Exhibit 10.26


 


Execution Copy


 


SHARE
PURCHASE AND SALE AGREEMENT


 


by and among


 


CHINACACHE INTERNATIONAL HOLDINGS
LTD.


 


JNET
HOLDINGS LIMITED


 


SUNDREAM
HOLDINGS LIMITED


 


SMART
ASIA HOLDINGS LIMITED


 


SHANGHAI
JNET TELCOM CO., LTD.




 


and


 


CHEN
PEIDI




 


MEI YONGKAI




 


LU JUN




 


ZHANG
SHIJIE




 


HAN
DANHUA




 


MEI
XIURONG 




 


Dated:  December 20, 2007


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  PURCHASE AND SALE OF COMPANY SHARES

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Purchase and Sale of Company Shares

  	
  2

  
	
   

  	
  1.2

  	
  Purchase Consideration and
  Payment Schedule

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  CLOSING

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Closing

  	
  8

  
	
   

  	
  2.2

  	
  Deliveries by Sellers to Buyer

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND WARRANTIES OF SELLERS, SHANGHAI JNET, COMPANY, AND SHAREHOLDERS

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Organization, Power and Authority

  	
  10

  
	
   

  	
  3.2

  	
  Authorization; Validity of
  Agreement

  	
  10

  
	
   

  	
  3.3

  	
  Capitalization of Company and Shanghai JNET

  	
  10

  
	
   

  	
  3.4

  	
  Subsidiaries and Investments

  	
  11

  
	
   

  	
  3.5

  	
  Consents and Compliance

  	
  11

  
	
   

  	
  3.6

  	
  No Conflict

  	
  12

  
	
   

  	
  3.7

  	
  Title to Shares

  	
  13

  
	
   

  	
  3.8

  	
  Financial Statements

  	
  13

  
	
   

  	
  3.9

  	
  Absence of Certain Changes

  	
  14

  
	
   

  	
  3.10

  	
  Litigation

  	
  14

  
	
   

  	
  3.11

  	
  Tangible and Intangible Property Other Than Intellectual
  Property

  	
  14

  
	
   

  	
  3.12

  	
  Condition and Adequacy of Tangible Property

  	
  15

  
	
   

  	
  3.13

  	
  Intellectual Property

  	
  15

  
	
   

  	
  3.14

  	
  Contracts

  	
  19

  
	
   

  	
  3.15

  	
  Assets and Title

  	
  20

  
	
   

  	
  3.16

  	
  Environmental Matters

  	
  21

  
	
   

  	
  3.17

  	
  Labor and Employment Matters

  	
  21

  
	
   

  	
  3.18

  	
  Employee Benefits

  	
  22

  
	
   

  	
  3.19

  	
  Absence of Corrupt Practices

  	
  23

  
	
   

  	
  3.20

  	
  Taxes

  	
  24

  
	
   

  	
  3.21

  	
  Representations of the Sellers and the Shareholders

  	
  25

  
	
   

  	
  3.22

  	
  Disclosure of Information

  	
  26

  
	
   

  	
  3.23

  	
  Other Representations and Warranties Relating to Shanghai JNET

  	
  26

  
	
   

  	
  3.24

  	
  Other Representations and Warranties Relating to the Shareholders

  	
  28

  
	
   

  	
  3.25

  	
  Other Representations and Warranties Relating to the PRC Restructuring

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES OF THE BUYER

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Corporate Existence and Good Standing

  	
  29

  
	
   

  	
  4.2

  	
  Authorization; Validity of Agreement

  	
  29

  
	
   

  	
  4.3

  	
  Purchase Consideration

  	
  29

  



 


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TABLE OF CONTENTS


(cont’d)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  5.

  	
  COVENANTS AND UNDERTAKINGS

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Compliance by the Company,
  Shanghai JNET and the Shareholders

  	
  30

  
	
   

  	
  5.2

  	
  PRC Restructuring and Financial
  Achievements

  	
  30

  
	
   

  	
  5.3

  	
  Termination of Shanghai He Shuo
  and Shanghai Chuan Wang

  	
  31

  
	
   

  	
  5.4

  	
  No Material Adverse Effect

  	
  31

  
	
   

  	
  5.5

  	
  Covenants Not to Compete

  	
  31

  
	
   

  	
  5.6

  	
  Licenses and Certificates

  	
  32

  
	
   

  	
  5.7

  	
  Information Access for Due Diligence

  	
  32

  
	
   

  	
  5.8

  	
  Actions Pending Closing

  	
  32

  
	
   

  	
  5.9

  	
  Notice of Material Changes

  	
  34

  
	
   

  	
  5.10

  	
  Exclusiveness

  	
  34

  
	
   

  	
  5.11

  	
  Public Announcements

  	
  35

  
	
   

  	
  5.12

  	
  Use of Purchase Consideration

  	
  35

  
	
   

  	
  5.13

  	
  Offset Right

  	
  35

  
	
   

  	
  5.14

  	
  Incentives to the Shareholders

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  TAX MATTERS

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Tax Returns and Payments

  	
  35

  
	
   

  	
  6.2

  	
  Refunds

  	
  36

  
	
   

  	
  6.3

  	
  Tax on Purchase Consideration

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  CONDITIONS PRECEDENT TO OBLIGATIONS

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Conditions Precedent to Buyer’s Obligations

  	
  36

  
	
   

  	
  7.2

  	
  Conditions Precedent to the Sellers’ Obligations

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  INDEMNIFICATION

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Indemnification by the Sellers and Shareholders

  	
  41

  
	
   

  	
  8.2

  	
  Indemnification Procedure

  	
  42

  
	
   

  	
  8.3

  	
  Definition of Loss

  	
  43

  
	
   

  	
  8.4

  	
  Survival of Representations and Warranties and Indemnity
  Obligations

  	
  43

  
	
   

  	
  8.5

  	
  Other Damages

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  MISCELLANEOUS

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Expenses

  	
  44

  
	
   

  	
  9.2

  	
  Notices

  	
  44

  
	
   

  	
  9.3

  	
  Amendment; Waiver

  	
  45

  
	
   

  	
  9.4

  	
  Successors

  	
  45

  
	
   

  	
  9.5

  	
  Entire Agreement

  	
  45

  



 


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TABLE OF CONTENTS


(cont’d)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
  Governing Law

  	
  46

  
	
   

  	
  9.7

  	
  Counterparts

  	
  46

  
	
   

  	
  9.8

  	
  Headings

  	
  46

  
	
   

  	
  9.9

  	
  Termination of Agreement

  	
  46

  
	
   

  	
  9.10

  	
  Confidentiality

  	
  47

  
	
   

  	
  9.11

  	
  Arbitration

  	
  47

  



 


	
   

  	
  SCHEDULE 1 List of Sellers

  	
   

  
	
   

  	
  SCHEDULE 2 Purchase Consideration

  	
   

  
	
   

  	
  EXHIBIT A Disclosure Schedule

  	
   

  
	
   

  	
  EXHIBIT B Existing Control Documents

  	
   

  
	
   

  	
  EXHIBIT C Deed of Adherence

  	
   

  
	
   

  	
  EXHIBIT D Transferred Personnel

  	
   

  



 


iii






 










 


SHARE PURCHASE
AND SALE AGREEMENT


 


THIS
SHARE PURCHASE AND SALE AGREEMENT
(this “Agreement”) is entered into as of December 20, 2007
in the People’s Republic of China (the “PRC” or “China”) by and among the following parties:


 


(1)           CHINACACHE
INTERNATIONAL HOLDINGS LTD. (the “Buyer”),  a company duly incorporated and existing under the laws of the Cayman Islands whose registered address is at the offices of Offshore
Incorporations (Cayman) Limited, Scotia Centre, 4th Floor, P.O. Box 2804,
George Town, Grand Cayman, Cayman Islands;


 


(2)           JNET
HOLDINGS LIMITED  (the “Company”), a company duly
incorporated and existing under the laws of the British Virgin Islands whose registered address is at P.O. Box
957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands;


 


(3)           Shareholders
of the Company listed on Schedule 1 hereto, each a British Virgin Islands corporation (collectively the “Sellers” and individually, a “Seller”);


 


(4)           SHANGHAI
JNET TELCOM CO., LTD.  (“Shanghai JNET”), a
limited liability company duly incorporated and existing under the laws of the
PRC whose registered address is at Suite 221, No. 728 Guanghua Road,
Minhang District, Shanghai;


 


(5)           CHEN PEIDI  ,  a
PRC citizen whose ID card No. is 330622490421004, MEI YONGKAI ,
a PRC citizen whose ID card No. is 330622750103001, LU JUN ,
a PRC citizen whose ID card No. is 310105196909290415, MEI Xiurong ,
a PRC citizen whose ID card No. is            ,
ZHANG SHIJIE ,
a PRC citizen whose ID card No. is            ,
and HAN DANHUA ,
a PRC citizen whose ID card No. is            
(collectively the “Shareholders” and each, a “Shareholder”).


 


WHEREAS,
as of the date of this Agreement, the
Company is authorized to issue an aggregate of 50,000 ordinary shares with a
par value of US$1.00 each.  The Sellers are the
legal and beneficiary owners  of an aggregate
of 10,000 ordinary shares of the Company, par value US$1.00 each (the “Company Shares”), which constitute  100% of the issued and outstanding shares of the
Company.  The numbers of Company Shares
held by each of the Sellers are as set forth on Schedule 1
hereto.


 


WHEREAS,
as of the date of this Agreement, CHEN Peidi
is the registered owner of 100% of the equity interests of Shanghai JNET (the “Domestic
Interests”).


 

















 


WHEREAS, Shanghai He Shuo Telecommunication
Technology Co., Ltd.  (“Shanghai He Shuo”) is a limited
liability company duly incorporated in the PRC. 
Mei Yongkai, Lu Jun and Han Danhua collectively own 100% of the equity
interests of Shanghai He Shuo. Shanghai Chuan Wang Telecommunication Technology
Co., Ltd.  (“Shanghai Chuan Wang”) is a limited
liability company duly incorporated in the PRC. Mei Yongkai and Zhang Shijie
collectively own 100% of the equity interest of Shanghai Chuan Wang.  Pursuant to this Agreement, Shanghai He Shuo
and Shanghai Chuan Wang will transfer certain assets, properties, and the
rights and obligations under certain contracts to Shanghai JNET before the
Closing (as defined in Section 2.1). 
For the purpose of this Agreement, the Company, Shanghai JNET, Shanghai
He Shuo and Shanghai Chuan Wang shall be hereinafter collectively referred to
as the “Group Companies” and each a “Group Company”.


 


WHEREAS, the business of the Company and Shanghai
JNET shall include the lease of Internet broadband, provision of Internet
access services and IDC services and other business as approved by the board of
directors of the Company from time to time (the “Principal Business”).


 


WHEREAS, the
Buyer desires to purchase from the
Sellers, and the Sellers desire to sell
to the Buyer, subject to the terms
and conditions set forth in this Agreement, the total amount of Company Shares owned by the Sellers.


 


NOW,
THEREFORE, in consideration of the mutual agreements, representations and
warranties contained herein, and subject to the conditions contained herein,
the parties hereto hereby agree as follows:


 


1.             PURCHASE
AND SALE OF COMPANY SHARES.


 


1.1          Purchase
and Sale of Company Shares.


 


Subject
to the terms and conditions hereof, the
Sellers  hereby agree to sell, transfer and assign to
the Buyer, and the Buyer hereby agrees to purchase and acquire from the Sellers,
a total of 10,000 Company Shares, free and clear of all liens,
claims and encumbrances of any kind or character whatsoever, with the respective amount of Company Shares to be sold by each Seller
as set forth opposite such Seller’s name in Schedule 1.


 


1.2          Purchase
Consideration and Payment Schedule.


 


1.2.1            In
consideration of the  sale and transfer of the  Company Shares and taking into account the
after-tax profits of Shanghai JNET between January 1, 2007 and July 31,
2007 and the forecasted after-tax profits of the Company and Shanghai JNET
between August 1, 2007 and December 31, 2007, the Buyer agrees to pay to the Sellers a purchase price in the
aggregate amount of US$20,666,667 (the “Purchase Consideration”),
provided such amount of Purchase Consideration (as well as the Cash
Consideration and Share Consideration set forth in Sections  1.2.2 and 1.2.3) shall be subject to the
adjustment set forth in Section 1.2.4.


 


2

















 


1.2.2            The
Purchase Consideration shall be paid to the Sellers in accordance with the
schedule set forth in Section 1.2.3 and in the form of cash and ordinary
shares of the Buyer as follows:


 


(i)        US$6,200,000
accounting for 30% of the Purchase Consideration, shall be paid in the form of  ordinary shares of
the  Buyer with a par value of US$0.0001
each (the “Ordinary Shares”), representing approximately US$1.02952 per
share based on the current valuation of the Buyer
of US$250,000,000 (the “Share Consideration”);


 


(ii)       US$14,466,667,
accounting for 70% of the Purchase Consideration, shall be paid in cash (the “Cash
Consideration”) to the bank accounts designated by the Sellers.


 


The
respective portion of Share Consideration and Cash  Consideration to
be allocated to each of the Sellers
are as set forth in Schedule 2 hereto. Sundream Holdings Limited will
obtain 90% of the Purchase Consideration and Smart Asia Holdings Limited will
obtain 10% of the Purchase Consideration.


 


1.2.3            Schedule
of Payment


 


1.2.3.1             Deposit: Within ten (10) business days after the date of execution of this
Agreement, the Buyer shall pay to the Sellers a total of US$400,000, as deposit
for the transaction described hereunder (the “Deposit”), provided
that (A) each of the Sellers shall have provided the bank account
detail to the Company for such Deposit within three (3) business days
after the date of execution of this Agreement, (B) if the Closing (as
defined in Section 2.1) has not occurred  within
six (6) months from the date of this Agreement (unless otherwise mutually
agreed by the Sellers and the Buyer) and such failure of Closing is caused by
the default of the Sellers or if the Agreement is terminated before the Closing
for any reason stated in Section 9.9.2, then the Sellers shall return to
the Buyer an amount equals to two times of the Deposit within ten (10) business
days after the expiry date of the six (6) months period; if the Agreement
is terminated before the Closing Date for any other reason stated in Section 9.9,
the Sellers shall return to the Buyer the full amount of the Deposit; if the
Agreement is terminated before the Closing solely due to  the default of the Buyer, the Sellers will
not return the Deposit to the Buyer.


 


1.2.3.2             Closing
Payment: after all the conditions set forth in Section 7.1
have been completed to the satisfaction of, or waived by, the Buyer, the Buyer
shall pay to the Sellers a total of US$8,266,667 within thirty (30) days after
the Closing Date (provided that before payment, the Buyer shall deduct the
Deposit from such amount), of which the net of US$5,786,667 (accounting for 40%
of the Cash Consideration) minus the Deposit of US$400,000 as paid in process
of execution of Section 1.2.3.1 shall be paid in cash by wire
transfer of immediately available funds to the accounts designated by the Sellers, and the remaining US$2,480,000 (accounting for 40% of the Share
Consideration) shall be paid by issuing a total of 2,408,890 Ordinary Shares to
the Sellers, provided that the following pre-conditions (the “Additional
Conditions”) shall have been satisfied before the payment of the Share
Consideration:


 


3

















 


(i)            Each of the Sellers
and Shareholders shall have entered into a Deed of Adherence, in the form attached hereto as Exhibit C, with the Buyer and other ancillary documents in relation to the
issuance of the Ordinary
Shares.  Each Seller shall
have delivered to the Buyer an application
letter for the allotment of the Ordinary Shares; and


 


(ii)           Within
such thirty (30) day period the Shareholders shall have performed their
obligations under Section 5.2(iii) and (iv) on continuous basis.


 


1.2.3.3             Second Payment:
if by April 15, 2008 (or any other time when the Price Adjustment set
forth in Section 1.2.4 for the year 2007 has been completed) each of the
Additional Conditions has been completed to the satisfaction of, or waived by,
the Buyer, then the Buyer shall pay to the Sellers a total of US$4,133,333
within thirty (30) days, of which US$2,893,333 (accounting for 20% of the Cash
Consideration) shall be paid by cash by wire transfer of
immediately available funds to the accounts designated by the Sellers, and the remaining
US$1,240,000 (accounting for 20% of the Share Consideration) shall be paid by
issuing a total of 1,204,445 Ordinary Share to the Sellers, provided that each
Seller shall execute a Deed of Adherence for the allotment of its share of the
Ordinary Shares.  The parties understand
that the Second Payment shall be made after the Price Adjustment has been
determined in accordance with Section 1.2.4, therefore at the time of
payment the amount of Cash Consideration and Share Consideration set forth in
this Section 1.2.3.3 may be adjusted.


 


1.2.3.4             Third Payment:
if by April 15, 2009 (or any other time when the Price Adjustment set
forth in Section 1.2.4 for the year 2008 has been completed), each of the
Additional Conditions has been completed to the satisfaction of, or waived by,
the Buyer, then the Buyer shall pay to the Sellers a total of US$4,133,333 within thirty
(30) days, of which US$2,893,333 (accounting for 20%
of the Cash Consideration) shall be paid by cash by wire transfer of
immediately available funds to the accounts designated by the Sellers, and the remaining
US$1,240,000 (accounting for 20% of the Share Consideration) shall be paid by
issuing a total of 1,204,445 Ordinary Share to the Sellers, provided that each
Seller shall execute a Deed of Adherence for the allotment of its share of the
Ordinary Shares.  The parties understand
that the Third Payment shall be made after the Price Adjustment has been
determined in accordance with Section 1.2.4, therefore at the time of
payment the amount of Cash Consideration and Share Consideration set forth in
this Section 1.2.3.4 may be adjusted.


 


1.2.3.5             Fourth Payment:
if by December 31, 2009 each of the Additional Conditions has been
completed to the satisfaction of, or waived by, the Buyer, then the Buyer shall
pay to the Sellers a total of US$4,133,334 within thirty (30) days, of which US$2,893,334 (accounting for 20% of the Cash Consideration)
shall be paid by cash by wire transfer of immediately available funds to
the accounts designated by the Sellers, and the remaining
US$1,240,000 (accounting for 20% of the Share Consideration) shall be paid by
issuing a total of 1,204,445 Ordinary Share to the Sellers, provided that each
Seller shall execute a Deed of Adherence for the allotment of its share of the
Ordinary Shares. The parties understand that the Fourth Payment shall be made
after the Price Adjustment has been determined in accordance with Section 1.2.4,
therefore at the time of payment the amount of Cash Consideration and Share
Consideration set forth in this Section 1.2.3.5 may be adjusted.


 


4

















 


1.2.4            Adjustment
to Purchase Consideration and Payment Schedule


 


1.2.4.1             Adjustment to Purchase Consideration: The parties acknowledge that the Purchase Consideration set forth in
Sections 1.2.1, 1.2.2 and 1.2.3 is calculated based on the sum of (i) the
after-tax profits of Shanghai JNET between January 1, 2007 and July 31,
2007 pursuant to the due diligence investigation report issued by the
independent auditor engaged by the Buyer, and (ii) the forecasted
after-tax profits of the Company and Shanghai JNET between August 1, 2007
and December 31, 2007 mutually accepted by the Buyer, the Sellers and the
Company, taking consideration of basic 5 time of PE.  The parties agree that the amount of Purchase
Consideration shall be adjusted based on the annual audited after-tax profits
of Shanghai JNET for the year 2007 and year 2008 (the “Price Adjustment”),
as follows:


 


(i)            if the annual after-tax profits of Shanghai JNET for the year 2007 (as
of December 31, 2007), as calculated based on the audit report issued in
accordance with U.S. GAAP (referred to as a sets of Generally Accepted
Accounting Principles in the United States) by the independent auditor engaged
by the Buyer (the “2007 Profit”), equals to or exceeds RMB 31,000,000,
then the amount of Purchase Consideration shall be adjusted to 5.25 times the
aforesaid audited 2007 Profit, provided that in no event shall the maximum
amount of Purchase Consideration exceed RMB 245,000,000; and


 


if the 2007 Profit, is
less than RMB 31,000,000, then the amount of Purchase Consideration shall be
adjusted to 4.75 times the aforesaid audited 2007 Profit, provided that in no
event shall the maximum amount of Purchase Consideration exceed RMB
245,000,000; and


 


(ii)           if the annual after-tax profits of Shanghai JNET for the year 2008 (as
of December 31, 2008), as calculated based on the audit report issued in
accordance with U.S.GAAP by the independent auditor engaged by the Buyer (the “2008
Profit”), equals to or exceeds RMB 45,000,000, then the amount of Purchase
Consideration shall be adjusted to 5.25 times the aforesaid audited 2007
Profit, provided that in no event shall the maximum amount of Purchase
Consideration exceed RMB 245,000,000.


 


if the 2008 Profit, is
less than RMB 45,000,000, but larger than the 2007 Profit, then the amount of
Purchase Consideration shall be adjusted to 4.75 times the aforesaid audited
2007 Profit, provided that in no event shall the maximum amount of Purchase
Consideration exceed RMB 245,000,000.


 


if the 2008 Profit is
less than the 2007 Profit, but larger than amount of 75% of 2007 the Profit,
then the amount of Purchase Consideration shall be adjusted to 4.5 times the
aforesaid audited 2007 Profit, provided that in no event shall the maximum
amount of Purchase Consideration exceed RMB 245,000,000, provided that in no
event shall the maximum amount of Purchase Consideration exceed RMB
245,000,000.


 


(iii)              if the 2007 Profit is higher than RMB 31,000,000 AND the 2008 Profit is
higher than RMB 45,000,000, then the amount of Purchase 


 


5

















 


Consideration shall be equal to 5.25 times
aforesaid audited 2007 Profit, provided that in no event shall the maximum
amount of Purchase Consideration exceed RMB 245,000,000.


 


if the 2007 Profit is
lower than RMB 31,000,000 OR the 2008 Profit is lower than RMB 45,000,000, then
the amount of Purchase Consideration shall be the average amount of the
Purchase Consideration calculated based on the 2007 Profit and 2008 Profit,
provided that in no event shall the maximum amount of Purchase Consideration
exceed RMB 245,000,000.


 


In any events, if the
2008 Profit is less than amount of 75% of the 2007 Profit, but larger than
amount of 50% of 2007 Profit, then the amount of Purchase Consideration shall
be adjusted to 3.5 times the aforesaid audited 2007 Profit, provided that in no
event shall the maximum amount of Purchase Consideration exceed RMB
245,000,000, provided that in no event shall the maximum amount of Purchase
Consideration exceed RMB 245,000,000.


 


(iv)              The
parties further agree that if at any time after the date of this Agreement,
Shanghai JNET is required by any competent government authorities to make up
tax payment in connection with its revenue, transaction or other business
incurred conducted before the Closing Date, such amount of the tax payment
shall be deducted from the Cash Consideration and may be offset against the
unpaid Cash Consideration.


 


The Buyer agrees to
engage an independent auditor for the auditing work described above within one (1) month
following the end of each fiscal year.


 


1.2.4.2             Deduction:
Before an actual payment is made, the Purchase Consideration mentioned in
Sections 1.2.1, 1.2.2 and 1.2.4.1 shall be subject to deduction of (i) all
dividends and distribution from the distributable profits of Shanghai JNET in
2007 paid to the Sellers and/or the Shareholders before the Closing Date (as
defined in Section 2.1), and (ii) all of the loans made by the
Shareholders to Shanghai JNET.


 


1.2.4.3             Foreign Exchange:  The Purchase Consideration, which is
calculated based on the after-tax profits of Shanghai JNET in the currency of
RMB, shall be converted into US dollar, in a manner permitted by PRC laws,
based on an exchange rate between US dollar and RMB equivalent to (i) 1:7.5
for the Closing Payment, and (ii) the exchange rate promulgated by the Bank
of China on the 2007 auditing report signing date for the Second Payment and
the 2008 auditing report signing date for the Third Payment and Fourth Payment,
unless otherwise mutually agreed by the Sellers and the Buyer from time to
time.


 


1.2.4.4             Time and Method of Adjustment:          The Price Adjustment and the adjusted Share Consideration and Cash
Consideration of each installment of payment shall be determined by the Buyer
and the Sellers within fifteen (15) days after the date of each audit report
mentioned in Section 1.2.4.1. 
Within fifteen (15) days after the Price Adjustment and the adjusted
Share Consideration and Cash Consideration are determined, any amount exceeding
the adjusted Cash Consideration previously paid to the Sellers shall be
returned to the Buyer or used to off-set the next installment of payment, any
Ordinary Shares exceeding the adjusted Share Consideration previously issued to
the Sellers shall be repurchased by the Buyer 


 


6

















 


at no additional cost or used to off-set the next installment
of payment, and any insufficient Purchase Consideration shall be made up to the
Sellers by the Buyer.


 


1.2.4.5             Material Adverse Effect and  Postponement of Payment Schedule


 


For the purpose of this
Agreement, a “Material Adverse Effect” shall mean the material
adverse effect or change of
the Company and/or Shanghai JNET, which is an occurrence, event or condition
that has or would likely cause a long term or significant diminution in the
earnings power of the Company or Shanghai JNET or the value of the Principal Business,
and any significant change to the assets, properties, business, financial or
legal condition, results of operations or prospects of any of the Company or
Shanghai JNET that a reasonable financial investor in the Buyer’s position
would consider material relative to the investment being made pursuant to this Agreement,
taking into consideration the financial purpose for which the investment by the
Buyer is being made.  The Material
Adverse Effect shall EXCLUDE (i) unforeseeable and
unavoidable objective natural disasters (such as earthquakes, typhoons,
flood, or
war), and (ii) the Material Adverse Effect which is solely attributed to the wrongful conduct of the Buyer.  Only when the Material Adverse Effect occurs
before the Closing Date, shall it include any government actions, promulgation
of new laws and regulations, and market actions.


 


If
before the Closing Date, there occurs a Material Adverse Effect to the Company
and/or Shanghai JNET, any outstanding payment of the Purchase Consideration
shall be postponed until the time when such Material Adverse Effect is cured to
the satisfaction of the Buyer or any other time mutually agreed by the Buyer
and the Sellers.  If a Material Adverse
Effect continues without cure for a period of thirty (30) days, the Buyer shall
have the right terminate this Agreement, in which case, without limiting other
remedies that may be available to the Buyer under the applicable laws, (i) the
Buyer shall have no obligation to pay any of the Purchase Consideration, (ii) the
Sellers shall pay to the Buyer the full amount of the Deposit, provided that if
the Material Adverse Effect is caused by default on the part of the Sellers,
Shareholders, Shanghai JNET and/or the Company, then the Sellers shall instead
pay to the Buyer an amount equal to two times of the Deposit.


 


If
there occurs a Material Adverse Effect after the Closing Date (provided that a
Material Adverse Effect shall be deemed to have occurred if the 2008 Profit
falls below 50% of the 2007 Profit), the Buyer shall have the right to
terminate this Agreement, and without limiting other remedies that may be
available to the Buyer under the applicable laws, (i) the Buyer shall have
no obligation to pay any unpaid and outstanding amount of Purchase
Consideration; (ii) the Seller shall return to the Buyer all the Cash
Consideration and Share Consideration paid to them previously; (iii) the Buyer
shall return the Company Shares and the Domestic Interests to the Sellers
and/or the Shareholders, as the case may be, and the Buyer and the Seller agree
to revert the PRC Restructuring set forth in Section 7.1.5 without any
obligation to compensate each other for the cost incurred therefrom.


 


1.2.4.6             Non-Compete Obligations of the Shareholders:  If before the Fourth Payment
and for any time within twenty-four (24) months after the Fourth Payment, a
Shareholder is in breach of the non-compete obligations set forth in Section 5.2(iii) and
Section 


 


7

















 


5.5, then, based on the
actual situation, the Buyer shall have the right to postpone or cancel any
outstanding and unpaid Share Consideration due to the Seller owned by such
Shareholder in accordance with Section 1.2.3 and/or require the Seller
owned by such Shareholder to return to the Buyer up to all of the Share
Consideration previously paid to it for no additional cost.


 


1.2.4.7             PRC Law Compliance for Share Consideration. Each of the Sellers, Mei Yongkai and Mei Xiurong agrees that before
each time the Buyer makes payment of Share Consideration to the Sellers, Mei
Yongkai and Mei Xiurong (and other Shareholder who may hold shares in the Buyer
from time to time) shall fulfill all approval, registration and filing
procedures required under the PRC laws and regulations for their direct holding
of shares in the Sellers and indirect holding of Ordinary Shares in the Buyer,
including without limitation the requirements of the State Administration of
Foreign Exchange (the “SAFE”).  In
case that Mei Yongkai or Mei Xiurong (and other Shareholder who may hold shares
in the Buyer from time to time) fails to fulfill such approval, registration
and filing procedures required under the PRC laws and regulations, the relevant
Seller and the Buyer shall discuss the method of payment of the Share
Consideration due, and the relevant Share Consideration shall be paid to the
Seller in the manner determined by the Buyer in good faith.


 


2.             CLOSING.


 


2.1          Closing.


 


The purchase and sale of the Company Shares (the “Closing”)  shall take place in Shanghai or at such
other place as the  Buyer and the Sellers may mutually agree, on the date when all of the conditions precedent set forth in Section 7.1 have been completed to the satisfaction of the Buyer
or waived by the Buyer.  The date on when the Closing
occurs is hereinafter referred to as the “Closing
Date.”  The
Closing Payment shall be made on the date no later than thirty (30) days after
the Closing Date.


 


2.2          Deliveries by Sellers to Buyer.


 


On or prior to the Closing Date, the Sellers shall deliver, or shall cause to be delivered, to the Buyer the following documents:


 


2.2.1            a
duly signed and issued share certificate
representing all of the Company Shares purchased by the Buyer, accompanied
by the applicable stock assignment forms duly endorsed by the
Sellers, and such
other instruments or documents evidencing the sale, assignment, transfer and
conveyance of the Company Shares by the Sellers to the Buyer in accordance with the terms hereof as the Buyer may reasonably request;


 


2.2.2            the
original register of members of the Company dated
the Closing Date reflecting the Buyer’s sole and legal ownership of the Company Shares, and
the original register of directors
of the Company  dated the Closing Dating indicating the person(s) nominated by the Buyer have been
appointed the directors of the Company;


 


2.2.3            instruments
executed by each of the Shareholders
and the Sellers releasing all existing or potential claims of any kind (except the claims approved by the Buyer 


 


8

















 


before the Closing) against the Company, Shanghai JNET, and their respective
directors, officers, employees, agents and representatives (the “Sellers Releases”) in the form satisfactory to the Buyer;


 


2.2.4            all
original corporate documents of the Company, including without limitation the
certificate of incorporation, Memorandum and Articles of Association, minute
books, stock transfer records and resolutions of the Company;


 


2.2.5            all
original corporate documents of Shanghai JNET, including without limitation the
business license, articles of association, various licenses, permits,
certificates and qualifications essential to its Principle Business, and the minute books, equity transfer records,
and resolutions of Shanghai JNET;


 


2.2.6            satisfactory
evidence of (1) resignation of
the present director and legal representative of Shanghai JNET and (2) appointment of new directors (including the
legal representative) designated by the Buyer to Shanghai JNET, effective not
later than the Closing Date;


 


2.2.7            original or certified copies of the board resolutions
and shareholders’ resolutions of each
Seller, authorizing
the execution and delivery of this Agreement and
performance of the transactions contemplated hereunder;


 


2.2.8            original board resolutions and shareholders’ resolutions of the Company
and Shanghai JNET, authorizing the execution and delivery of this Agreement and
performance of the transactions contemplated hereunder;


 


2.2.9            a compliance certificate
dated as of the Closing Date signed by each Shareholder and a duly authorized
representative of the Company, Shanghai JNET and each Seller,
certifying that (1) all the representations and warranties made by them this
Agreement are true, correct and complete when made, and are true, correct and
complete as of the date of the Closing, and (2) there has been no Material
Adverse Effect in the business, prospects,
operations, properties, assets or
financial or legal condition of the Company
and Shanghai JNET since date
of the Latest Balance Sheet (as defined in Section 3.8);


 


2.2.10          the original certificate of
good standing issued by the Registrar of Companies of the British Virgin Islands dated no earlier than fifteen (15) business days
prior to the Closing;


 


2.2.11          a legal opinion
from the Company’s PRC counsel in the
form satisfactory to the Buyer;


 


2.2.12          a legal opinion
from the Company’s BVI counsel in the
form satisfactory to the Buyer;


 


2.2.13          the Existing Control Documents described in Section 3.23.5 and New
Control Documents described in Section 7.1.5(viii); and


 


9

















 


2.2.14          other documents that are necessary to give
effect to  the  conditions
set forth under Section 7.1.


 


3.             REPRESENTATIONS
AND WARRANTIES OF SELLERS, SHANGHAI JNET, COMPANY, AND
SHAREHOLDERS.


 


Each of the Company, Shanghai JNET, the Sellers and the Shareholders hereby jointly and severally represents and warrants to the Buyer, with respect to each
Group Company and Seller as of the date hereof and the Closing Date as follows,
except as set forth in the Disclosure Schedule (the “Disclosure
Schedule”) attached to this Agreement as Exhibit A (which disclosure shall be deemed to be
representations and warranties to
the Buyer):


 


3.1          Organization,
Power and Authority.


 


3.1.1            Each of the Group Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation, and has all requisite corporate power and authority to own and operate its businesses as it is now and at the
Closing will be conducted.


 


3.1.2            Attached
as  Section 3.1.2(a) of the Disclosure Schedule  are
the true, complete and accurate copies of the certificate of incorporation and constitutional documents of the Company, as in effect on the date of this Agreement and the Closing Date. 
Attached as Section 3.1.2(b) of the Disclosure Schedule  are
the true, complete and accurate copies of the business license and articles
of association of Shanghai
JNET, as in effect on the date of this Agreement
and the Closing Date.


 


3.2          Authorization;
Validity of Agreement.


 


All
corporate action on the part of
the Company, Shanghai JNET and each Seller and their respective officers,
directors and shareholders necessary for (i) the authorization, execution
and delivery of, and the performance of all obligations of the Company, Shanghai JNET and each Seller under, this Agreement  and all other agreements and documents to which any of the Company, Shanghai JNET or the Sellers is a party and the
execution and delivery of which is contemplated
hereunder (the “Ancillary Documents”), and (ii) transfer of all of Company
Shares, has been taken
or will be taken prior to the Closing. 
Each of this Agreement and the Ancillary Documents
is a valid and binding obligation of the
Company, Shanghai JNET and each Seller
and Shareholder enforceable in accordance with its terms, subject,
as to enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors’ rights
generally and to general equitable principles.


 


3.3          Capitalization of Company and Shanghai JNET


 


3.3.1            The authorized capital shares or registered capital  (as
the case may be) of each
of the Company and Shanghai JNET is as set forth on Section 3.3.1 of the Disclosure Schedule.


 


10






 










 


3.3.2            The outstanding shares of the Company  as of the date of
this Agreement and capitalization of
the  Company immediately after the Closing Date  are set forth on Section 3.3.1
of the Disclosure Schedule.  All of the outstanding shares of capital
stock of Company and the registered capital
and capital contributions to Shanghai JNET have been duly
authorized, validly issued and fully
paid.


 


3.3.3            Except
as contemplated hereunder and those described in Section 3.3.1 of the Disclosure Schedule, there are no outstanding
options, subscriptions, warrants, calls, commitments or other rights which obligate  Shanghai JNET or
the Company to issue, transfer or sell any
shares or equity interest of Shanghai JNET  or the Company or any securities convertible into or exercisable
for any shares or equity interest of
Shanghai  JNET or the  Company, or otherwise requiring Shanghai  JNET or the Company to give any person the right to receive any
benefits or rights similar to any rights enjoyed by or accruing to the holders
of shares of capital stock of Shanghai
JNET or the Company or any rights
to participate in the capital, equity or net income of Shanghai JNET or the Company. There are no shares of the
Company’s outstanding
share capital, or shares issuable upon exercise or exchange of any outstanding
options of the Company, are subject to any
preemptive rights, rights of first refusal or other rights to purchase such
shares. 
Except as required under the Company Law of the PRC, the Domestic
Interest of Shanghai JNET is not subject to any preemptive rights, rights of
first refusal or other rights to purchase the Domestic Interests.


 


3.3.4            The Company Shares
and the Domestic Interests shall (i) be duly authorized, validly
issued and not violate any preemptive or similar rights of other shareholders; (ii) be
issued in accordance with the Memorandum
and Articles of Association of Company
or the articles of association of Shanghai JNET, as applicable; (iii) be
free from all claims, liens, charges, pledges, mortgages, trust, third party rights and other encumbrances.


 


3.3.5            There are no shareholders’ agreements, voting trusts or other agreements or
understandings between or among present or former shareholders of Shanghai JNET and Company or to which Shanghai  JNET or the Company  is a party or by
which any of them is bound with respect to the transfer or voting of any securities of Shanghai JNET or the  Company.


 


3.4          Subsidiaries and Investments.


 


Except as set forth on Section 3.4 of the
Disclosure Schedule, none of the Group Companies has established any subsidiary or branch office,  or owns, directly
or indirectly, any capital stock of, or other equity interest in, or have any
other investment in, or outstanding loans to, any corporation, partnership or
other entity or organization.


 


3.5          Consents and Compliance.


 


3.5.1            None of the Group Companies has knowingly conducted any activity in
violation of any applicable law, statute,  regulation, rule order or
restriction of any domestic or foreign government in respect of the conduct of
its business or the ownership of its properties.  All consents, permits, approvals, orders,
authorizations or registrations, qualifications, designations, declarations or
filings by or with any governmental authority and any third party which are
required to be obtained or made by any
of the Group Companies, the Sellers, and the 


 


11

















 


Shareholders in connection
with the execution of this Agreement and the
consummation of the transactions contemplated hereunder (including the PRC Restructuring defined in Section 7.1.5) shall have
been obtained or made prior to and be effective as of the Closing.


 


3.5.2            Except as set forth on Section 3.5.2 of the Disclosure Schedule,
each of the Company and Shanghai JNET has obtained all permits, licenses,
certificates, qualifications and any similar authority necessary for the
conduct of its Principal Business as currently
conducted and as proposed to be conducted, the absence of which would be
reasonably likely to have a Material Adverse Effect.  Each of the Company and Shanghai
JNET has maintained the validity of, and full complied with, all such permits,
licenses, certificates, qualifications and other necessary authority.  Neither
the Company or Shanghai JNET is in default under any of such permits,
licenses, certificates, qualifications or other
similar authority.  There are no fines or penalties asserted against any of the Company or
Shanghai JNET
under any applicable
law,
and neither
the Company or Shanghai JNET has received any notice from any governmental authorities with respect to any violation
of any applicable
law or regulation.


 


3.5.3            Neither the Company
nor Shanghai JNET is in  violation,
breach or default of any term of its
respective articles of association or other constitutional documents,
or in any material respect of any term or provision of any indenture, contract,
agreement or instrument to which the Company
or Shanghai JNET (as the case may be) is a party or by which it
may be bound, or of any
provision of any judgment, decree, order, statute, rule or regulation
applicable to or binding upon the Company
or Shanghai JNET (as the case may be). None of the activities,
agreements, commitments or rights of the Company
and Shanghai JNET is unauthorized. The execution, delivery and
performance of and compliance with this Agreement and any
Ancillary Agreement and the consummation of the transactions contemplated
hereby and thereby will not result in any violation, breach or default under the articles of association, constitutional documents, indenture,
contract, agreement or instrument
of the Company and/or Shanghai JNET.


 


3.6          No
Conflict.


 


The execution, delivery and performance of this Agreement or any Ancillary Document, and the consummation of the
transactions contemplated hereby, do not and will not:


 


(i)            violate any
provision of the articles of association,
certificate of incorporation, business license, by-laws or other organizational documents of
the  Company or Shanghai JNET; or


 


(ii)           conflict with,
or result in the breach of, or constitute a default under, or result in the
termination, cancellation or acceleration (whether after the filing of notice
or the lapse of time or both) of any right or obligation of any of the  Company, Shanghai JNET,  the Sellers, or the Shareholders under, or a loss of any benefit to which any of the Company, Shanghai JNET,  the
Sellers, or the Shareholders is entitled under, or trigger any charge or payment or
accelerate the maturity date or payment of any money, or result in the creation
of any liens, claims or encumbrances upon or with respect to any of the assets
of the Company or Shanghai  JNET under or pursuant to, any written or
oral contract to which any of the Company,
Shanghai JNET, Sellers
and Shareholders is a party or under or pursuant to any law, judgment, 


 


12

















 


injunction, order, decree or other restriction of
any governmental entity to which any
of the Company, Shanghai JNET, the Sellers and the Shareholders is subject.


 


3.7          Title to Shares.


 


3.7.1            The delivery by
the Sellers to the Buyer at the Closing of the
certificate representing the  Company Shares, duly endorsed in blank or accompanied by stock
powers endorsed in blank, will vest
the Buyer on the Closing Date with good and marketable title to the  Company Shares, free and clear of all
liens, claims and encumbrances of any kind or character whatsoever.  The
Sellers have the full power, right and authority to vote and transfer The  Company Shares.


 


3.7.2            Except as contemplated under the Existing Control Documents, Chen Peidi has the full power, right and authority to vote and transfer the Domestic Interests.


 


3.8          Financial Statements.


 


3.8.1            Schedule 3.8 of the Disclosure Schedule  contains the following
financial statements of Shanghai JNET (collectively, “JNET Financial Statements”): (1) the unaudited balance
sheets  (“Latest Balance Sheet”)
and income statements for the fiscal year
ended December 31, 2006, together with changes in stockholder equity, statements of cash flows and retained earnings for such period, and (2) unaudited balance sheets
and income statements as of August 31,
2007, together with changes in stockholder equity, statements of cash flows and retained earnings for such period.  The JNET Financial Statements are true, correct
and complete and present fairly the financial condition  of Shanghai JNET at the date or dates
therein indicated and the results of operations for the period or periods
therein specified.  The JNET Financial
Statements have been prepared on an accrual basis and were prepared in
accordance with generally accepted accounting principles of PRC applied on a consistent basis throughout the
periods covered.


 


3.8.2            The JNET Financial Statements fairly
reflect all liabilities or obligations of Shanghai
JNET, including all prepaid support and maintenance liabilities, whether
the same are accrued, contingent or otherwise, and whether asserted or
unasserted, arising out of transactions effected or events occurring on or
prior to the respective dates thereof, other than liabilities and obligations
that in the aggregate will not have a Material
Adverse Effect.


 


3.8.3            All reserves shown in the
Latest Balance Sheet are appropriate, reasonable and sufficient to provide for
the losses thereby contemplated.


 


3.8.4            All accounts receivable and
other rights of Shanghai JNET to payments as
of the date hereof are valid and genuine, and
arise out of bona fide license, sales or other transactions of Shanghai JNET within its scope of business, and all such
accounts receivable and other rights to payment are actual and bona fide
receivables and rights representing obligations for the total amount thereof
shown on the books of Shanghai JNET.  Except as set forth on Section 3.8.4 of the Disclosure Schedule, none of Shanghai  JNET,  the Company, the Sellers and
the Shareholders have any knowledge of any material counterclaim or setoff
against any of such accounts receivable and other rights to payment outstanding
as of the date hereof.


 


13

















 


3.8.5            Except for those assets
acquired since the date of the Latest Balance Sheet, all assets and properties
used in or necessary for the conduct of the businesses and operations of Shanghai  JNET are reflected
in the Latest Balance Sheet in a manner and to the extent required by the generally accepted accounting principles
of the PRC.


 


3.8.6            Since the date of the Latest
Balance Sheet, neither  Shanghai JNET nor the Company has sold, transferred, leased, distributed or otherwise disposed of any of
its assets or agreed to do so, except for sale of products and services in the
ordinary course of business.


 


3.8.7            Neither
the Company nor Shanghai JNET is liable or obligated in any
way to provide funds to or in respect of or to guarantee or assume in any
manner, any debt, obligation, liability of, or to contribute to the capital of
or make any investment in, any other person, corporation, association,
partnership, joint venture, trust or other entity, and none of the Company, Shanghai JNET, the Sellers and the Shareholders
knows any basis for the assertion
of any other claims, liabilities or obligations of any nature or in any amount
that would result in a Material Adverse Effect.  Save as disclosed in Section 3.87 of the Disclosure Schedule, neither the Company nor Shanghai JNET has any continued liabilities, including without limitation
indebtedness for borrowed money that it has directly or indirectly created,
incurred, assumed, or guaranteed, or with respect to which the Company or Shanghai JNET has otherwise become directly or indirectly liable.


 


3.9          Absence of Certain Changes.


 


Since the date of the Latest Balance Sheet, the businesses of Shanghai  JNET and the  Company have been operated in the
ordinary course of business consistent with past practice; and there has not
been any event or condition which has resulted or would result in a Material
Adverse Effect.


 


3.10        Litigation.


 


Except
as disclosed on Section 3.10
of the Disclosure Schedule, there are no judicial,
legal, administrative or arbitration proceedings, suits, actions claims, inquiries or investigations by any court or governmental authority, that are pending or, to the
knowledge of Shanghai JNET and  the Shareholders, threatened against any
of the Group Companies or their business, operations, assets, products or
services, or which question the validity or legality of the transactions
contemplated hereby.  Neither Sellers nor Shareholders is aware of any basis or
ground for any such suit, action, claim, inquiry, investigation or proceeding
against any of the Group Companies or their
businesses, operations, assets, products or services.  There is no outstanding order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
against or affecting the businesses,
operations, assets, conditions, products or
services of any of the Group Companies.


 


3.11        Tangible
and Intangible Property Other Than Intellectual Property.


 


3.11.1          Section 3.11.1 of the Disclosure Schedule  sets
forth a true, correct, complete list of all real estate properties
currently owned  by the Group Companies (the “Owned Real Property”), together with descriptions of such Owned Real Property.


 


14

















 


3.11.2          Section 3.11.2 of the Disclosure Schedule  sets
forth a true, correct and complete list of all of the
real property properties currently
leased or occupied by the
Group Companies (“Leased Real Property”), together with
descriptions of each such lease.


 


3.11.3          Section 3.11.3
of the Disclosure Schedule  sets
forth a true, correct and complete list
of  (1) all the tangible properties  currently owned by the Group Companies, including all computer and office equipment
(“Owned Tangible Property”) and (2) all the tangible properties currently leased or occupied
by the Group Companies (“Leased
Tangible Property”).


 


3.12        Condition
and Adequacy of Tangible Property.


 


All of the Owned Real
Property, Leased Real Property, Owned Tangible
Property and Leased Tangible Property are in
operable condition and good working order, are adequate and suitable for their
intended uses in the ordinary course of business.  The ownership and use by the Group Companies
of the Owned Real Property, Leased Real Property, Owned Tangible Property and Leased Tangible
Property are  in all material respects compliance with all
applicable laws, ordinances, regulations and rules.  None of the Sellers, Shanghai JNET, the
Company and the Shareholders is aware of any material defects in such Owned Real
Property, Leased Real Property, Owned Tangible
Property and Leased Tangible Property.


 


3.13        Intellectual
Property.


 


3.13.1          For the purpose of this Agreement:


 


(i)            “JNET Intellectual Property” means all
Intellectual Property owned by or licensed to any
Group Company.


 


(ii)           “JNET Products” means all the products and services provided by Shanghai JNET and any Group Company.


 


(iii)          “Copyrights” shall
mean all domestic and foreign copyright interests in any original work of
authorship fixed in a tangible medium of expression, whether registered or
unregistered, including but not limited to all copyright registrations or
foreign equivalent, all applications for registration or foreign equivalent,
all moral rights, all common-law rights, and all rights to register and obtain
renewals and extensions of copyright registrations, together with all other
copyright interests accruing by reason of international copyright convention,
and the right to sue for past, present, or future infringement and to collect
and retain all damages and profits therefor;


 


(iv)          “Intellectual Property”
shall mean and include Patent Rights, Trademark Rights, Copyrights, Inventions,
Know-how, Trade Secrets and Internet domain name registrations.


 


(v)           “Inventions” shall
mean and include novel devices, processes, compositions of matter, methods,
techniques, observations, discoveries, apparatuses, designs, expressions,
theories, formulas, algorithms, processes, schematics, and ideas, whether or
not patentable.


 


15

















 


(vi)          “Know-How” shall mean
scientific, engineering, mechanical, electrical, financial, marketing or
practical knowledge or experience useful in the operation of Shanghai JNET or the Company.


 


(vii)         “Patent Rights” shall
mean and include all domestic and foreign patents (including without limitation
certificates of invention and other patent equivalents), provisional
applications, patent applications and patents issuing therefrom as well as any
division, continuation or continuation in part, reissue, extension,
reexamination, certification, revival or renewal of any patent, all Inventions
and subject matter related to such patents, in any and all forms, and the right
to sue for past, present, or future infringement and to collect and retain all
damages and profits therefore.


 


(viii)        “Trade Secrets” shall
mean any formula, design, device or compilation, or other information which is
used or held for use by the Group Companies, which gives
the holder thereof an advantage or opportunity for advantage over competitors
which do not have or use the same, and which is not generally known by the
public.  Trade Secrets can include, by
way of example, compounds, formulas, market surveys, market research studies,
information contained on drawings and other documents, and information relating
to research, development or testing of Products.


 


(ix)           “Trademark Rights”
shall mean and include all domestic and foreign trademarks, trade dress,
service marks, trade names, icons, logos, slogans, and any other indicia of
source or sponsorship of goods and services, designs and logotypes related to
the above, in any and all forms, and all trademark registrations and
applications for registration related to such trademarks (including, but not
limited to intent to use applications), including the right to sue for past,
present, or future infringement and to collect and retain all damages and
profits therefor, and all designs and logotypes related to such trademarks, in
any and all forms, and all trademark registrations and applications for
registration related to such trademarks.


 


3.13.2          Each
of the Group Companies possess sufficient and legally enforceable rights
(by ownership or license or otherwise) with respect to all Intellectual
Property necessary for the conduct its
business as currently conducted and for the creation, development, marketing, distribution and licensing and broadcasting of the JNET Products.


 


3.13.3          To the extent included in JNET Intellectual Property, Section 3.13.3
of the Disclosure Schedule  contains a true,
complete and correct list (by title, registration number if applicable,
jurisdiction and owner) of:


 


(i)            all Patent
Rights of each Group Company, including
pending applications;


 


(ii)           all registered
and unregistered Trademark Rights
of each Group Company, including pending applications;


 


(iii)          all registered
and unregistered Copyrights of each Group
Company, including the Copyrights related to
the JNET Products and any pending applications; and


 


16

















 


(iv)          all other JNET Intellectual Property of the Group Companies, including without
limitation Internet domain names registered by
any Group Company and other issuances, registrations, applications and
the like with respect to those or any other JNET Intellectual
Property.


 


Each Group Company  (i) independently developed and owns, or (ii) has a valid right or license to use all of
the JNET Intellectual Property, in each case free and clear of all
claims, security interests, liens or other encumbrances.  None of the Company, Shanghai  JNET, the Sellers or the Shareholders is aware of any claims, legal proceedings, actions, investigation against any of the
JNET Intellectual Property.  All evidence regarding the filings, registrations and government notice in respect of
the JNET  Intellectual
Property have been provided to the
Buyer.  None of the Company, Shanghai  JNET, the Sellers or the
Shareholders  is
aware of any event that may result in cancellation, termination,
expiration or abandonment of any item of the JNET  Intellectual Property (except upon
expiry of the statute term of a JNET
Intellectual Property, including extensions and renewals thereto).


 


3.13.4          Section 3.13.4
of the Disclosure Schedule  contains a true,
correct and complete list of:


 


(i)            all the licenses or sublicenses granted by any Group Company to any third party with respect to any JNET
Intellectual Property, and  all agreements
(written or otherwise)  which any of
the JNET Intellectual Property is
bound by or subject to,  or pursuant to which any
person has been assigned, licensed, or authorized to
use, exercise or exploit (“Use”), or given access to, any of the JNET Intellectual Property;


 


(ii)           all the licenses or sublicenses granted to any Group Company with respect to the Intellectual Property
of any third party, and all agreements (written or otherwise) which any Group Company is bound by or subject to, or pursuant to
which any Group  Company have been
assigned, licensed, or authorized to Use or incurred any obligation, in connection with any third party Intellectual Property that has been
or is incorporated or embodied in, or forms all or any part of any previous,
current or proposed JNET Product, or the  JNET Intellectual Property,
including agreements executed by employees and contractors assigning JNET Intellectual Property conceived or developed by them to any Group  Company; and


 


(iii)          all the consulting, service or other agreements (written or otherwise) to which any Group Company is party and under which any of the JNET
Intellectual Property or any update version, innovation or alternation thereof
shall be transferred or licensed to or jointly owned by any third party.


 


(iv)          any transfer or assign by or to any Group Company with respect to the ownership of
any JNET Intellectual Property.


 


Except as set forth in Section 3.13.4 of the Disclosure Schedule, none of the Group Companies, the Sellers  or
the Shareholders has entered into any agreement to indemnify, hold harmless or defend any
other person with respect to any assertion of infringement or 


 


17

















 


misappropriation
of any Intellectual Property rights or property of any person (“Infringement”)
or warranting the lack thereof.


 


3.13.5          No event or circumstance has
occurred or exists that (with or without notice, consent or the lapse of time)
could reasonably be expected to result in, and neither the execution nor
delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will result in:


 


(i)            the breach or
violation by any of the Group Companies of any
license, sublicense or other agreement listed in the
Disclosure Schedule; or


 


(ii)           the loss or
expiration of any material right or option by any
Group  Company (or the gain thereof by any
third party) under any such license, sublicense or other agreement.


 


3.13.6          To the best knowledge of the Company, Shanghai JNET, the Sellers and the
Shareholders, there is no unauthorized Use or disclosure, and no Infringement,
of any JNET Intellectual Property by
any third party, including, without limitation, any employee or former employee
or shareholder of any Group  Company.  None of the Group Companies has  taken, initiated or threatened, any action,
suit or proceeding against any third party for any Infringement of any JNET Intellectual Property or
for any material breach of any license, sublicense or agreement involving any JNET Intellectual Property.


 


3.13.7          The
Group Companies have taken all
reasonable actions to protect and maintain the confidentiality of (1) the
JNET Intellectual Property and the JNET
Products, including the development, acquisition, utilization,
marketing, sale and other disposition thereof,  unless such property is otherwise disclosed in
published patents, patent
applications or registered copyrights in
accordance with the applicable laws, and (2) information related to the
research and development, business operation, sales channels, marketing
strategies, customers, suppliers, technology, database, and financial and
accounting matters of the Group Companies which is not currently in the public domain and which is of economic value to
the Group Companies (collectively “JNET Confidential Information”).  All use by, and disclosure to, the employees or third parties of the
JNET Confidential Information has been made
pursuant to the terms of valid and binding written confidentiality and
nonuse/restricted-use agreements or agreements that contain similar
obligations.  None
of the Group Companies has disclosed or delivered, or permitted the
disclosure or delivery, to any third
party, any JNET Confidential Information, except
pursuant to the agreements listed in Section 3.13.4.


 


3.13.8          Each
Group Companies owns or has an exclusive prepaid or royalty-free
license to all JNET Intellectual
Property that is incorporated or embodied in, or that forms part of, any of the
JNET Products.  Without limiting the generality of the
foregoing:


 


(i)            No current or former
employee, contractor or shareholder of the
Sellers, Group Companies, or the Shareholders has any right or interest to or in any such JNET
Intellectual Property; and


 


(ii)           None
of the Group Companies has any ongoing or
future obligation to pay any license fee, royalty, or other payment to any
person with respect to the 


 


18

















 


creation, distribution,
modification, marketing, broadcasting or license of
any of the JNET Products.


 


3.13.9          Except
as set forth in Section 3.13.9 of the Disclosure Schedule, each current and
former employee, contractor and shareholder of
the Group Companies has executed and delivered (and to the best knowledge of the Company,
Shanghai JNET, the Sellers and the
Shareholders, is in
compliance with) an agreement which validly assigns to the relevant Group  Company all title and
rights to the Intellectual Property that
is incorporated or embodied in, or that forms part of, the JNET Products.


 


3.13.10        None of the Company, Shanghai JNET, the Sellers or the Shareholders has received any communication alleging or
suggesting that any of them or any of the JNET Intellectual Property
or the JNET Products has been or may be (whether in its past, current or
proposed business or otherwise) engaged in, liable for or infringing or
violating the Intellectual Property rights of other persons or entities, nor
does any of Shanghai JNET, the Company, Sellers or the
Shareholders has any reason to
expect that any such communication will be forthcoming.  To the best
knowledge of the Company, Shanghai
JNET, the Sellers  and the Shareholders, none of the Group Companies, the Sellers  and the Shareholders has ever, at any
time, infringed, misappropriated, or otherwise violated any Intellectual
Property right of any other person or entity, nor, to their best knowledge, is there any basis for a claim that any
of the Company, Shanghai JNET, the Sellers or the Shareholders has infringed,
misappropriated or otherwise violated any Intellectual Property Right of any
other person or entity.


 


3.13.11        None
of the Company, Shanghai JNET, the Sellers or the Shareholders is aware that any
of its employees or contractors is obligated under any agreement, commitment,
judgment, decree, order or otherwise that would conflict with the business of
the Group Companies or interfere with the use of
his or her best efforts to perform his or her duties for the Group Companies.


 


3.14        Contracts.


 


3.14.1          All agreements, contracts,
licenses, instruments, commitments (oral or written), indebtedness, liabilities
and other obligations to which each Group Company is a party or by which it is
bound that (i) are material to the conduct and operations of its business
and properties, (ii) involve any of the officers, consultants, directors,
employees or shareholders of the Group Company; or (iii) obligate such
Group Company to share, license or develop any JNET
Products or technology, are listed in Section 3.14.1
of the Disclosure Schedule and have been made
available for inspection by the Buyer and its
counsel.  For purposes of this Section 3.14, “material” shall mean (i) having an aggregate value, cost
or amount, or imposing liability or contingent liability on any Group Company,
in excess of US$10,000 or that
extend for more than one year beyond the date of this Agreement, or (ii) containing exclusivity, non-competition, or similar clauses
that impair, restrict or impose conditions on any Group Company’s right to
offer or sell products or services in specified areas, during specified
periods, or otherwise, or (iii) not in the ordinary course of business, (iv) transferring or licensing any JNET
Intellectual Property to or from any Group Company (other than licenses
granted in the ordinary course of business or licenses from commercially
readily available “off the shelf” computer software), or (vi) an
agreement whose termination would be reasonably likely to have a material adverse effect  


 


19

















 


on
the business operation, financial or legal conditions, or development of any
Group Company.  For purposes of this
Agreement, all of the agreements listed, or required to be listed in Section 3.14.1 of the Disclosure  Schedule are collectively herein defined as the “Contracts.”  Such Contracts may include without
limitation any cooperation agreements, sales
agreements, loan agreements, deeds of trust, mortgages,
indentures, security agreements, joint development or joint production contracts, and any contracts or agreements
among the Group Companies, the Shareholders or any current or former
shareholder, or director of the Group
Companies.


 


3.14.2         Section 3.14.1
of the Disclosure Schedule
sets forth a complete and accurate list of all the contracts, agreements, or
tasks that have been transferred, or are under the process of being
transferred, or will be transferred after the Closing, from Shanghai He Shuo or
Shanghai Chuan Wang to Shanghai JNET (the “Transferred Contracts”).


 


3.14.3          There have been no amendments or modifications made to any
material terms of  the Contracts and Transferred Contracts, except as set forth in Section 3.14.3
of the Disclosure Schedule.  All of the Contracts and Transferred Contracts are valid, binding, in full
force and effect (except to the extent fully performed by the parties thereto),
and enforceable against the parties thereto in
accordance with their respective terms, subject to applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and similar laws
now or hereafter in effect relating to or affecting creditors’ rights and
remedies generally and to general principles of equity. With respect to any Contract
and Transferred Contract currently in force, there
is no existing default, commitment of breach, or any event which, after notice or
lapse of time or both, would constitute a default on
the part of any Group Company,
or to the best knowledge of the
Company, Shanghai JNET, the Sellers and the Shareholders, on
the part of any other party thereto.  No defenses, off-sets or
counterclaims have been asserted or, to the best
knowledge of the Company,
Shanghai JNET, the Sellers and the
Shareholders, are reasonably likely to be asserted by any party thereto against
any of the Group Companies, nor has any Group Company waived any rights thereunder.


 


3.14.4          None
of the Group Companies has received any
notice from the other parties to a Contract or Transferred Contract  informing the intention to exercise the right to terminate such Contract or Transferred Contract, and none of the Company, Shanghai JNET,
the Sellers or the
Shareholders is aware of any fact
that would justify the exercise of such right. 
None of the Group Companies currently
contemplates, nor do they have any knowledge that
any other party to the Contracts and
Transferred Contracts currently contemplates, any termination of or any
material amendment to any Contract
and any Transferred Contract.


 


3.15        Assets
and Title.


 


3.15.1          The Owned Real Property,
Leased Real Property, Owned Personal Property, Leased Personal Property,
Contracts, JNET Intellectual Property, and JNET Confidential
Information constitute all of the assets and rights of the Group Companies necessary to conduct the business as
currently conducted and to create, develop, market, distribute and license the JNET Products.  None of the Shareholders personally
owns any assets or rights that are essential
to, or otherwise utilized in, the conduct of
business of any Group Company or the
creation, development, marketing, distribution and licensing of the JNET Products.


 


20






 


 


 










 


3.15.2          Each
Group Company has good and
marketable title to, or a valid and binding leasehold interest in, the Leased
Real Property, Owned Personal Property and the Leased Personal Property, free
and clear of all liens, claims and encumbrances.


 


3.16        Environmental Matters.


 


3.16.1          Neither
the Company nor Shanghai JNET is in violation of any laws, rules or regulations of applicable governmental authorities governing or
regulating release or discharge of hazardous materials into the environment,
activities that might result in damage to, protection or improvement of the
environment, natural resources, wildlife or public or employee health and
safety in the jurisdictions in which the
Company or Shanghai JNET  is located (“Environmental
Laws”).


 


3.16.2          Each
of the Company and Shanghai JNET possesses all the necessary permits required under the Environmental Laws in connection with
the operation of its business.


 


3.16.3          Neither
the Company nor Shanghai JNET has received
any written notice, and none of the Company, Shanghai
JNET, the Sellers  and the Shareholders has any knowledge of any claims under Environmental
Laws against any facilities that may have received hazardous materials
generated by the Company or Shanghai
JNET.


 


3.17        Labor and Employment Matters.


 


3.17.1          Each
Group Company has complied in all material aspects with all applicable
employment and labor laws.  None of the Group Companies is aware that any officer or
key employee intends to terminate their employment with any Group Company, nor
does any Group Company have a present intention to terminate the employment of
any officer or key employee.  Except as set forth in Section 3.17.1 of the Disclosure Schedule,
each employee, officer, director and consultant of the Group Companies has duly executed a confidential information
and invention assignment agreement and neither Shanghai
JNET nor any Shareholder is aware,
after reasonable investigation,  that any of
such employees, officers, directors or consultants are in violation thereof.


 


3.17.2          None of the Group Companies
is a party to any collective bargaining agreements and there are no
labor strikes or work stoppages, slowdown or other concerted action by
employees of any of the Group Companies now pending or,
to the knowledge of Sellers, Shanghai JNET,
Company and the Shareholders, threatened against any of the Group Companies.


 


3.17.3          Section 3.17.3
of the Disclosure Schedule  contains
a true, accurate and complete list of all
the officers and employees  of each Group Company as of the date
hereof (“JNET’s Employees”) and all officers and employees of Shanghai JNET immediately after the
Closing.


 


3.17.4          Section 3.17.4
of the Disclosure Schedule  sets
forth the terms and conditions of the sample employment contract entered into
between Shanghai JNET and each of its employees.  All of such employment
contracts are valid, binding and enforceable as at the Closing Date.


 


21

















 


3.17.5          Except
as set forth in Section 3.17.5 of the Disclosure Schedule, no
Shareholder nor any officer or director of a Group Company or any affiliate of any such person has any agreement, understanding,
transaction with, or is indebted to, any Group Company, nor is any Group
Company indebted (or committed to make loans or extend or guarantee credit) to
any of such persons (other than for accrued salaries, reimbursable expenses or
other standard employee benefits). No officer or director of a Group Company
has any direct or indirect ownership interest in any firm or corporation with
which a Group Company or Shareholder is affiliated
or with which a Group Company or Shareholder has a business
relationship, or any firm or corporation that competes with a Group Company. No
Shareholder  or any officer or
director of a Group Company is directly or indirectly interested in any Contract with a Group Company. No Shareholder nor any
officer or director of a Group Company or any affiliate of any
such person has had, either directly or indirectly, a material interest in: (a) any
person or entity which purchases from or sells, licenses or furnishes to a
Group Company any goods, property, intellectual or other property rights or
services; or (b) any contract or agreement to which a Group Company or any
Shareholder is a party or by which it
may be bound or affected.  There is no
agreement among any Shareholder and any other person with respect to the ownership or control of any
Group Company.


 


3.17.6          There is no legal proceeding, action, unfair labor practice
complaint or claim of discrimination or sexual harassment brought against any of the Group Companies during the last three years
before any government authority.


 


3.17.7          None
of the Group Companies is involved in any dispute with any of its employees or any trade union or association.


 


3.17.8          None of the
Group Companies is bound or accustomed to pay any moneys to any of its employees other than the salary, remuneration or
benefit provided under the relevant employment contracts, the Employee Plans and the
Benefit Arrangements.


 


3.17.9          None of the
Group Companies has received any notice of resignation from any of
the employees since the date
hereof.


 


3.17.10        All medical insurance,
work-related injury insurance, unemployment insurance, child-birth insurance,
public accumulation funds for housing, retirement scheme, pension or other
retirement or death, disability benefits that are required by laws in the PRC
or elsewhere to be kept for any present or former officers or employees have
been duly performed and complied with in all respects.


 


3.18        Employee Benefits.


 


3.18.1          Section 3.18.1 of the Disclosure Schedule  contains a true and
complete list of:


 


3.18.1.1       material “employee benefit plans” (each, an “Employee Plan”), pursuant to which any Group Company may
have:


 


(i)        any liability in
respect of its current or former
employees, agents, directors or independent contractors; or


 


22

















 


(ii)       any obligation
to issue capital shares or equity of the any Group Company; and


 


3.18.1.2       each other plan,
program, policy, contract or arrangement providing for bonuses, pensions,
deferred pay, stock or stock related awards, profit sharing, severance pay,
salary continuation or similar benefits, hospitalization, medical, dental or
disability benefits, life insurance, post-retirement, insurance, supplemental
unemployment benefits, vacation benefits or annual or monthly leave, other
forms of incentive compensation or other employee benefits, or compensation to
or for any current or former employees, agents, directors or independent
contractors or any beneficiaries or dependents of such person (other than
directors’ and officers’ liability policies), whether or not insured or funded;


 


(i)        pursuant to
which any Group Company would have any liability in excess of US$10,000; or


 


(ii)       constituting an
employment or severance agreement with any employee, officer or director of any Group Company (each, a “Benefit Arrangement”).


 


3.18.2          Each
Employee Plan is implemented in compliance
with its terms and the requirements of
any applicable laws, and is fully
funded.


 


3.18.3          Each
of the Group Companies has performed and complied with all Benefit Arrangements in all material respects.


 


3.18.4          Shanghai JNET  and the Company
have furnished to the Buyer true and correct copies of the Employee Plans and Employment Arrangements.


 


3.18.5          There
are no actions, suits, arbitrations, inquiries, investigations or other
proceedings (other than routine claims for benefits) pending or, to the best knowledge of  the
Company, Shanghai JNET, the Sellers and the Shareholders, threatened,
with respect to any Employee Plan or Benefit Arrangement.


 


3.18.6          Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (either alone or in conjunction with any other event)
result in, cause the accelerated vesting or payment of, or materially increase
the amount or value of, any payment or benefit to any employee, officer or
director of Shanghai JNET or any
Company.


 


3.19        Absence of Corrupt Practices.


 


Neither the Group
Companies nor any of their respective officers, employees, directors,
representatives or agents has within the past three years knowingly offered,
promised, authorized or made, directly or indirectly, any unlawful payments to
any government official, including any official of any entity owned or
controlled by a government, with the intent or purpose of:


 


(i)            influencing
any act or decision of such official in his official capacity;


 


23

















 


(ii)           inducing
such official to do or omit to do any act in violation of the lawful duty of
such official; or


 


(iii)          inducing
such official to use his influence with a government or instrumentality thereof
to affect or influence any act or decision of such government or
instrumentality;


 


in order to assist any Group Company in obtaining or retaining business for or
with, or directing business to, any person.


 


3.20        Taxes.


 


3.20.1          For purposes of this Agreement:


 


(i)        “Tax” or “Taxes” means all income, profits,
franchise, gross receipts, capital, sales, use, withholding, value added, ad
valorem, transfer, employment, social security, disability, occupation, asset,
property, severance, documentary, stamp, excise and other taxes, duties and
similar governmental charges or assessments imposed by or on behalf of the PRC, or any state or local or other foreign, state or local governmental
authority and any interest, fines, penalties or additions relating to any such
tax, duty, charge or assessment; and


 


(ii)       “Tax Return” means any return, report, information
statement, or similar statement required to be filed with respect to any Taxes
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return and declaration of
estimated Tax.


 


3.20.2          Except
as set forth in Section 3.20.2 of the Disclosure Schedule, all Tax Returns
required to be filed on or before the Closing Date by or on behalf of, or in
which is required to be reported the income or other items of, the Company and Shanghai JNET have been or will be filed
within the time prescribed by law (including extensions of time permitted by
law).  Such Tax Returns are or will be
accurate, correct, and complete in all material respects.


 


3.20.3          Except
as set forth in Section 3.20.3 of the Disclosure Schedule, the
Company and Shanghai JNET have paid, or will pay
within the time prescribed by law, all Taxes of that are due on or before the
Closing Date (including, but not limited to, Taxes shown to be due on the Tax
Returns described in the preceding paragraph), except those Taxes that are
being disputed in good faith.


 


3.20.4          There are no liens, claims or
encumbrances of any kind whatsoever for Taxes, other than Taxes not yet due and
payable, upon any of the properties or assets of the
Company and Shanghai JNET.


 


3.20.5          Except
as set forth in Section 3.20.5 of the Disclosure Schedule, all Taxes
required to be withheld, collected or deposited by the
Company and Shanghai JNET (including, but not limited to, amounts
required to be withheld, collected or deposited with respect to amounts paid or
owing to any employee, creditor, independent contractor or other person) as of
dates through and including the Closing Date have been timely withheld,
collected or deposited and, to the extent required, have been timely paid to
the relevant taxing authority.


 


24

















 


3.20.6          Except
as set forth in Section 3.20.6 of the Disclosure Schedule, no claim has
been made against any of  the Company and Shanghai JNET by any tax authority in any
jurisdiction where that company did not file payroll, unemployment, social
security or social insurance, or similar Tax Returns or did not pay payroll,
unemployment, social security or social insurance, or similar Taxes, to the
effect that such company is or may be subject to payroll, unemployment, social
security or social insurance, or similar Taxes by that jurisdiction.


 


3.21        Representations of the Sellers and the Shareholders.


 


3.21.1          Each of the
Sellers and the
Shareholders who receive Ordinary Shares under this
Agreement (collectively, “Purchasers”) hereby acknowledges and
understands that the shares of the
Buyer’s Ordinary Shares to be received under this Agreement have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”)
or any securities acts of any other state or country (“Other Acts”),
that the shares of the Buyer’s Ordinary
Share to be received under this Agreement are being issued in reliance upon
one or more exemptions from registration contained in the Securities Act and
the Other Acts, and that the Buyer’s
reliance on such exemptions is based in part upon the representations made by
the Purchasers in this Agreement.


 


3.21.2          Each of the Purchasers hereby
represents to the Buyer that such Purchaser is acquiring the  Buyer’s Ordinary Shares solely for the Purchaser’s own account and not for offer or sale in connection with,
the unregistered “distribution” of all or any part of the Buyer’s Ordinary Shares within the meaning of the
Securities Act.  Each of the Purchasers
acknowledges and agrees that the issuance of the Buyer’s
Ordinary Shares has not been reviewed or approved by the Securities and Exchange Commission or any other governmental agency or department.


 


3.21.3          Each of the Purchasers is aware of the
provisions of Rule 144 promulgated under the Securities Act (“Rule 144”),
which permits limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for such shares
and the availability of certain current public information about the
issuer of such shares.  Each of the
Purchasers hereby acknowledges that the provisions of Rule 144 are not now
available for the public resale of the Buyer’s
Ordinary Shares and that such Purchaser has no right to require the Buyer’s
Ordinary Shares  be registered
under the Securities Act.


 


3.21.4          Each of the Purchasers hereby
represents to the Buyer that
such Purchaser is a resident of the country set forth on Section 3.22.4
of the Disclosure Schedule and a non-U.S. person.  Each Purchaser represents that such Purchaser
is able to bear the economic risk with
respect to the  Buyer’s Ordinary
Shares.


 


3.21.5          Each Purchaser acknowledges that such
Purchaser had given access to all
information which are necessary or
advisable for such Purchaser to make an
informed decision concerning the acquisition
of  the  Buyer’s
Ordinary Share.  Each
Purchaser is receiving the Buyer’s Ordinary
Share based solely on such Purchaser’s investigation of, and satisfaction
with, the Buyer’s current and
anticipated financial condition and assets. 
Each Purchaser confirms that the
Purchaser and Purchaser’s representatives and advisors have been given
the 


 


25

















 


opportunity to inquire against the Buyer or the persons acting on behalf of the Buyer concerning the business and prospects of the Buyer.


 


3.21.6          Each Purchaser understands that it must not, and agrees that such Purchaser will not, sell, transfer,
assign, encumber or otherwise dispose of the Buyer’s
Ordinary Shares or any interest therein, unless prior thereto such
Purchaser has delivered to Buyer, and Buyer has accepted as satisfactory, an
opinion of competent counsel to the effect that such proposed sale, transfer,
assignment, encumbrance or disposition will not constitute or result in any
violation of the Securities Act and the Other Acts, or any other applicable
statute relating to the disposition of securities.


 


3.21.7          Each Purchaser will at any time and
from time to time, promptly execute and deliver all further amendments,
modifications, agreements, instruments and documents and take all further
action that the Buyer may
request in order to effect the agreements and acknowledgments set forth in this
Section 3.21.


 


3.22        Disclosure of Information.


 


The Company, Shanghai JNET, the Sellers and the
Shareholders have provided the Buyer with all information relating to the
JNET Products, JNET Intellectual Property and the business,
operations, assets and liabilities of the
Group Companies  that are necessary
for the Buyer to decide to consummate the transactions contemplated hereunder. All such information has been prepared by the Group
Companies and the Shareholders in good faith and in a
diligent and professional manner.  No
representation or warranty by the Company, Shanghai
JNET, the Sellers and the Shareholders in this Agreement and no
information or materials provided by them
to the Buyer in connection with the negotiation or execution of
this Agreement contains any untrue statement of a material fact, or omits to
state any material fact (i) required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they are made, not misleading or (ii) which would affect the Buyer’s investment decision.


 


3.23        Other Representations and Warranties Relating to Shanghai JNET.


 


Except
for those set forth in Section 3.23 of the
Disclosure Schedule:


 


3.23.1          The constitutional documents and
certificates of Shanghai JNET are valid and
have been duly approved or issued
by, or filed with (as applicable) the
competent authorities of the PRC.


 


3.23.2          All approvals, permits,
filings and registrations by or with the relevant government authorities in
respect of Shanghai JNET and the conduct of its
business operations have been duly obtained in accordance
with the applicable laws and regulations of the PRC and the local rules, regulations
and decrees of Shanghai.


 


3.23.3          As of the date of this
Agreement, Chen Peidi owns and controls 100% of the equity interest of Shanghai
JNET, free
of any liens, pledges, claims, charges, encumbrances and third party
rights.  Chen
Peidi has the full power, authorization and capacity to transfer the Domestic
Interests pursuant to the PRC Restructuring.


 


26

















 


3.23.4          As of the date hereof, the
registered capital of Shanghai JNET has been paid
in full in accordance with the schedule set
forth in its articles of association.


 


3.23.5         Each of the contracts, agreements and documents listed on Exhibit D
hereto (the “Existing Control Documents”) has been duly executed and
delivered by the parties thereto.  The
execution and deliver of the Existing Control Documents, and the
consummation of the transactions contemplated therein, do not (i) result in any violation of the articles of association,
business license or other constitutive documents of the
Company and Shanghai JNET,
or (ii) conflict with or constitute a breach of any Contract or Transferred Contract. 
Each of the Existing Control  Documents is a valid and binding obligation of the Company and Shanghai JNET and Chen Peidi, enforceable in
accordance with its terms.


 


3.23.6          Except
for those contemplated under the Existing
Control Documents
and New Control Documents (as defined in Section 7.1.5(viii)),
there are no outstanding rights, or commitments made by Shanghai JNET to sell any of its equity
interest, and
none of the outstanding equity interest in Shanghai
JNET is subject to any preemptive rights, rights of first refusal or other
rights to purchase such shares (whether in favor of the
Company or any other person).


 


3.23.7          Except for the transaction
contemplated hereunder and under the Existing Control Documents and New Control
Documents, there are no outstanding commitments made by Shanghai JNET to sell
any of its assets, properties, JNET Intellectual Property or business to any
third party.


 


3.23.8          At present there  is no (i) action, suit,
proceeding, claim, arbitration or investigation pending against Shanghai JNET, any of the assets or properties of Shanghai JNET, or any
of the business being conducted by Shanghai JNET, or (ii) creation of any
third party rights on any assets or properties of Shanghai JNET (i.e. JNET
Intellectual Property), or (iii) any material  change in the
liabilities, management, marketing
strategy or financial condition of Shanghai
JNET, that is likely to result, individually or in the aggregate, in any conflict with the transactions contemplated hereunder, including without
limitation the PRC Restructuring (as defined in Section 7.1.5).


 


3.23.9          The use, distribution,
licensing, sale, or disposal of any asset or property of Shanghai JNET does not infringe, misappropriate or violate any
rights of any other party.


 


3.23.10        Shanghai JNET is not in receipt of any letter or notice from any relevant authority
notifying revocation of any permits or licenses issued to it for noncompliance
or the need for compliance or remedial actions in respect of the activities
carried out directly or indirectly by it.


 


3.23.11        Shanghai JNET has been conducting its
business activities within the permitted scope of business or is otherwise
operating its business in full compliance with all relevant legal requirements
and with all requisite licenses, permits and approvals granted by competent
authorities  of the jurisdiction of its incorporation.


 


27

















 


3.24        Other Representations and Warranties
Relating to the Shareholders


 


Except
for those set forth in Section 3.24 of the Disclosure Schedule,


 


3.24.1          None of the Shareholders presently
owns or controls,  and will as of the
Closing own or control, directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, association, or other entity, except for the equity interest in the relevant Group Companies and the
Sellers.


 


3.24.2          None of the Shareholders presently and
will as of the Closing own, manage, operate, finance, join, or control, or
participate in the ownership, management, operation, financing or control of,
or be associated as a director, senior management, partner, lender, investor or
representative in connection with, any business
or corporation, partnership, or organization which competes with any Group Company  or with which a
Group Company has a business relationship.


 


3.24.3          There is no action, suit,
proceeding, claim, arbitration or investigation pending against any of the Shareholders in connection with his or her involvement with any Group
Company.  No Shareholder is a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality and there is no action, suit, proceeding, claim, arbitration
or investigation which a Shareholder intends to
initiate in connection with his or her involvement
with the Group Companies.


 


3.24.4          Each of the Shareholders has complied
with all PRC laws and other applicable laws and decrees in connection with his
or her ownership or control of equity securities in the relevant Seller, if
applicable.


 


3.25        Other Representations and Warranties
Relating to the PRC Restructuring


 


Except
for those set forth in Section 3.25 of the Disclosure Schedule, to
the best knowledge of Shanghai JNET and the Shareholders (after due investigation),


 


3.25.1          each of Shanghai He Shuo and Shanghai
Chuan Wang has the legal, valid and full title to all the
tangible and intangible assets (including without limitation the JNET Intellectual
Property) currently owned and used by it that are essential to the conduct of
the Principal Business (collectively the “Transferred Assets”), free and
clear of any mortgages, pledges, liens, encumbrances, security interest or charges of any kind.


 


3.25.2          each of Shanghai He Shuo and Shanghai
Chuan Wang has the full power, capacity and authority, and has duly obtained
all valid and lawful authorizations, approvals, registrations and permits,
necessary for it to own, sell, license, use and operate the Transferred Assets.  Each of Shanghai He Shuo and Shanghai Chuan Wang
has the full power, authorization and capacity to transfer the Transferred Assets
to Shanghai JNET before the Closing pursuant to the PRC Restructuring.  The use, distribution,
licensing, sale, or disposal of
any of the Transferred Assets does not infringe,
misappropriate or violate any rights of any other party. No license to use or
the right to acquire the Transferred Assets has ever been granted to any third
party, except as contemplated herein.


 


28

















 


3.25.3          with respect to the Transferred Contracts, there has been no threat or claim of
default or violation of any obligations thereunder by any signing party thereto.


 


3.25.4          Exhibit D
sets forth a complete list of all the employees who are essential to the
Principal Business and who will terminate employment relationship with Shanghai
He Shuo or Shanghai Chuan Wang and enter into employment contracts with
Shanghai JNET upon the Closing (the “Transferred Personnel”).  There is currently no judicial, legal, administrative or arbitration
proceedings, suits, actions
claims, inquiries or investigations by any
court or governmental authority pending (or, to the best knowledge of Shanghai JNET and the Shareholders, currently threatened) against any of Shanghai He Shuo or Shanghai Chuan Wang  in connection with such Transferred Personnel’s employment relationship
with, or action taken on behalf of the Shanghai He Shuo or Shanghai Chuan Wang.
None of the Transferred Personnel has any dispute with, or claim against, Shanghai
He Shuo or Shanghai Chuan Wang or intends to initiate legal, administrative or
arbitration proceedings against Shanghai He Shuo or Shanghai Chuan Wang.


 


4.             REPRESENTATIONS AND
WARRANTIES OF THE BUYER.


 


Buyer
hereby represents and warrants as follows:


 


4.1          Corporate Existence
and Good Standing.


 


The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the Cayman Islands and has all
requisite corporate power and authority to own, operate and to carry on its
business as currently conducted.


 


4.2          Authorization;
Validity of Agreement.


 


The
execution, delivery and performance by the
Buyer of this Agreement and each of the other agreements and
instruments contemplated hereby to which Buyer is a party have been duly authorized
and approved by the board of directors of Buyer.  This
Agreement and each of the other agreements and instruments contemplated hereby
to which the Buyer is or is contemplated
to be  a party have been or will have been
duly executed and delivered by the
Buyer and are or will be the legal, valid and binding obligations of the Buyer enforceable against
the Buyer in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles.


 


4.3          Purchase
Consideration.


 


When issued and delivered to the Sellers at the Closing,
the Buyer’s Ordinary Shares issued as
Purchase Consideration will be duly and validly authorized, fully paid, and non-assessable.


 


29






 










 


5.                                      COVENANTS
AND UNDERTAKINGS


 


5.1                               Compliance by the Company, Shanghai JNET and the
Shareholders


 


5.1.1                                    Before the Closing Date, the Company shall, and the Shareholders shall cause the Company to, fully comply with all
applicable laws, regulations, rules and decrees of the British Virgin
Islands and all requirements of the competent government authorities with
respect to its conducting of business and performing of obligations hereunder, on a continuing basis.


 


5.1.2                                    Before the Closing,
Shanghai JNET shall, and the Shareholders shall cause Shanghai JNET
to, fully comply with all applicable laws, regulations, rules and decrees
of the PRC and all requirements of the competent PRC government authorities
with respect to its conducting of business and performing of obligations
hereunder, on a continuing basis.


 


5.1.3                                    Each of the Shareholders shall, at his or her own expense, fully  comply
with all
applicable laws, regulations, rules, and decrees of the PRC as well as all requirements under the notices, circulars and legal
documents issued by  any PRC governmental authorities from time to time with respect to his or her indirect holding of Ordinary Shares  of  the Buyer, where
applicable, on a continuing basis.


 


5.2                               PRC Restructuring and Financial Achievements.


 


The Shareholders jointly and
severally undertake and covenant that, commencing
from the date hereof, they shall:


 


(i)                         cause Shanghai He Shuo and Shanghai Chuan Wang to fulfill all
procedures, and obtain all approvals, permits, registration and filing, as
required under the applicable PRC laws and regulations, for the (i) transfer
and assign of the Transferred Assets to Shanghai JNET, and (ii) termination
of employment relationship with each of the Transferred Personnel, who will
subsequently enter into employment agreements with Shanghai JNET;


 


(ii)                      cooperate with all the existing business partners, suppliers, customers
of Shanghai He Shuo and Shanghai Chuan Wang in order to transfer all the rights
and obligations under the Transferred Contracts to Shanghai JNET;


 


The Shareholders and the
Group Companies shall in good faith draw up a complete and accurate list of all
the revenue and income generated from, and all payment made pursuant to, each
of the Transferred Contracts and the Contracts; the Shareholders shall not
conceal, transfer or use any of such revenue and income without the prior
written consent of the Buyer; any operation cost of a Group Company shall be
paid under the name of such Group Company, and shall not be paid in the name of
any Shareholder;


 


(iii)                   obtain and secure the supplies, resources, customers, cooperation
projects, partnership relationship, marketing and business opportunities for
the JNET Products and on-going Principal Business of Shanghai JNET, and provide
such supplies, resources, customers, cooperation projects, partnership
relationship, marketing and business opportunities only to Shanghai JNET, so as
to ensure the profits and sound financial condition of Shanghai JNET; and


 


30

















 


(iv)                              cause and assist Shanghai JNET to carry out the business, activities and
undertakings as approved by or in accordance with the instruction of the Buyer
and make best efforts to ensure the optimal level of revenue and profits of
Shanghai JNET.


 


5.3                               Termination of Shanghai He Shuo and Shanghai Chuan
Wang.


 


The Shareholders jointly and
severally covenant that within two (2) months
after the Closing Date, they shall pass resolutions approving the termination
and liquidation of Shanghai He Shuo and Shanghai Chuan Wang, and cause Shanghai
He Shuo and Shanghai Chuan Wang to complete all procedures and obtain all
approvals, permits, registration and filings as required under PRC laws for the
same.


 


5.4                               No Material Adverse Effect.


 


Until and after the completion of the Fourth
Payment, the Shareholders, in the capacity as the officers of the Company and
Shanghai JNET, shall take all necessary actions to ensure that no Material
Adverse Effect shall have occurred in the
business, prospects, operations, properties, assets or financial or legal conditions of the Company and Shanghai JNET.


 


5.5                               Covenants
Not to Compete.


 


5.5.1                                    Each of the Shareholders undertakes and covenants to
the Company and the Buyer that he/she shall devote his/her
substantial business
time, energy, skill and efforts to
furthering the Principal Business of the Company and Shanghai
JNET or other business of the Buyer as approved by the Buyer and shall not,
without the prior written consent of the Buyer, either on his/her own account or through any of his/her  affiliates, or in conjunction with or on behalf of any other person,
carry out or be engaged or interested directly or indirectly whether as
shareholder, director, employee, partner, agent in any business
other than the JNET Products and the Principal Business of the Company
and Shanghai JNET and other business of the Buyer as approved by the Buyer.


 


5.5.2                                    Each of the  Shareholders undertakes to
the Company and the  Buyer that
commencing from the date of this Agreement for the later of a period of twenty four (24) months after
he/she ceases to (x) be employed by the  Company or Shanghai JNET or (y) hold the Ordinary Shares of the Buyer, he/she will not,
without the prior written consent of the
Buyer, either on his/her own account or
through any of his/her  affiliates, or in conjunction with or on behalf of any other person: (i) invest or be engaged or interested directly or indirectly in any other corporate or entity which
carries out any business that is  the
similar to, or in direct competition with, the Principal Business of Shanghai
JNET or any business of the Buyer, or otherwise carry out any such business; (ii) act as the shareholder, director,
employee, partner, agent or representative of any entity
described in subsection (i) above;
(iii) solicit or entice away or attempt to solicit or entice away from the Buyer, any affiliate of the Buyer, the Company, Shanghai JNET, any person,
firm, company or organization who is a customer, client, supplier, business partner, contractor, representative, agent or
correspondent of the Buyer, such affiliate
of the Buyer, the Company or Shanghai JNET.


 


5.5.3                                    Shanghai JNET shall not engage in any business or activity that are not
approved by the board of directors of the Buyer.


 


31

















 


5.5.4                                    Each of the Shareholders shall, and cause employees of Shanghai JNET,
keep and maintain the confidentiality of all JNET Confidential Information and
comply with the Confidentiality, Non-Compete, Intellectual Property
Assignment Agreement to be entered into upon the Closing.


 


5.6                               Licenses and Certificates.


 


The Shareholders jointly and
severally undertake to the Company, Shanghai
JNET and the Buyer that as soon as practicable
and in any event no later than the sixtieth
(60th) day after the Closing Date, they shall assist Shanghai JNET in applying
for and securing all licenses, permits and certificates as required under the
applicable PRC laws and regulations in connection with all aspects of the
Principal Business, including without limitation the licenses and certificates
for carrying out the lease of broadband and the IDC business.


 


5.7                               Information
Access for Due Diligence.


 


Commencing
from the date hereof, Shanghai JNET and
the Shareholders shall allow
the Buyer and its independent auditors, legal
counsels, financial advisors and the
representatives (collectively, “Buyer
Representatives”) (1) full access to the Contracts, Transferred Contracts, accounts, books,
records, financial statements, corporate
documents, database, the Transferred Assets, properties and assets (including without limitation the JNET Intellectual
Properties) of the Group Companies, and (2) the right to
discuss the business, operations and the
legal and financial conditions of the
Group Companies with their
respective directors, officers, employees, accountants, legal counsel and
investment bankers.  In addition, Shanghai JNET and the Company shall provide the Buyer and the  Buyer
Representatives with copies of all notices, reports or other documents filed or
sent to any governmental authority by Shanghai
JNET and the Company in connection with the transactions contemplated by
this Agreement.


 


5.8                               Actions
Pending Closing.


 


Prior to the Closing, unless otherwise
permitted or required by this Agreement or with the prior written consent of the Buyer,  each of Shanghai JNET and the Company
shall, and the Shareholders shall cause each of Shanghai JNET and the Company
to:


 


(i)                                                 operate its business only in the ordinary course and not introduce any new business lines or business development or incur any obligation or
liability, absolute or contingent, other than those incurred in the ordinary
course of the businesses consistent with past practices;


 


(ii)                                              use its best efforts, consistent with the manner in which its business is currently being
conducted, to preserve its assets and businesses intact, to retain its
present customers, suppliers and business partners, and to cause the consummation of the
transactions contemplated by this Agreement in accordance with its terms and
conditions;


 


(iii)                                           not take any action that could result
in a Material Adverse Effect
to any of the Group Companies, or take or fail to take any
action that would cause or permit any
of the 


 


32

















 


representations
and the warranties  in Section 3
of in this Agreement be inaccurate
or misleading in any material respect at the time of the Closing;


 


(iv)                                          not incur or assume any debt,
obligation, or liability in excess of US$10,000 individually or US$25,000 in the aggregate, except for those made during the ordinary course of business consistent
with past practices;


 


(v)                                             not sell, transfer, pledge, mortgage, create any third party right on,
or otherwise dispose of any of its assets, Transferred Assets and JNET
Intellectual Property, or otherwise subject any of
its assets, Transferred Assets and JNET Intellectual
Property to any lien, lease, security interest or other charge or encumbrance;


 


(vi)                                          not alter, terminate or assign any JNET Products;


 


(vii)                                       not make distributions to the Shareholders;


 


(viii)                                    not provide any loan;
not guarantee any indebtedness
for borrowed money;


 


(ix)                                            not write up, write down or write off the carrying value of any of its
assets (including the Transferred Assets);


 


(x)                                               not change its principle of accounting;


 


(xi)                                            not waive any valuable right
or any material debt;


 


(xii)                                         not enter into, terminate or agree to any modifications or amendments to
any Contract and any Transferred
Contract;


 


(xiii)                                      not make any material increase or decrease in
any salary or compensation of, or grant additional benefit to, any officer, employee or agent;


 


(xiv)                                     not make any payments to any shareholders or other affiliates, or advance to any person or entity;


 


(xv)                                        not establish any subsidiary or branch office, or acquire any
equity interest or security of any corporation, partnership, joint venture, or
other entity;


 


(xvi)                                     not redeem, purchase, or otherwise acquire, or sell, grant, or otherwise
dispose of, directly or indirectly, any of its capital stock or securities or
any rights to acquire such capital stock of securities, or agree to change
terms or conditions of any such capital stock, securities or rights;


 


(xvii)                                  not declare, pay or set aside for payment any dividend or distribution
with respect to its capital stock;


 


(xviii)                               not enter into any plan for the liquidation, dissolution or winding up
of Shanghai JNET or the Company;


 


33

















 


(xix)                                       not enter into any agreement or plan for
the acquisition, merger, consolidation, reorganization, share exchange, recapitalization;


 


(xx)                                          not amend the articles of association or other corporate documents, not
amend or terminate any of the Existing Control Documents;


 


(xxi)                                       not take any action or omit to take any action that would render any
licenses, certificates or permits currently possessed by Shanghai JNET invalid
or revoked, or violate any requirements of such licenses, certificates or
permits;


 


(xxii)                                    not enter into any commitment or transaction that is material to this
Agreement or the transactions contemplated hereby,
except for the transactions contemplated hereby.


 


5.9                               Notice
of Material Changes.


 


If
at any time before the Closing, the Company, Shanghai
JNET and any Shareholder comes to know of any material fact or event which:


 


(i)                                     is in any way
materially inconsistent with any of the representations and warranties given by
them  under
Section 3 of this Agreement, and/or


 


(ii)                                  suggests that
any material fact warranted may not be as warranted or may be materially
misleading, and/or


 


(iii)                               would have a Material Adverse Effect on the assets,
liabilities, business, operations or condition (financial or otherwise) of Shanghai JNET or the Company, or on the JNET Intellectual Property
or  JNET i Products, and/or


 


(iv)                              might affect
the willingness of a prudent investor to purchase the Company Shares or the amount of consideration which such
investor would be prepared to pay for the Company Shares,


 


the Company, Shanghai JNET or such Shareholder shall give immediate
written notice thereof to the Buyer in which event
the Buyer may within fourteen (14)
business days of receiving such notice terminate this Agreement by written
notice without any penalty whatsoever and without prejudice to any rights that the Buyer may have under this Agreement or applicable law.


 


5.10                        Exclusiveness.


 


None
of Shanghai JNET, the Company, the Sellers or the Shareholders shall seek or
solicit indications of interest, or seek or solicit offer, or discuss,
negotiate or enter into any agreements with any other person or entity with
respect to the sale of any of the assets or capital stock or equity interest of Shanghai
JNET or the Company, or the merger or consolidation of Shanghai JNET or the Company with any other person or entity.


 


34

















 


5.11                        Public
Announcements.


 


Prior to and after the Closing each party agrees to use its best
efforts to consult with the other before issuing any press releases or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement.  Shanghai JNET, the Sellers
and Shareholders agree that they shall not issue any such press release or
make any such public statement prior to the receipt of Buyer’s approval in
writing of such press release, or public statement.  No approval by either party of any such press
release or public statement shall be unreasonably withheld or delayed.


 


5.12                        Use of Purchase Consideration.


 


The Buyer shall have no responsibility or liability with
respect to the Sellers’  use or distribution of the Purchase Consideration, it being acknowledged and agreed that the Sellers shall have sole responsibility and liability with respect to the same.


 


5.13                        Offset Right.


 


Notwithstanding anything
herein to the contrary, the Buyer shall be
entitled to offset, against any consideration otherwise payable to the Sellers, any amount which any of the Shareholders, the Sellers,
the Company or Shanghai JNET may owe to the Buyer. Without
limiting the generality of the foregoing, the Buyer shall be
entitled to reduce the payment of the Purchase
Consideration otherwise payable to the Sellers by an amount equal to the aggregate amount due and payable by any of the Sellers, the Shareholders, the Company or Shanghai JNET to the Buyer.


 


5.14                        Incentives to the Shareholders


 


In case of the audited 2008 Profit
exceeds RMB 45,000,000 and
as a result the valuation of Shanghai JNET exceeds RMB 245,000,000, the Buyer
shall pay to the Sellers a cash incentive
(the “Incentive”) in the amount calculated as follows:


 


Incentive = (2008 Profit —
RMB 45,000,000) * 5.5 + Purchase Consideration (after Price Adjustments as set
forth in Section 1.2.4) - RMB 245,000,000.


 


The
Incentive shall be paid in two installments, with the first payment to be made
together with the Second Payment described in Section 1.2.3.2 and Section 1.2.4.3
and the second payment to be made on December 31, 2009.


 


6.                                      TAX
MATTERS.


 


6.1                               Tax
Returns and Payments.


 


6.1.1                                    Immediately after the date hereof, the Shareholders and Shanghai JNET
shall seek advice from the competent tax departments of the PRC and tax
advisors with respect to the types of Taxes applicable to Shanghai JNET and the
rate of such Taxes.


 


35

















 


6.1.2                                    The Sellers and the Shareholders shall cause the Company and Shanghai JNET to prepare and timely file
all required state, local and foreign Tax Returns of the Company and Shanghai JNET for any period which ends on or before the
Closing Date and for which Tax Returns are due to be filed on or prior to the
Closing Date.  At least twenty (20) days before the due date of any such Tax Return, the Company and Shanghai  JNET
shall deliver a copy of such Tax Return to the
Buyer for its review and
approval (which approval will not be
unreasonably withheld or delayed).  The Company and Shanghai JNET shall make changes to the Tax Return in accordance with the reasonable  request of the Buyer if the request
is consistent with the applicable laws.  Final copies of all such Tax Returns shall be
provided to the Buyer promptly
after the filing of such Tax Returns.  The Company and Shanghai JNET shall prepare and file all Tax
Returns required to be filed by them for taxable
periods ending after the Closing Date.


 


6.1.3                                    The Company and Shanghai JNET shall pay all
Taxes shown to be due on the Tax Returns filed on or prior to the Closing Date
from its cash flow and other resources available to it on or prior to the
Closing Date.


 


6.1.4                                    The Shareholders shall cause the
Company and Shanghai JNET to pay all Taxes shown to be due on the Tax
Returns filed after the Closing Date.  After the Closing,  the
Sellers, the
Shareholders, the Company and Shanghai
JNET  shall provide all such cooperation and
information as the Buyer may reasonably
request for filing any Tax Return,
amended Tax Return or claim for refund, determining a liability for Taxes or a
right to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes
of the Buyer and the Group Companies.


 


6.2                               Refunds.


 


Any refunds or credits of
state, local and foreign Taxes (including any interest thereon) received by or
credited to the Company or Shanghai JNET attributable to periods ending on or
prior to the Closing Date or after the Closing Date shall be for the benefit of
the Buyer, if the 2007 Profit does include any accrual of such refunds or
credits.  Otherwise, such refunds or
credits shall be adjusted to the Purchase Consideration calculated based upon
2007 Profit as set forth in Section 1.2.4.


 


6.3                               Tax on Purchase Consideration.


 


The Sellers and the Shareholders shall have sole
responsibility and liability for any and all
taxes and charges incurred on the Purchase Consideration received by them.


 


7.                                      CONDITIONS
PRECEDENT TO OBLIGATIONS.


 


7.1                               Conditions
Precedent to Buyer’s Obligations.


 


Except as may be waived in
writing by the Buyer, the obligations of the Buyer to purchase the Company
Shares and pay for the Closing Payment are subject to the
satisfaction of the following conditions:


 


36

















 


7.1.1                                    Representations
and Warranties.  The
representations and warranties of the
Company, Shanghai JNET, and
each Seller and  each Shareholder
contained in Section 3 of this Agreement  and in each Ancillary Document shall be true and correct in all material respects as of the date hereof, and
shall be true and correct in all material respects at the Closing Date, with
the same force and effect as if such representations and warranties had been
made at and as of the Closing Date.


 


7.1.2                                    Performance of Obligations.  Each of the Sellers,
the Shareholders, Shanghai JNET and the Company shall have performed and
complied in all material respects with all obligations,
covenants or conditions required under this Agreement
or any of the Ancillary Documents that are
required or contemplated to be performed or complied with by it on or before
the Closing.


 


7.1.3                                    No Action.  No action, proceeding or order by any court
or governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to which will restrain or
prohibit the carrying out of the transactions contemplated by this Agreement or
which would impose any material limitation on the ability of the Buyer to effectively exercise full rights of
ownership of any of the Company Shares after the Closing Date or that would impose any material limitation on
the ability of the Company and Shanghai  JNET to operate the businesses as currently conducted after the Closing Date.


 


7.1.4                                    No Material
Adverse Effect.  No Material Adverse Effect shall have occurred in the business, prospects,
operations, properties, assets or financial
or legal conditions of the Company or Shanghai JNET since the Latest Balance Sheet.


 


7.1.5                                    PRC Restructuring.  Before the Closing, the Company, Shanghai JNET
and each Shareholder shall have completed each and all of the following
restructuring and reorganization procedures with respect to the Group Companies
(collectively the “PRC Restructuring”):


 


(i)                                     each of Shanghai He Shuo and Shanghai Chuan Wang shall have transferred
and assigned all the rights and obligations of all of the Transferred Contracts
to Shanghai JNET; the Shareholders and the Group Companies shall have provided
the Buyer with a complete and accurate list of all the revenue and income
generated from, and all payment made pursuant to, each of the Transferred
Contracts and the Contracts; each of Shanghai He Shuo and Shanghai Chuan Wang
shall have transferred all the revenue and income received or receivable by it
to Shanghai JNET;


 


(ii)                                  all after-tax profits of Shanghai He Shuo and Shanghai Chuan Wang during
the period from January 1, 2007 to July 31, 2007 shall have been
transferred to Shanghai JNET in the manner consistent with the applicable PRC
laws and regulations;


 


(iii)                               each of Shanghai He Shuo and Shanghai Chuan Wang shall have transferred
all of the Transferred Assets (including without limitation the IP address and
equipment related to the Principal Business) to Shanghai JNET, free and clear
of any mortgages, pledges, liens, encumbrances, security interest or charges of any kind; each of Shanghai JNET, 


 


37

















 


Shanghai He Shuo and
Shanghai Chuan Wang shall have obtained all approvals, permits, registration
and filings required under the applicable PRC laws and regulations for such
transfer;


 


(iv)                              each of the Transferred Personnel shall have terminated his/her employment relationship with Shanghai
He Shuo or Shanghai Chuan Wang in accordance with the
applicable PRC labor  laws
and regulations; each of the Transferred Personnel and the current employees of
Shanghai JNET shall have entered into a new employment contract, a Confidentiality
Agreement, an Intellectual Property Assignment
Agreement and a Non-Compete and Non-solicitation Agreement, each in the form and substance to the satisfactory of the Buyer, with
either Shanghai JNET or an affiliate of the Buyer.
Before termination of the employment relationship with the Transferred
Personnel, Shanghai He Shuo and Shanghai Chuan Wang shall  have (1) fully paid
the outstanding salaries, allowances, subsidies, bonuses or other
payments or benefits to the Transferred
Personnel; (2) withheld, filed and paid the individual income tax payable
on wages, bonuses, allowances, subsidies, or other payments or benefits
received by the Transferred Personnel; and (3) fully settled the severance
payments with the Transferred Personnel as required by applicable PRC laws and
regulations, if applicable;


 


(v)                                 Shanghai JNET shall have delivered to the Buyer the execution copy of
each of the Existing Control Documents;


 


(vi)                              Chen Peidi shall have transferred all of the Domestic Interests in
Shanghai JNET to the persons designated by the Buyer, and Shanghai JNET shall
have completed all procedures, and obtained all approvals, permits,
registration and filings, as required under the applicable PRC laws and
regulation, for (1) the transfer of the Domestic Interests, and (2) transforming
Shanghai JNET from an one-shareholder company to a two-shareholder company. The
ICP license of Shanghai JNET shall have been amended with the relevant
telecommunication department to reflect the equity transfer.


 


(vii)                           the present executive director of Shanghai JNET shall have resigned,
effective not later than the Closing Date. 
The Buyer shall have received satisfactory evidence, indicating (1) the
resignation of the present executive
director of Shanghai JNET and (2) appointment
of new directors appointed by the Buyer to Shanghai JNET, effective not
later than the Closing Date.


 


(viii)                        the Company and Chen Peidi shall have transferred all of their rights
and obligations under the Existing Control Documents to the wholly-owned
subsidiary of the Buyer and persons designated by the Buyer, respectively, and
all necessary amendments have been made to the Existing Control Documents, in
the form and substance satisfactory to the Buyer (the “New Control Documents”).


 


(ix)                                the Shareholders and Shanghai JNET shall have provided the Buyer with
certificates or documents issued by the competent tax departments of the PRC,
indicating the amount of Tax paid by Shanghai JNET.


 


(x)                                   the Group Companies shall have entered into all the documents as
required under the PRC laws and regulations and by the legal counsel of the
Buyer to give effect to the PRC Restructuring (collectively the “Restructuring
Documents”).  Each of the 


 


38

















 


Group
Companies shall have delivered to the Buyer original copies of the shareholders’
resolutions and board resolutions approving the PRC Restructuring and execution
of the relevant Restructuring Documents to which it is a party.


 


7.1.6                                    Unilateral Undertaking.  Each of the Shareholders (except Zhang
Shijie) shall have delivered to the Buyer and Shanghai JNET a unilateral
undertaking letter in respect of his or her obligations set forth in Section 5.2
(iii) and (iv).


 


7.1.7                                    Approvals and Filings.  Each
of the Sellers, the Shareholders, Shanghai  JNET and  the Company  shall have completed all filings
and registrations with, and obtained all consents and approvals from,  the competent governmental
authorities and any third parties as required by the applicable laws of its respective jurisdiction or
any contract or agreement to which it is bound that are necessary for the execution and performance of this Agreement, Ancillary Documents
and Restructuring Documents, and for the consummation of the
transactions contemplated hereby and
thereby, including but not limited to all approvals, registration and filings required
by the SAFE and the Ministry of Commerce of the PRC, where applicable.


 


7.1.8                                    Due Diligence.  The Buyer shall have completed the legal and financial due diligence investigation against Shanghai
JNET, Shanghai He Shuo, Shanghai Chuan Wang, and the Company to its
satisfaction.


 


7.1.9                                    Sellers Releases.  Each
Seller  and each Shareholder
shall have delivered to the Buyer the Sellers Releases.


 


7.1.10                              Counsel Opinion.  The
Buyer shall have received opinions from
each of the  BVI counsel and PRC counsel to the Company, which shall be dated as of the Closing
Date and in form and substance satisfactory to the
Buyer.


 


7.1.11                              Register of
Members.  The
Buyer shall have received the original register of
members of the Company updated to show the  Buyer  being
the  sole and legal holder of the Company Shares as of the Closing.


 


7.1.12                              Register of Directors.  The present director(s) and officer(s) of
the Company shall have resigned, effective not later than the Closing
Date.  The Buyer shall have received the
original register of directors of the Company, updated to show (1) the
termination of service of the present director(s) of the Company and (2) entry
of the director(s) appointed by the Buyer.


 


7.1.13                              Delivery of Corporate Documents.  The Sellers and the Company shall have
delivered to the Buyer all original corporate documents of the Company and Shanghai
JNET, as described in Sections 2.2.4 and 2.2.5.


 


7.1.14                              Proceedings and Corporate Action.  All corporate actions and other proceedings in connection with the
transactions contemplated hereby and all documents and instruments incident to
such transactions shall have been obtained and satisfactory
in substance and form to the Buyer.  The Buyer shall have received all
original or certified copies of such documents,
including without limitation the board resolutions and shareholders’ resolutions of 


 


39

















 


each
Seller, the Company and
Shanghai JNET, authorizing the execution and delivery of this
Agreement and the transactions contemplated hereunder.


 


7.1.15                              Compliance Certificates.  The Buyer shall have received compliance
certificates, dated as of the Closing Date, signed by each Shareholder and a duly authorized
representative of the Company, Shanghai JNET and each Seller, certifying that (1) all
the representations and warranties made by
them this Agreement are true, correct
and complete when made, and are true, correct and complete as of the date of
the Closing, and (2) there has been no Material Adverse Effect in the business, prospects, operations, properties,
assets or financial or legal condition of
the Company and Shanghai JNET since Latest Balance Sheet;


 


7.1.16                              Certificate of Good Standing.  The Buyer shall have received the original certificate of
good standing issued by the Registrar of Companies of the British Virgin Islands dated no earlier than fifteen (15) business
days prior to the Closing certifying that Company has been duly incorporated,
has paid all required fees and taxes, and is validly existing and in good
standing under the laws of the British
Virgin Islands;


 


7.1.17                              Employment Agreement and Non-Competition Agreement.  Each
of the Shareholders shall have entered into an  Employment Agreement with a term of  no less than three (3) years,
a Confidentiality Agreement, an Intellectual
Property Assignment Agreement and a Non-Compete and Non-solicitation Agreement, each in the form and substance to the satisfactory of the Buyer, with
either Shanghai JNET or an affiliate of the Buyer.


 


7.1.18                              Employees
Insurance and Welfare.  Shanghai JNET shall have paid all the insurance, welfare, pension that are required by laws in the PRC in respect of its employees and the Transferred Personnel.


 


7.1.19                              Other Delivery. The Company,
Shanghai JNET, the Sellers and the Shareholders shall have delivered all other
documents listed under Section 2.2.


 


7.2                               Conditions
Precedent to the Sellers’ Obligations.


 


Except
as may be waived in writing by the Sellers, the
obligations of the Sellers to sell the Company Shares to the Buyer are subject to the
satisfaction of the following conditions:


 


7.2.1                                    Representations
and Warranties.  The
representations and warranties of
the Buyer contained herein and in each of the agreements, documents and
instruments executed pursuant hereto or thereto shall have been true and
correct in all material respects as of the date hereof, and shall be true and
correct in all material respects at the Closing Date, with the same force and
effect as if such representations and warranties had been made at and as of the
Closing Date.


 


7.2.2                                    Performance.  The
Buyer shall have performed and complied in all material respects with
all covenants or conditions required by this Agreement or any of the
agreements, documents or instruments executed pursuant hereto or thereto to be
performed and complied with by
the Buyer at or prior to the Closing.


 


40














 


7.2.3                                    No Action.  No action, proceeding or order by any court
or governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.


 


7.2.4                                    Board Approval.  The Agreement and the transactions
contemplated thereby shall have been adopted and approved by the meeting of the board of directors of the Buyer.


 


8.                                      INDEMNIFICATION.


 


8.1                               Indemnification
by the Sellers and Shareholders.


 


The Sellers, the Shareholders, and the Company shall jointly and severally
indemnify the Buyer against any and
all damages and losses sustained by the
Buyer or any of its affiliates that result, directly or
indirectly, from (i) any event or
act occurred before the Closing that would result in a Material Adverse Effect
of any of the Group Companies, or (ii) any third party action or governmental action against the Company, Shanghai JNET, or the Shareholders which results or
arises from (1) any defect in the equity interest
of the Company or Shanghai JNET, the JNET Intellectual Property, the JNET
Products or any license or permit of Shanghai JNET, (2) or any default
under any of the Contracts or the Transferred Contracts, or (3) any business or actions of any of the Group Companies that occurred prior to Closing.


 


In
particular, subject to the further provisions of this Section 8, the Sellers
and Shareholders will, jointly and severally, indemnify, defend and hold
harmless the Buyer and their successors
and assigns, from, against and in respect of any and all Losses (as hereinafter
defined) which arise or result from or relate to:


 


8.1.1                                    any facts or circumstances in existence or occurring on or prior to the
Closing that constitute a breach of a representation or warranty made by  any of the Sellers, Shanghai JNET, the Company and the Shareholders contained in
this Agreement, including without
limitation any false or misleading representation or warranty on the Domestic
Interests, Company Shares, the Contracts, Transferred Contracts or the assets
of Shanghai JNET, and as a result the value of the Company Shares is
significantly lower than the Purchase Consideration;


 


8.1.2                                    any material breach of or failure by
any Seller, Shareholder, Shanghai JNET, or the Company to perform any of the covenants,
agreements or other obligations under
this Agreement;


 


8.1.3                                    as of the date of this Agreement or as of the Closing Date, any assets,  JNET Intellectual
Property and  JNET Products (or
component thereof or process for making such product) created, developed,
marketed, supplied, distributed, or licensed by Shanghai
JNET or the Company infringes on or otherwise violates the Intellectual
Property Rights of any other person or
entity; or


 


41

















 


8.1.4                                    any fact, occurrence, event or transaction arising out of or relating to Shanghai  JNET’s or the
Company’s operations on or prior to
the date of this Agreement, or any
Seller’s and/or any Shareholder’s ownership of
the Company Shares or Domestic Interests on or prior to
the Closing Date, other than the obligation of
Shanghai  JNET and the Company to pay the
liabilities, obligations and expenses reflected in Latest Balance Sheet or
incurred in the ordinary course of business thereafter and prior to the Closing
Date.


 


8.2                               Indemnification
Procedure.


 


8.2.1                                    Upon obtaining  knowledge of any facts or circumstances that would give rise to a claim
for indemnification by one party against the other party to this Agreement,
including any claim or proceeding by a third party that may form the basis for
an indemnification obligation under this Agreement, the party entitled to
indemnification hereunder (the “Indemnified Party”) shall notify the
other party (the “Indemnifying Party”) in writing of such claim (such
written notice being hereinafter referred to as a “Notice of Claim”).  A Notice of Claim shall
specify in reasonable detail the nature and any particulars of any such claim
giving rise to a right of indemnification. 
The parties shall use their commercially reasonable efforts for a period
of thirty (30) days to resolve any disputes with respect to the obligation to
indemnify pursuant to this Agreement, after which time period the provisions
regarding arbitration set forth in Section 9.10 below shall govern the resolution of such dispute.  Nothing contained herein shall limit any
other remedies the parties may have available to them under any other
agreements between or among them with respect to the subject matter of any
provision of this Agreement or of any of the agreements, as actually executed
and delivered at Closing, set forth as an Exhibit hereto.


 


8.2.2                                    With regard to
claims or proceedings by third parties that form the basis for a Notice of
Claim hereunder, the Indemnifying Party shall have the right (and the obligation), exercisable by written notice to the Indemnified
Party within fifteen (15) days following receipt of the Notice of Claim, to
assume, at its own expense, defense in
and control the legal proceeding
and/or settlement of such third party claim. 
If the Indemnifying Party has assumed the defense of such third party
claim, the Indemnified Party shall have the right, but not the obligation, to
participate, at its own expense, in the defense thereof through counsel of its
own choice and shall have the right, but not the obligation, to assert any and
all cross-claims or counterclaims it or any Indemnifying Party may have.  So long as the Indemnifying Party is
defending in good faith any such claim, the Indemnified Party shall at all
times cooperate in all reasonable ways with, make its relevant files and
records available for inspection and copying by, and make its employees
available or otherwise render reasonable assistance to, the Indemnifying Party
in connection with the defense of such claim. 
If the Indemnifying Party fails to timely defend, contest or otherwise
protect against any such claim, the Indemnified Party shall have the right, but
not the obligation, to defend, contest, assert cross claims or counterclaims,
or otherwise protect against any such claim and may make any compromise or
settlement thereof and recover and be indemnified for the entire cost thereof
from the Indemnifying Party, including, without limitation, reasonable
attorneys’ fees, disbursements, and all amounts paid as a result of such claim
or any compromise or settlement thereof.  If the Sellers and/or the Shareholders lose
the claim, they shall pay all compensation in accordance with the court ruling
or arbitration award and indemnify the Buyer and/or its affiliate(s) in
accordance with this 


 


42

















 


Agreement.  If the Sellers and/or the Shareholders win
such claim, all costs borne by the Sellers and/or the Shareholders shall be
reimbursed by the Company.


 


8.3                               Definition
of Loss.


 


For
purposes of this Section 8, “Loss”
or “Losses” shall mean
the damages, losses or liabilities sustained by an Indemnified Party with respect to a claim, or which it is required to pay or incur
to a third party claimant by reason of a settlement or judgment in respect of a
claim, and includes reasonable attorneys’ fees,
auditing fees, witness fees and other costs incurred by the Indemnified Party in the
ordinary course of reasonably investigating, defending or resolving the
claim.  The amount of the Loss shall be
calculated as the damages, losses, liabilities and expenses suffered or paid by
the Indemnified Party and shall be reduced by the amount of any insurance proceeds
received by the Indemnified Party with respect to the claim and any tax savings or benefits realized
by the Indemnified Party and attributable to the claim. 
Unless the same is part of a damage award or judgment in favor of a
third party for which the Indemnified Party is seeking recovery, no Indemnified Party shall be entitled to recover, and the terms Loss or Losses shall
not include, any consequential damages, exemplary or punitive damages, or any
damages to the extent they result from the use of a multiplier or a
capitalization rate.  Indemnification
claims of the Indemnified Party shall be reduced by and to the extent that an indemnified party shall
have received proceeds under insurance policies, risk sharing pools, or similar
arrangements specifically as a result of, and in compensation for, the subject
matter of an indemnification claim.


 


8.4                               Survival
of Representations and Warranties and Indemnity Obligations.


 


The
representations and warranties of the Sellers,
the Shareholders, the Company, and Shanghai JNET contained in this Agreement
shall survive until December 31,
2009.


 


8.5                               Other Damages.


 


The Sellers and the Shareholders agree that the Buyer will be damaged and the damages of the
Buyer will be difficult to determine upon any of the following events:


 


(i)                         any of the Company, Shanghai JNET, the Shareholders and/or the Sellers enters into
any agreement or plan for the acquisition,
merger, consolidation, reorganization, exchange, recapitalization of any Group Company or other similar agreement or plan, including
a letter of intent or agreement in principle, other than with the Buyer prior to Closing;


 


(ii)                      any of the Group Company adopts a plan for liquidation, dissolution or
distribution to its shareholder(s) of more than
five percent (5%) of its assets,
except for those contemplated in this Agreement or the PRC Restructuring;


 


(iii)                   any
of the Company, the Shareholders and Shanghai JNET enters into one or more agreements or plans which individually or in the
aggregate would result in the sale of a Group Company’s assets or
equity interest before the Closing, except the sale and transfer contemplated
in this Agreement and the PRC Restructuring;


 


43

















 


(iv)                  the Shareholders fail to perform the obligations set forth under Section 5.2(ii),
(iii) and (iv) on a continuing basis; or


 


(v)                     the Shareholders, the Company and Shanghai JNET fail to comply with any
of the provisions set forth under Section 5.8.


 


Each of (i), (ii),
(iii), (iv) and (v) are hereinafter
referred to as a Triggering Event prior to the occurrence of the
termination of this Agreement by mutual consent of the
parties hereto.


 


As a result of the difficulty of determining damages
if a “Triggering Event” shall occur and in lieu of any payment by the Sellers, the Shareholders, the  Company  or Shanghai JNET of the
Buyer’s expenses and as compensation for loss of the Buyer’s rights hereunder, the
Sellers,  the Shareholders, the Company and
Shanghai JNET shall jointly and severally be obligated to pay to the Buyer, the sum up to amount equivalent
to the received Purchase Consideration (the “Damages”),
plus interest on the Damages at the prime rate of
7 % on any unpaid amount of Damages from the date of the Triggering Event
until the date actually paid, provided this Section shall
not limit other remedies that may be available to the Buyer under this
Agreement or the applicable laws.


 


9.                                      MISCELLANEOUS.


 


9.1                               Expenses.


 


All
costs and expenses incurred in connection with this Agreement and the Ancillary Documents and the consummation of the
transactions contemplated hereby and
thereby will be borne by the party incurring such expenses.  Any attorneys’, accountants’, financial
advisory, broker’s or finder’s fees shall be paid by the party contracting for
the same.


 


9.2                               Notices.


 


All notices and other communications required or
permitted to be given pursuant to this Agreement shall be delivered personally
or sent by registered mail, postage prepaid, by a commercial courier service or
by facsimile transmission or email to the address of such party set forth below,
unless the party has informed the other parties in writing of change of address.
The dates on which notices shall be deemed to have been effectively
given shall be determined as follows:


 


(i)                                     notices given by personal delivery, by courier service or by registered
mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices; and


 


(ii)                                  notices given by facsimile transmission shall be deemed effectively
given on the date of successful transmission (as evidenced by an automatically
generated confirmation of transmission).


 


44

















 


	
  If
  to the Sellers or the

  	
   

  
	
  Shareholders,
  to:

  	
  Room527, 1033 Kang Ding Road, Jing An District

  
	
   

  	
  Shanghai

  
	
   

  	
  Fax: 021-5228 9716

  
	
   

  	
  Email:myk@shjw.net.cn

  
	
   

  	
   

  
	
  If
  to the Company or

  	
   

  
	
  Shanghai JNET, to:

  	
  Room527, 1033 Kang Ding Road, Jing An District

  
	
   

  	
  Shanghai

  
	
   

  	
  Fax: 021-5228 9716

  
	
   

  	
  Email:myk@shjw.net.cn

  
	
   

  	
   

  
	
  If
  to the Buyer, to:

  	
  6/F, Block A, Galaxy Plaza, No.10 Jiuxianqiao Road Middle, Chaoyang District, Beijing

  
	
   

  	
  Fax: 6437
  5315

  
	
   

  	
  Email:song.wang@chinacache.com

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Han Kun Law Offices

  
	
   

  	
  9/F, Office Tower C1,

  
	
   

  	
  Oriental Plaza,

  
	
   

  	
  1 East Chang An Avenue,

  
	
   

  	
  Dongcheng District, Beijing, PRC

  
	
   

  	
  Attention:
  Yijun Chao, Esquire

  
	
   

  	
  Fax: 86-10-8525 5511

  



 


9.3                               Amendment;
Waiver.


 


Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the Buyer, the Sellers, the
Shareholders and Shanghai JNET, or in the
case of a waiver, by the party against whom the waiver is to be effective.  No failure or delay by either party in
exercising any right, power or privilege hereunder will operate as a waiver
thereof nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
herein provided will be cumulative and, except as otherwise expressly provided
herein, not exclusive of any rights or remedies provided by law.


 


9.4                               Successors.


 


This
Agreement shall inure to the benefit of, be binding upon, and be enforceable by
the parties hereto and their respective successors, heirs and assigns.


 


9.5                               Entire
Agreement.


 


This
Agreement and the Exhibits and Schedules hereto constitute the entire agreement
and understanding between the parties relating to the subject matter hereof and
thereof and supersedes all prior representations, endorsements, premises,
agreements, 


 


45

















 


memoranda,
communications, negotiations, discussions, understandings, and arrangements,
whether oral, written or inferred, between the parties relating to the subject
matter hereof.


 


9.6                               Governing
Law.


 


This
Agreement shall be governed by and construed and enforced in all respects in
accordance with the laws of the State of New
York without regard to its conflict of laws.


 


9.7                               Counterparts.


 


This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


 


9.8                               Headings.


 


The
headings of the sections and subsections of this Agreement have been inserted
for convenience of reference only and shall in no way restrict or otherwise
modify any of the terms or provisions hereof or affect in any way the meaning
or interpretation of this Agreement.


 


9.9                               Termination
of Agreement.


 


The parties may not
terminate this Agreement prior to the Closing except as provided below:


 


9.9.1                                    The parties may
terminate this Agreement by mutual written consent;


 


9.9.2                                    The Buyer may terminate this Agreement by giving written notice to the Sellers  and the Shareholders in the event any
of the Sellers, the Company, Shanghai
JNET and the Shareholders are in breach of any their representations,
warranties, obligations or covenants herein and
such breach (A) individually or in combination with any other such breach,
would cause the Buyer being
unable to obtain the major benefits under, or to realize the main objectives
of, this Agreement, or (B) is not cured
within thirty (30) days following delivery by the Buyer to defaulting party  the written notice of such breach;


 


The Sellers and the Shareholders may terminate
this Agreement by giving written notice to the
Buyer in the event the Buyer  is in breach of any representations
and warranties set forth in Section 4.


 


9.9.3                                    Where the Buyer fails to pay the relevant Purchase Consideration on the
due date without valid reason (such as delay in auditing by the auditor or the
reasonable time for calculating the Price Adjustment, etc.), the Buyer
shall be subject to a penalty equivalent to 0.02% of the outstanding Purchase
Consideration for each day of delay. 
Where the failure to pay the Purchase Consideration when due (without
valid reason) continues for a period of thirty (30) days, the Buyer shall be
subject to a penalty equivalent to 0.03% of the outstanding Purchase
Consideration for each day of delay commencing from the expiration of the
thirty day period.  Where the failure to
pay the Purchase Consideration when due (without valid reason) continues 


 


46

















 


for
another thirty (30) days, the Sellers, Mei Yongkai and Mei Xiurong shall have
the right to terminate this Agreement.


 


9.9.4                                    Either party may terminate this Agreement, by written notice to the other parties, if the Closing has not occurred within six (6) months from the date of this Agreement (unless
otherwise mutually agreed by the Sellers and the Buyer), provided that:
(i) the terminating party shall not be in material default of any of its obligations hereunder, and (ii) the
right to terminate this Agreement shall not be
available to any party whose breach of any provision of this Agreement has been the cause of, or resulted in, the failure
of the Closing within the six (6) month
period;


 


9.9.5                                    In case of a Material Adverse Effect, the Buyer may terminate this
Agreement by giving written notice to the Sellers and Shareholders in
accordance with the conditions and terms set forth in Section 1.2.4.5.


 


If
any party terminates this Agreement pursuant to this Section, all obligations
of the parties hereunder (except for those set forth in Section 5.5, Section 9.1, Section 9.2, Section 9.6, Section 9.10 and Section 9.11) shall terminate without any liability of any party to any other
party, except that each party shall remain responsible for and liable for
breaches of this Agreement, including a wrongful failure to consummate the
transactions contemplated hereby.


 


9.10                        Confidentiality


 


The parties
acknowledge that the existence and the
terms of this Agreement and any oral or written information exchanged between the parties  in
connection with  the preparation
and performance this Agreement are
regarded as  confidential information. Each party shall
maintain confidentiality of all such confidential
information, and without obtaining the written consent of the other party, it shall not disclose any relevant confidential
information to any third parties, except for
the information that: (a) is or will be in the public domain (other than through the receiving party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any party to its shareholders, investors, legal counsels or financial advisors regarding the
transaction contemplated hereunder, provided
that such shareholders, investors, legal counsels or financial advisors  shall be bound by the
confidentiality obligations similar to those set forth in this Section.


 


9.11                        Arbitration.


 


9.11.1                              Any dispute,
controversy or claim arising out of, relating to, or in connection with this
Agreement, or the breach, termination or validity hereof, shall be finally
settled exclusively by arbitration.  The
arbitration shall be conducted under
the auspice of the Hong Kong International Arbitration Center (“HKIAC”) in accordance
with the UNCITRAL Arbitration Rules in effect at the time of the arbitration,
except as they may be modified by mutual agreement of the parties.  The arbitration shall be conducted in the
English language.


 


9.11.2                              The arbitration
shall be conducted by three arbitrators. 
The party (or the parties, acting jointly, if there are more than one)
initiating arbitration (the “Claimant”) shall appoint an arbitrator in
its request for arbitration (the “Request”).  The other party (or the other 


 


47

















 


parties, acting jointly, if there are more
than one) to the arbitration (the “Respondent”) shall appoint an
arbitrator within 30 days of receipt of the Request and shall notify the
Claimant of such appointment in writing. 
If within 30 days of receipt of the Request by the Respondent, either party
has not appointed an arbitrator, then that arbitrator shall be appointed by the
HKIAC.  The first two arbitrators appointed in
accordance with this provision shall appoint a third arbitrator within 30 days
after the Respondent has notified Claimant of the appointment of the Respondent’s
arbitrator or, in the event of a failure by a party to appoint, within 30 days
after the HKIAC has notified the parties
and any arbitrator already appointed of the appointment of an arbitrator on
behalf of the party failing to appoint. 
When the third arbitrator has accepted the appointment, the two
arbitrators making the appointment shall promptly notify the parties of the
appointment.  If the first two
arbitrators appointed fail to appoint a third arbitrator or so to notify the
parties within the time period prescribed above, then the HKIAC shall appoint the third arbitrator and shall
promptly notify the parties of the appointment. 
The third arbitrator shall act as Chair of the tribunal.


 


9.11.3                              The arbitral
award shall be in writing, state the reasons for the award, and be final and
binding on the parties.  The award may
include an award of costs, including reasonable attorneys’ fees and
disbursements.  In addition to monetary
damages, the arbitral tribunal shall be empowered to award equitable relief,
including, but not limited to, an injunction and specific performance of any
obligation under this Agreement.  The
arbitral tribunal is not empowered to award damages in excess of compensatory
damages, and each party hereby irrevocably waives any right to recover
punitive, exemplary or similar damages with respect to any dispute, except
insofar as a claim is for indemnification for an award of punitive damages
awarded against a party in an action brought against it by an independent third
party.  The arbitral tribunal shall be
authorized in its discretion to grant pre-award and post-award interest at
commercial rates.  Any costs, fees or
taxes incident to enforcing the award shall, to the maximum extent permitted by
Law, be charged against the party resisting such enforcement.  Judgment upon the award may be entered by any
court having jurisdiction thereof or having jurisdiction over the relevant
party or its assets.


 


9.11.4                              In order to
facilitate the comprehensive resolution of related disputes, and upon request
of any party to the arbitration proceeding, the arbitration tribunal may,
within 90 days of its appointment, consolidate the arbitration proceeding with
any other arbitration proceeding involving any of the parties relating to this
Agreement and the Ancillary Agreements. 
The arbitration tribunal shall not consolidate such arbitrations unless
it determines that (x) there are issues of fact or law common to
the proceedings, so that a consolidated proceeding would be more efficient than
separate proceedings, and (y) no party would be prejudiced as a
result of such consolidation through undue delay or otherwise.  In the event of different rulings on this
question by the arbitration tribunal constituted hereunder and any tribunal
constituted under the Ancillary Agreements, the ruling of the tribunal
constituted under this Agreement will govern, and that tribunal will decide all
disputes in the consolidated proceeding.


 


9.11.5                              The parties
agree that the arbitration shall be kept confidential and that the existence of
the proceeding and any element of it (including but not limited to any
pleadings, briefs or other documents submitted or exchanged, any testimony or
other oral submissions, and any awards) shall not be disclosed beyond the
tribunal, the HKIAC, the parties,
their counsel and any person necessary to the conduct of the proceeding, except
as may be lawfully required in 


 


48

















 


judicial proceedings relating to the
arbitration or otherwise, or as required by NASDAQ rules or the rules of
any other quotation system or exchange on which the disclosing party’s
securities are listed or applicable Law.


 


9.11.6                              The costs of
arbitration shall be borne by the losing party unless otherwise determined by
the arbitration award.


 


9.11.7                              All payments
made pursuant to the arbitration decision or award and any judgment entered
thereon shall be made in United States dollars, free from any deduction, offset
or withholding for Taxes.


 


9.11.8                              Notwithstanding
this Section 9.11 or any other provision to the contrary in this Agreement, no party
shall be obligated to follow the foregoing arbitration procedures where such
party intends to apply to any court of competent jurisdiction for an interim
injunction or similar equitable relief against any other party, provided there
is no unreasonable delay in the prosecution of that application.


 


49














 


IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.


 


 


	
   

  	
  “BUYER”

  
	
   

  	
   

  
	
   

  	
  CHINACACHE
  INTERNATIONAL HOLDINGS LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Song Wang

  
	
   

  	
  Print Name: Song Wang

  
	
   

  	
  Title: Director

  



 


50

















 


IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed as of the date first above
written.


 


	
   

  	
  “SELLERS”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUNDREAM HOLDINGS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  MEI Yong Kai

  
	
   

  	
  Print Name: MEI Yongkai 

  
	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SMART ASIA HOLDINGS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  MEI Xiurong

  
	
   

  	
  Print Name: MEI Xiurong 

  
	
   

  	
  Title: Director

  



 


51

















 


IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed as of the date first above
written.


 


	
   

  	
  “SHAREHOLDERS”

  
	
   

  	
   

  
	
   

  	
  CHEN PEIDI 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  CHEN PENDI

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEI YONGKAI 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  MEI YONGKAI

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LU JUN 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  LU JUN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HAN DANHUA 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  HAN DANHUA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZHANG SHIJIE 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ZHANG SHIJIE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEI XIURONG 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  MEI XIURONG

  



 


52

















 


IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed as of the date first above
written.


 


	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
  JNET HOLDINGS LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MEI Yongkai

  
	
   

  	
  Print Name: MEI Yongkai 

  
	
   

  	
  Title: Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “SHANGHAI JNET”

  
	
   

  	
   

  
	
   

  	
  SHANGHAI JNET TELCOM CO., LTD.

  
	
   

  	
  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  CHEN Peidi

  
	
   

  	
  Print Name: CHEN
  Peidi 

  
	
   

  	
  Title: Legal Representative

  



 


53

















 


SCHEDULE
1


 


SELLERS


 


	
   

  	
   

  	
  Number of Company Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sundream Holdings
  Limited (“Sundream”)

  	
   

  	
  9,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Smart Asia Holdings
  Limited (“Smart Asia”)

  	
   

  	
  1,000

  	
   

  



 


54

















 


SCHEDULE
2


 


PURCHASE
CONSIDERATION


 


Closing
Payment


 


	
  Sellers

  	
   

  	
  Share Consideration

  	
   

  	
  Cash Consideration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sundream

  	
   

  	
  2,232,000

  	
   

  	
  5,208,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smart
  Asia

  	
   

  	
  248,000

  	
   

  	
  578,667

  	
   

  



 


Second
Payment


 


	
  Sellers

  	
   

  	
  Share Consideration

  	
   

  	
  Cash Consideration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sundream

  	
   

  	
  1,116,000

  	
   

  	
  2,604,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smart
  Asia

  	
   

  	
  124,000

  	
   

  	
  289,333

  	
   

  



 


Third
Payment


 


	
  Sellers

  	
   

  	
  Share Consideration

  	
   

  	
  Cash Consideration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sundream

  	
   

  	
  1,116,000

  	
   

  	
  2,604,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smart
  Asia

  	
   

  	
  124,000

  	
   

  	
  289,333

  	
   

  



 


Fourth
Payment


 


	
  Sellers

  	
   

  	
  Share Consideration

  	
   

  	
  Cash Consideration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sundream

  	
   

  	
  1,116,000

  	
   

  	
  2,604,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smart
  Asia

  	
   

  	
  124,000

  	
   

  	
  289,334

  	
   

  



 






Note:


 


(1)                                  The Share Consideration and Cash
Consideration indicated above shall be subject to adjustment set forth in Section 1.2.4.


 


55

















 


EXHIBIT A


 


DISCLOSURE
SCHEDULE


 


56

















 


EXHIBIT B


 


EXISTING
CONTROL DOCUMENTS


 


57

















 


EXHIBIT C


 


DEED
OF ADHERENCE


 

















 


EXHIBIT D


 


TRANSFERRED
PERSONNEL


 


	
  

  	
   

  	
  

  
	
  

  	
   

  	
  330622197501030013

  
	
  

  	
   

  	
  310107197806043224

  
	
  

  	
   

  	
  31010319741025242x

  
	
  

  	
   

  	
  31010819810101204x

  
	
  

  	
   

  	
  652301197406116415

  
	
  

  	
   

  	
  360403197801220914

  
	
  

  	
   

  	
  310104195104132056

  
	
  

  	
   

  	
  42058219821229751x

  



 


2