserves; (6) to comply with all applicable laws and regulations, and government rules forthe development of the businesses of Little Star Group. In the event of the breach ofany applicable laws and regulations, it shall immediately notify the Acquiring Partyafter it is aware of such breach.6.8 The Acquired Parties jointly and severally warrant that, without the written consent of theAcquiring Party, Cartoon Digital and other members of Little Star Group shall, during theTransition Period, not do the following: (1) amendments to articles of association or other constituent documents; (2) increase or decrease of registered capital; (3) merger, consolidation, sale or transfer of all or substantial part of assets; (4) realization, dissolution or liquidation, reorganization or restructuring ofcapital structure in any form, or any matters leading to the change of control; (5) any significant changes to any accounting policies, standards or principles; (6) any significant change to the nature of the businesses of Little Star Group, orsuspension or termination of any part of the current businesses of Little Star Group; (7) authorization or issue of any securities, including any equity; (8) purchase of any equity of entities, or merger with any other entities orparticipation in any joint ventures; (9) increase of the number of directors; (10) declaration and payment of any dividends or making distribution in any otherform (save for the circumstances described in Article 4 hereof); (11) approval of the annual budget and business plan;
 
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 (12) creation of an indebtedness whose single amount or cumulative exceedsRMB100,000 (the indebtedness of all members of Little Star Group shall be calculated ona consolidated basis); (13) creation of a guarantee whose single amount or cumulative amount exceedsRMB100,000 (the guarantees of all members of Little Star Group shall be calculated on aconsolidated basis); (14) obtaining of loans or credits from any financial institutions; (15) creation of indebtedness of any types that are beyond the scope of ordinarybusiness operation of Little Star Group; (16) transfer, sale or disposal of the fixed assets and property of Little StarGroup that are beyond the scope of its ordinary business operation, creation of anypledge, mortgage or guarantee over such assets and property, or provision of anyguarantee to third parties; (17) making any capital expenditure or commitment in an amount of RMB100,000 ormore, such as the purchase of fixed assets or investment (the capital expenditure orcommitment of all members of Little Star Group shall be calculated on a consolidatedbasis); (18) execution of contracts that are not in the nature of normal business operation; (19) change of the senior management, or change of the terms and conditions of anylabor contracts with employees; (20) institution or resolution of any litigation or arbitration; (21) other acts which will reduce the value of Little Star Group.6.9 Upon execution hereof, each of the Acquired Parties shall undertake and warrant that he/it andany of his/its family members (including his spouse, children, brothers and sisters), associatedenterprises, subsidiary enterprises, subsidiaries and shareholders shall not: (1) directly or indirectly engage, invest or be involved in or manage any entities,businesses or products that are identical, similar to or in competition with the TargetBusiness, nor shall they have any direct or indirect rights or interests in anyentities, businesses or products that are identical, similar to or in competition withthe Target Business. (2) directly or indirectly enter into any transactions in relation to the TargetBusiness with any customers, potential customers, representatives, agents, enterpriseswith business relationship or other persons doing business with Little Star Group inany manner or way for the account of themselves or any third parties.
 
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 (3) directly or indirectly induce any customers, potential customers,representatives, agents, suppliers, enterprises with business relationship or otherpersons doing business with Little Star Group in any manner or way to terminate theirrelationship or contact with Little Star Group for the account of themselves or anythird parties. (4) directly or indirectly employ, hire or induce, recruit, encourage, persuade orprocure any advisers, contractors, employees, directors, management, managers,representatives, agents or other persons currently working for Little Star Group in anymanner or way to terminate their relationship or contact with Little Star Group for theaccount of themselves or any third parties. (5) use or register any patents, trademarks, trade names, logos, copyrights,proprietary technologies or other intellectual property rights that are identical,similar or relevant to the intellectual property rights owned by, transferred orlicensed to Little Star Group (whether registered or not) or that are developed basedon such intellectual property rights.**ARTICLE 7. AMENDMENT, MODIFICATION AND TERMINATION OF THE AGREEMENT**7.1 Without the consent of the Parties, no Party shall make any amendment or modification to thisAgreement without authorization.7.2 If this Agreement cannot be fully performed due to the non-performance by a Party of his/itsobligations hereunder or serious breach of this Agreement, it shall be deemed as the termination ofthis Agreement unilaterally by the defaulting Party. In addition to any claims against thedefaulting Party, the non-defaulting Party shall be entitled to discharge this Agreement inaccordance with the Contract Law.**ARTICLE 8. LIABILITIES FOR BREACH OF CONTRACT**8.1 If any Party does not perform any of its substantive obligations hereunder, or anyrepresentations and warranties hereunder are inaccurate, untrue or misleading, it shall constitutea breach of this Agreement (hereinafter referred to as the “**Breach**”). The defaulting Party shallindemnify against all damages and losses suffered by the non-defaulting Party as a result of suchBreach.8.2 If this Agreement cannot take effect or be performed in whole or in part due to the reasons ofthe Approval Authority or other government departments, the Parties shall not be liable to thebreach for each other.
 
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**ARTICLE 9. FORCE MAJEURE**9.1 If the performance of this Agreement is directly affected and this Agreement cannot beperformed according to the agreed terms due to earthquake, typhoon, flood, fire, war and otherforce majeure which are not foreseeable and the occurrence and consequence of which areunpreventable or unavoidable, the Party affected by the force majeure described above shallimmediately notify the other Parties by telex of such a force majeure and shall, within 15 days,provide the details of the force majeure and valid documentation certifying the reasons for thefailure to perform or fully perform or the need to delay the performance of this Agreement. Suchdocumentation shall be issued by a notarization authority at the place where the force majeureoccurred. The Parties shall, in accordance with the extent to which the performance of thisAgreement is affected by the force majeure, decide on whether or not to discharge this Agreement,or to exempt part of the obligations under this Agreement or to extend the term for the performanceof this Agreement.9.2 In the event of any force majeure, the Party affected by the force majeure shall be exempt fromany liabilities for the breach of this Agreement arising therefrom.**ARTICLE 10. GOVERNING LAW AND DISPUTE RESOLUTION**10.1 The formation of this Agreement, its validity, interpretation, performance, and disputeresolution arising therefrom shall be governed by the PRC Laws.10.2 All disputes arising from the performance of this Agreement or in connection herewith shall beresolved by the Parties through friendly consultation. In the event that a dispute cannot beresolved through consultation, it shall be referred to China International Economic and TradeArbitration Commission for arbitration in Beijing. During the arbitration, the Parties shallcontinue to perform this Agreement, except for those parts that are in disputes or beingarbitrated.**ARTICLE 11. LANGUAGE AND COUNTERPARTS**This Agreement is written and executed in Chinese in 13 originals. The Parties shall eachkeep one copy. Cartoon Digital shall also keep one copy and the remaining copies shall besubmitted to the relevant government departments for completion of the relevant formalities.**ARTICLE 12. EFFECTIVENESS AND MISCELLANEOUS**This Agreement shall become effectives after it is signed by the legal representative orauthorized representatives of the Parties and approved by the Approval Authority.(The following intentionally left blank)
 
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   [Signature Page]     Acquiring Party: Global Ring Limited     (Chop)     *[Chop of Global Ring Limited is affixed]*     Authorized Representative: */s/*        Acquired Parties: Tianming Du         */s/*          Liangdong Du         */s/*        Changsha Xingchen Enterprise Management & Consultation Co. Ltd.     *[Chop of Changsha Xingchen Enterprise Management & ConsultationCo., Ltd. is affixed]*     Legal Representative: */s/*   Date of Execution: 22 May 2009Place of Execution: Changsha
 
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**APPENDIX 5.1**Save as disclosed to the Acquiring Party, each of the Acquired Parties jointly and severallyrepresents and warrants to the Acquiring Party as follows:**1.** **Approval and License from the PRC Regulatory Authorities** (A) All licenses, consents and other permits and approvals of each member of LittleStar Group that are necessary for its establishment, validly existence and theoperation of its current businesses have been obtained and are in full force andeffect. (B) All reports, declaration forms and information relating to the existence andoperation of Little Star Group as required by laws or necessary to be submitted orprovided to any person or competent authorities as a condition for any licenses,consents, permits or approvals have been submitted or provided to the relevant personsor competent authorities, except for those reports, declaration forms and informationthat have not been submitted or provided, which would not have any material adverseeffect on Little Star Group. (C) There are no circumstances where any licenses, consents, permits or approvalsthat are necessary for the continuous operation of each member of Little Star Group maybe modified, revoked or not renewed, or any right of modification or revocation may begiven in such circumstances, save for the circumstances where such modification,revocation or non-renewal is expected not to have any material adverse effect on LittleStar Group.**2.** **Civil Capacity of the Acquired Parties** (A) They have full legal rights, all requisite corporate power and authority, andhave taken all corporate actions required to execute and deliver this Agreement, fullyperform their respective obligations under such documents and to complete thetransaction hereunder. (B) This Agreement, once executed and delivered by the Parties hereto, constitutestheir lawful, valid and binding obligations and is enforceable against them pursuant totheir respective terms. (C) The execution and delivery by the Acquired Parties of this Agreement and theperformance of their respective obligations hereunder will: (i) not violate any provisions of their respective memorandum orarticles of association; and (ii) not violate any legal instrument binding on them nor constitutethe non-performance of their respective obligations under such legalinstruments; and (iii) not violate orders, judgments or decrees of any court orgovernment authorities binding on them; and (iv) not require any consent from shareholders of any of theAcquired Parties, except for those consents that have been obtained.except for the above circumstances which would not affect the performance of theirobligations hereunder.
 
 

 
**3.** **Ownership** (A) Each member of Little Star Group is a limited liability company ornon-enterprise legal person duly incorporated, existing and registered under the lawsof the PRC. It has the right to exercise all civil rights, power and capacity of acompany/non-enterprise legal person, and has passed annual inspections over the years. (B) All capital contribution has been paid towards the registered capital/schoolfund of each member of Little Star Group, and the capital verification in respect thereof has been made in accordance with the applicable PRC Laws and regulations. (C) There are no options, pre-emptive rights, mortgages, pledges, liens or otherforms of guarantees or other rights relating to or created over or affecting all or anypart of the shares of any member of Little Star Group. In addition, there are noagreements or undertakings for the provision or creation of any of the above, nor arethere any persons who claim to be entitled to any of the above interests. (D) There are no outstanding agreements or undertakings requiring the allocation,issue or transfer of any equity of any member of Little Star Group, or granting to anypersons the right to allocate, issue or transfer any equity of any member of LittleStar Group. (E) Save for the members of Little Star Group, Cartoon Digital does not own any shares nor has similar shareholders’ interest in any companies, affiliated companies,offices, branches and other social organizations; nor does it directly or indirectlycontrol or invest nor has any interest in any other entities. (F) Copies of the existing business license/license for non-enterprise legal personand articles of association of each member of Little Star Group that have beensubmitted by the Acquired Parties to the Acquiring Party or its representatives andadvisers on the date of this Agreement are complete and accurate in all respects. (G) Each member of Little Star Group maintains any account books that are necessaryfor its business operation in accordance with applicable PRC laws and regulations, andsuch account books accurately recorded any matters that shall be recorded in theaccount books; Little Star Group has not received any notices or allegations statingthat any of the above records are inaccurate or should be rectified. (H) All documents that shall be submitted by each member of Little Star Group toall the relevant PRC government departments and other competent authoritieshave been properly submitted, save for those documents that have not been submitted,which would not have any material adverse effect on Little Star Group.
 
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**4.** **Accuracy and Sufficiency of Information** (A) All information supplied by the Acquired Parties or Cartoon Digital to theAcquiring Party or its advisers are true, accurate and complete in all respects, andthere are no facts or matters that have not been disclosed to the Acquiring Party orany of its advisers, which would result in any of the information becoming inaccurateor misleading because of omission or ambiguity in terms of meaning or due to any otherreasons. (B) The Acquired Parties and Cartoon Digital have, upon reasonable request from theAcquiring Party or its advisers, provided the Acquiring Party or its advisers with allinformation that can be obtained without paying unreasonable costs within the scope oftheir control for the Acquiring Party to determine whether or not to accept thetransfer of the Target Equity. The written information and public documents providedby Cartoon Digital or/and the Acquired Parties to the Acquiring Party in relation tothis Agreement do not include the misrepresentation or misstatement of material facts,or material facts the omission of which would make any representations contained inthis Agreement or such disclosed documents misleading.**5.** **Accounts** (A) The accounts of each member of Little Start Group: (i) are prepared in accordance with the PRC laws, and theaccounting principles and practices recognized by the PRC and also generallyaccepted by companies which conduct any business that is similar to Little StarGroup (IFRS); (ii) are complete and accurate in all respects, and have made fullprovisions for bad and doubtful debts, obsolete, depreciated and unsaleablestocks and profit taxes (whether they are profits from income or capitalprofits) for any period ending on or prior to the completion date of itsaccounts; (iii) reflect a true and fair view of the state of affairs of eachmember of Little Star Group for each of the financial year ends covered by itsaccounts, and the profits or losses of each member of Little Star Group foreach financial year covered by its accounts; and (iv) are not affected by any extraordinary, exceptional ornon-recurring items, save for any items expressly disclosed in the accounts ofeach member of Little Star Group. (B) On the Accounting Reference Date, Cartoon Digital does not have any liabilitiesthat have not been fully disclosed or provided for in its accounts (whether actual,contingent, undetermined in terms of amount or in dispute) orany outstanding capital commitments, with the exception of those outstanding amountsthat have been settled prior to 30 June 2009.
 
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**6.** **Accounting Records** (A) Each member of Little Star Group maintains proper and consistent accounts,books, ledgers, financial and other records; such accounting records contain the latestinformation, the complete and accurate details of the business activities of eachmember of Little Star Group, and all matters that must be recorded in accordance withthe *Company Law of the People’s Republic of China*and the *Accounting System ofEnterprises of the People’s Republic of China*. (B) Such accounts, books, ledgers, financial and other records, which constitutethe property of Little Star Group, are owned and controlled by Little Star Group, andno notices or allegations stating that any of the above records are inaccurate orshould be rectified have been received. (C) All transactions relating to the Target Business of Little Star Group havebeen recorded in the accounting records of the relevant members of Little Star Group ina proper and timely manner, and no errors or differences of any nature have beenincluded or reflected in such accounts, books, ledgers, financial and other records,and such records truly and accurately reflect the financial situation of Little StarGroup and give explanation of its transactions.**7.** **Events Subsequent to the Accounting Reference Date** (A) Subsequent to the Accounting Reference Date: (i) there has been no material adverse change in the financial oroperating position or prospect of Little Star Group, and to the best ofknowledge of the Acquired Parties, there are no circumstances which would giverise to such kind of change; (ii) Little Star Group has been operating its usual and ordinarybusiness, and operates its business in a manner as before (including the natureand scope of its operation); (iii) no member of Little Star Group has any capital expenditure ofover RMB150,000; (iv) no member of Little Star Group has acquired nor sold any assetson its capital account with a total value of over RMB100,000, nor has it agreedto acquire or sell the assets of this kind. In addition, it has not enteredinto any contracts involving expenditures on capital account; (v) no member of Little Star Group has made any factoringarrangement in respect of its indebtedness or other amount receivables, nor hasit sold or agreed to sell indebtedness or other amount receivables; (vi) Little Star Group has not incurred any indebtedness, guarantee,security , prepayment or amount receivables with a combined value ofover RMB100,000, save for any amount receivables incurred in the ordinarycourse of business;
 
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 (vii) Little Star Group has not incurred any amount receivableswhose single amount exceeds RMB100,000 and whose cumulative amount (the amountreceivables of all members of Little Star Group shall be calculated on aconsolidated basis) exceed RMB500,000 in the ordinary course of business; (viii) no member of Little Star Group has created any mortgage, pledge or otherencumbrance on any assets of Little Star Group; (ix) no member of Little Star Group has invested in any companies orother entities, nor has it formed any joint ventures or merged with anycompanies, natural persons or other entities; (x) no member of Little Star Group has issued any securities,including equity; (xi) no member of Little Star Group has increased the costs of itsemployees, with the exception of the increased costs incurred in accordancewith the rules and regulations currently in force or the relevant laborcontracts; (xii) no member of Little Star Group has provided any loans to anyof its directors, management or other employees, save for any travellingexpenses prepaid in the ordinary course of business pursuant to the rules andregulations of the relevant members of Little Star Group and any amounts thathave been settled in full prior to 30 June 2009; (xiii) no member of Little Star Group has offered price reduction or discountedprice or discount in the provision of its service nor has it provided servicesat a price lower than its costs, which might have material effects on itsprofitability; (xiv) no member of Little Star Group has changed its financial year. (B) No member of Little Star Group has made any commitments which might result inthe Acquired Parties violating this Article 7.**8.** **Contract and Undertakings** (A) Each member of Little Star Group is not a party to, nor does it bear any legalliabilities (whether present or future) in respect of any of the following: (i) any guarantee, indemnification, guarantee relationship orletter of credit; (ii) any contract or arrangement which directly or indirectlyrestricts the freedom of Little Star Group to operate its business around theworld in any manner as it think fits, or directly or indirectly restricts theability of Little Star Group to transfer all or any part of its business;
 
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 (iii) any joint venture agreement or arrangement, partnership rightor obligation for the purpose of profit sharing (but for avoidance of doubts,excluding any arrangement which shares fees or operating income on acase-by-case basis), or any other agreement or arrangement where any members ofLittle Star Group and any other persons jointly participate in any business; (iv) any agreement or arrangement involving any matters that arebeyond the ordinary business scope of Little Star Group, or constitutingcommercial transactions or arrangements that derivate from the usual model ofLittle Star Group; (v) any contract or arrangement in which any directors of anymembers of Little Star Group or its Affiliates have direct or indirectinterest, except for employment contracts; (vi) any contract or arrangement that is not signed in the ordinarycourse of business and involving the expenses or incomes of any members ofLittle Star Group in any financial year which exceed RMB100,000; (vii) any contract or arrangement that is not signed with anyAffiliates or subsidiary enterprises of any members of Little Star Group in theordinary course of business and involving the payment or incomes which exceedRMB100,000; (viii) any contract or arrangement that cannot be terminated by any members ofLittle Star Group by a notice of 3 months or such shorter period without thepayment of any special compensation; or (ix) any contract or arrangement which may be terminated in theevent of any change in the ownership or control of any members of Little StarGroup or will be materially affected due to such change. (B) All members of Little Star Group and the Acquired Parties have not been awareof the violation or invalidity of any material contracts to which any members of LittleStar Group is a party, or any reasons that such contracts be terminated, revoked,abrogated or refused for performance, nor have they been aware of any such allegation,except for the circumstance where a third party to the relevant contracts has not madeany payment. (C) No member of Little Star Group has any outstanding prices or tenders or sale orservice proposals which are of significance to its business and, if accepted, arelikely to result in loss.**9.** **Authorization**Except for the authorization given to employees to enter into contracts for routinetransactions in the course of the performance of their usual duties or to be involved in thebusiness operation and management activities customarily conducted by Little Star Group, nomember of Little Star Group has given nor provided any authorization or other basis ofauthorization that are outstanding or remain effective to any personto enter into any contracts or undertakings on behalf of any members of Little Star Group.
 
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**10.** **Operation**The major customers or suppliers of any members of Little Star Group have not ceased orexpressed their intention to cease their transactions with the relevant members of LittleStar Group, and to the best of knowledge of the Acquired Parties, no major customers orsuppliers of any members of Little Star Group are likely to reduce significantly the numberof their transactions with any members of Little Star Group; to the best of knowledge of theAcquired Parties, the execution or Closing of this Agreement will not have any adverseeffect on the attitude or act of the major customers or suppliers towards any members ofLittle Star Group.Each member of Little Star Group is in compliance with all applicable laws, regulations,government requirements and the relevant permits and licenses during its operation.**11.** **Arrangement between Little Star Group and the Acquired Parties**No member of Little Star Group has agreed to provide guarantee or any security orindemnification in respect of any liabilities or obligations of any of the Acquired Partiesor any persons related to the Acquired Parties.**12.** **Bank Accounts and Loans** (A) No member of Little Star Group has had any outstanding loan capital, nor has itborrowed or agreed to borrow any amount which consequently fail to make repayment or toperform its loan obligations. It is not a party to nor has any obligation relating toany of the following: (i) any loan agreement, debenture, acceptance credit, bill ofexchange, promissory note, finance lease, debt or stock financing, transfer andsale arrangement or sales and leaseback arrangement for discount or accountreceivables; (ii) any other arrangement for the purposes of fund raising or theprovision of fund or credit. (B) No member of Little Star Group holds any shares and securities that are notpaid in full or with any additional liabilities, nor does it have any liabilities inconnection with the above shares or securities. (C) No member of Little Star Group has lent or agreed to lend any amount whichconsequently fail to get back the repayment, nor is it interested in any existing orfuture debts (save for the outstanding amounts and amount receivables between themembers of Little Star Group in the ordinary course of business). (D) No member of Little Star Group has signed any mortgage, guarantee orindemnification contract that is invalid and unenforceable pursuant to its terms.
 
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 (E) There have been no events which would result in the non-performance or breachof any terms of the loan capitals, borrowings, debentures or financing of any membersof Little Star Group, or which would entitle any third parties to demand for repaymentprior to the normal payment date. No persons have alleged the occurrence of suchevents. (F) Subsequent to the Accounting Reference Date, no member of Little Star Group hasborrowed any amount from any source of capital, save for those amount that is borrowedin the ordinary course of business and will not have any material adverse effect on theproduction and operation of any members of Little Star Group. (G) No member of Little Star Group has any indebtedness or amount payables from thefollowing personnel/enterprises: (i) the Acquired Parties; (ii) the directors or senior officers of the members of Little StarGroup; or (iii) the Affiliates or family members (including parents, spouse,brothers and sisters) of the above personnel/entities.**13.** **Working Capital**Each member of Little Star Group has sufficient working capital from internal source to meetits current requirement and to complete any purchase orders, projects and contractualobligations that have been issued to or assumed by it pursuant to the relevant terms.**14.** **Insolvency** (A) No orders nor applications have been made to require for the liquidation of anymembers of Little Star Group; no meetings have been convened for the purpose ofconsidering resolutions for the liquidation of any members of Little Star Group; and nosuch resolutions have been approved. (B) No receiving orders have been made for any members of Little Star Group; nopetitions or applications have been made to require for making such orders; noreceivers have been appointed for any members of Little Star Group; no notices havebeen issued or submitted for the purpose of appointing receivers for any members ofLittle Star Group; and no steps or procedures have been taken or commenced for thepurpose of appointing receivers for any members of Little Star Group. (C) No receivers (including administrative receivers) have been appointed inconnection with all or any assets of any members of Little Star Group. (D) No debt restructuring agreements between any members of Little Star Group andits creditors or proposals of similar arrangement have been put forward.
 
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 (E) There are no valid rights of any members of Little Star Group to delay inmaking payment; no steps or procedures have been taken or commenced for the purpose ofobtaining such right. (F) No events involving any member of Little Star Group that are similar to any ofthe above have been occurred. (G) No member of the Little Star Group is insolvent nor unable to pay debts, nordoes it cease to repay any debts that are due. (H) No judgments against any of the members of Little Star Group have not beenperformed.**15.** **Litigation and Claims** (A) To the best of knowledge of the Acquired Parties, neither any members of LittleStar Group nor the Acquired Parties participate in any prosecutions, arbitrations orother dispute resolution proceedings or administrative or criminal proceedings that arepending and have effects on the major assets and business of Little Star Group in thecapacity of claimant, defendant or other capacity. To the best of knowledge of theAcquired Parties, there are no prosecutions, arbitrations or other dispute resolutionproceedings or administrative or criminal proceedings pending that are brought by oragainst any members of Little Star Group or the Acquired Parties, or threatened to bebrought by any members of Little Star Group or threatened to be brought by othersagainst any members of Little Star Group or the Acquired Parties or expected to bebrought by or against any members of Little Star Group or the Acquired Parties. To thebest of knowledge of the Acquired Parties, there are no facts or circumstances whichmight give rise to any prosecutions, arbitrations, mediation or administrative orcriminal proceedings. (B) To the best of knowledge of the Acquired Parties, neither any members of LittleStar Group nor the Acquired Parties have received any written notices in relation toany investigations or enquiries into the affairs of any members of Little Star Group orthe Acquired Parties that are being made or have been made by any government or otherauthorities, in particular (but not limited to) any matters in the areas ofenvironmental protection, public health, safety, labor and publication. The existingshareholders are not aware of any situations which would give rise to such formalinvestigations or enquiries.If any matters occurred as of the Closing Date give rise to any dispute with anyrelevant authorities over the matters of environmental protection, public health,safety, labor and publication and other relevant laws and regulations, the AcquiredParties agree to compensate Little Star Group immediately for all costs inconnection with the settlement of such disputes, including any interests and finesthat are imposed, and the Acquired Parties hereby agree to assume the joint andseveral liabilities in respect thereof.
 
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 (C) No member of Little Star Group has committed any criminal, illegal, unlawful orunauthorized acts, nor has it breached any obligations or liabilities prescribed by orarising from regulations, contracts or otherwise; it does nothave any legal liabilities involving the above acts or breaches, nor any claimspending that are against any members of Little Star Group or the Acquired Parties,save for those claims which would not have material adverse effects on theproduction and operation of Little Star Group.If any matters occurred due to the reasons of the Acquired Parties as of the ClosingDate give rise to any claims or disputes relating to such violations or breaches,the Acquired Parties agree to compensate Little Star Group immediately for allexpenses and losses in connection with the settlement of such claims or disputes. (D) No member of Little Star Group has produced, sold or provided any products orservices that fail to meet all applicable laws, regulations or standards or aredefective or hazardous or do not meet any expressed representations or warranties.If any matters occurred due to the reasons of the Acquired Parties as of the ClosingDate give rise to any claims or disputes relating to such violations or breaches,the Acquired Parties agree to compensate Little Star Group immediately for allexpenses and losses in connection with the settlement of such claims or disputes.**16.** **Ownership and Status of Assets** (A) The assets of each member of Little Star Group that are necessary for use inthe course of the operation of the Target Business have been included in its account. (B) Each member of Little Star Group is the legal and beneficial owner of eachasset contained in its account or obtained by it after the Accounting Reference Date(save for the current assets sold, disposed of or used in the ordinary course ofbusiness); such assets are not subject to any third parties’ rights (including but notlimited to encumbrances such as mortgage, pledge and lien) and each asset that can bepossessed is possessed by the relevant members of Little Star Group. (C) Each member of Little Star Group has the ownership of all land use rights,buildings and fixed assets that are reflected in its balance sheets as assets and thereare no mortgages, pledges or liens created over them. Such land use rights, buildingsand fixed assets are properly registered with the registration office of the relevantgovernment authorities under the name of the relevant members of Little Star Group inaccordance with the relevant laws and regulations. (D) Save as disclosed by the Acquired Parties, any member of Little Star Group hasthe titles to any real property, personal property and assets used by it in itsbusiness that are good, merchantiable and free from any encumbrances. Any entitiesunder Little Star Group have paid in full all land premiums pursuant to applicablelaws, and the lands owned by it are not farmlands specified in the relevant PRC Laws.
 
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 (E) All non self-owned lands, buildings and fixed assets being used by any membersof Little Star Group are leased in accordance with valid leases. All such leases arelawful and valid. No member of Little Star Group has violated such leases or committedany faults thereunder. (F) There are no options, pre-emptive rights, mortgages, pledges, liens (except forany liens legally created in the ordinary course of business) or other forms ofguarantees or third parties’ rights relating to or created over or affecting all or anypart of the business or assets of any members of Little Star Group. There are also noagreements or undertakings for the provision or creation of any of the above, nor arethere any persons who claim to be entitled to any of the above interests. (G) All vehicles and office equipment used by each member of Little Star Group inrelation to its business are repaired and maintained properly and operated normally,and can be used for the business of Little Star Group.**17.** **Intellectual Property Rights** (A) No member of Little Star Group use any name other than the name shown in itsbusiness license/license for non-enterprise legal person. (B) Each member of Little Star Group owns or has the right to use any intellectualproperty rights and business information that are being used for the Target Business orthat are necessary to meet the requirements of current plans and proposals. (C) All fees and steps in connection with the renewal, application and other formalregistration that are necessary for the maintenance, protection and enforcement ofintellectual property rights of each member of Little Star Group have been paid oradopted, or will be paid or adopted according to plans. (D) The intellectual property rights owned by each member of Little Star Group arevalid, existing and enforceable, and are not subject to any mortgages, options, thirdparties’ rights or other rights. (E) All permits involving intellectual property rights and business information,and all agreements entered into by each member of Little Star Group in relation theretowill not be terminated due to the change of ownership or control of Cartoon Digital. (F) None of the members of Little Star Group and, to the best of knowledge of theAcquired Parties, any third parties violate any permits or agreements which arecurrently used for the purpose of the business, and which are of significance to theTarget Business and relate to any intellectual property rights. (G) No member of Little Star Group is under the obligation to grant any licenses orsub-licenses or to make transfer in respect of any intellectual property rights orbusiness information owned or used by it.
 
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 (H) To the best of knowledge of the Acquired Parties, no third parties areinfringing or using without authorization or have infringed or used withoutauthorization any intellectual property rights or business information owned or used byany of the members of Little Star Group. (I) No activities, business information and intellectual property rights of eachmember of Little Star Group constitute and have constituted any infringement orunauthorized use of third parties’ intellectual property rights or businessinformation. (J) The intellectual property rights and business information of any member ofLittle Star Group are not the subject of any litigations, objections or administrativeproceedings. (K) To the best of knowledge of the Acquired Parties, the Confidential Informationof Little Star Group has not been disclosed or otherwise made known to any thirdparties without requiring the third parties to perform the obligation ofconfidentiality. (L) Any member of Little Star Group is not a party to any confidentiality or otheragreement that restricts the freedom to use or the disclosure of its businessinformation, nor does it assume any obligations that restrict the freedom to use or thedisclosure of its business information, which might have material adverse effect on thebusiness of Little Star Group. (M) The operation of Little Star Group does not give rise to the obligations to payany fees for using intellectual property right or similar payment.**18.** **Information Technologies** (A) Little Star Group is the sole legal and beneficial owner of all its informationtechnologies. Such information technologies are not subject to any liens, mortgages,third parties’ rights or other rights. (B) All information technologies owned or used by Little Star Group or in the nameof any members of Little Star Group are in good operating conditions, and have beenmaintained in accordance with good industry practices. (C) The information technologies and domains owned or used by Little Star Group arenot the subject of any litigations or other disputes or claims. To the best ofknowledge of the Acquired Parties, no litigations, disputes or claims in relation toany information technologies or domains owned or used by Little Star Group are expectedor likely to occur. (D) The business or operation of Little Star Group has not been materiallyinterfered due to one of the following events: (a) any breach of the securityregulations relating to any information technologies, (b) malfunction of anyinformation technologies (whether it is due to any breakdown, virus, defects or otherreasons), insufficient capacity, or failure to meet the required standards in otheraspects, or (c) malfunction, interruption or defective operation of any informationtechnologies due to the occurrence or processing of one or moredates. There exists no circumstances which are likely or expected to give rise toany such interference.
 
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 (E) Little Star Group is the legal and beneficial owner of all informationtechnologies and business information that are necessary or required for the operationof its business in a manner used currently or at any time within one year prior to thedate of this Agreement, and for the performance or implementation of any existingcontracts, undertakings, plans or proposals, or the party which has the contractualrights to use such information technologies; such contractual rights will not bedirectly or indirectly affected due to any transaction contemplated under thisAgreement. (F) Little Star Group has not disclosed any source programs to any third parties;no source programs relating to proprietary software have been disclosed or otherwisemade known to any third parties. (G) Little Star Group is not a party to any agreements or arrangements thatrestrict the freedom to use or the disclosure of any source programs relating to anyproprietary software, nor does it assume any obligations that restrict the freedom touse or the disclosure of any source programs relating to any proprietary software.**19.** **Employees** (A) Little Star Group does not have any employees who have not been disclosed tothe Acquiring Party. (B) Subsequent to the Accounting Reference Date, no change has been made to thecompensation of any senior employees of the company or its subsidiaries or otheremployment terms. (C) There are no circumstances in any members of Little Star Group that itsemployees or directors are entitled to receive an annual remuneration of overRMB500,000 (including wages, bonus or other benefits) or (if the amount of remunerationis not fixed) an annual remuneration of over RMB500,000 on average for the past threefinancial years. (D) All employees of any members of Little Star Group have not made any claims inrespect of any intellectual property rights pertaining to the Target Business orrelating to any teaching materials sold by any members of Little Star Group (includingbut not limited to teaching materials that have been, is being and will be sold). Inaddition, to the best of knowledge of the Acquired Parties, there will not have anyemployees who make such claims. (E) No disputes exist nor are there any outstanding or possible disputes betweenany members of Little Star Group and any trade unions or other organizations that areformed for similar purposes. Moreover, no member of Little Star Group is a party toany collective bargaining agreements or other arrangements (whether they are binding ornot).
 
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 (F) There are no acts or circumstances of any members of Little Star Group whichare in violation of the laws and regulations with regard to labor, employment andsocial security. (G) To the best of knowledge of the Acquired Parties, no employees or otherpersonnel (whether existing or former) threaten to make any claims against any membersof Little Star Group, nor do any other persons threaten to make any claims against anymembers of Little Star Group in respect of any employees or other personnel (whetherexisting or former), for any accidents, injuries, unpaid salaries, overtime pay,severance payment, contributions to social security funds, holidays or any othermatters resulting or arising from the employment or engagement by any members of LittleStar Group of such employees or other personnel (whether existing or former). Inaddition, there are no outstanding claims of this kind.**20.** **Taxation** (A) Each member of Little Star Group has legally submitted all tax returns thatshall be submitted by it in accordance with the requirements of the relevant taxationauthorities, and such tax returns are complete and correct in all material respects.Each member of Little Star Group has legally paid all taxes payable (whether they areshown in tax returns) or made appropriate provisions in its financial statements inaccordance with the requirements of the relevant taxation authorities. There are notax guarantees which are ordered by the relevant taxation authorities to provide forany assets or property of each member of Little Star Group, save for those guaranteesrelating to payable taxes that are outstanding. Each member of Little Star Group meetsthe requirements of the relevant taxation authorities that are applicable to it or itsbusiness (including but not limited to any conditions of preferential tax treatmentgranted); and to the best of knowledge of the Acquired Parties, no governments orregulatory authorities will impose or have reasons to impose on any members of LittleStar Group any additional taxes for the period for which tax returns are or have beenrequired to submit. No member of Little Star Group has: (i) any disputes or complaints relating to any tax liabilities thathave been asserted or put forward by any governments or regulatory authorities;or (ii) to the best of knowledge of the Acquired Parties, any warningconcerning the disputes or complaints of any tax liabilities as reasonablyexpected. (B) On the Accounting Reference Date, the provisions made for the deferred tax ofeach member of Little Star Group in its account are sufficient and in fully compliancewith the accounting practices recognized by the PRC and also generally accepted bycompanies or organizations which conduct any business that is similar to Little StarGroup. (C) If all facts and circumstances currently known to any members of Little StarGroup or the Acquired Parties are the publicly known facts and circumstancesat the time of the preparation of accounts, the provisions made for the deferred taxin the corresponding accounts shall not be greater than those provisions that havecurrently been made.
 
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**21.** **Tax Declaration, Disputes, Records and Requests** (A) Each member of Little Star Group has submitted and provided to any taxationauthorities all appropriate tax returns and information required by them by itself orthrough others. (B) As at the date of this Agreement, there are no tax obligations of Little StarGroup that are outstanding or, to the best of knowledge of the Acquired Parties, areexpected to occur, which would allow any taxation authorities to recover from anymembers of Little Star Group any taxes (including fines or interests), nor are thereany disputes or disagreements with any taxation authorities regarding the provision ofany preferential tax treatments to any members of Little Star Group, and there are nocircumstances which are likely to give rise to any such disputes or disagreements.**22.** **Insurance**To the best of knowledge of the Acquired Parties, all major assets of Little Star Group thatcan be and are required to be insured pursuant to the industry practices (which specificallyrefer to real estate and vehicles) have been insured against those risks that shallgenerally be insured in accordance with applicable PRC Laws and the industry practices.**23.** **Incentive Mechanism**There are no share options or other similar performance-based incentive arrangements(including stock appreciation right schemes) for any employees (or former employees) ordirectors (or former directors) or advisers (or former advisers) or contractors (or formercontractors) of any members of Little Star Group, nor are there any arrangements affectingany such personnel.**24.** **No State-owned Assets**Little Star Group does not have any state-owned assets, and therefore are not required tocarry out the evaluation of state-owned assets in any form as required by the PRC Laws andregulation for the purpose of facilitating the completion of the transaction.**25.** **No Undisclosed Business**Little Star Group has not conducted any business that has not been disclosed to theAcquiring Party.**26.** **Commercial Practices in Compliance with Laws**None of the Acquired Parties, all members of Little Star Group, their Affiliates and anyother persons who act for the above Parties (i) willfully violate any applicable laws andorders; and (ii) make any inappropriate payment to government officers to obtain anycommercial benefits or advantages in respect of the transaction under thisAgreement or other matters.
 
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