Document:

Exhibit 10.5

    
      

    

    EXHIBIT
      10.5

    

    

    November
      22, 2005

    Mr.
      Doug
      Glader

    President
      and CEO

    PROCERA
      NETWORKS, INC.

    100
      Cooper Court

    Los
      Gatos, CA 95032

    

    Dear
      Doug, 

    

    This
      letter confirms our agreement that Chadbourn Securities, Inc (“Chadbourn”) will
      act as exclusive financial advisor to Procera Networks, Inc. (“you”
or
      the
“Company”)
      in
      connection with the proposed private placement (an “Offering”) of unregistered
      equity or equity linked securities of the Company (“Securities”). 

    

    Services.
      During
      the term of our engagement, we will advise and assist you in connection with
      the
      planning, execution and closing of the Offering. In connection with the
      planning, execution and closing of an Offering, Chadbourn’s services may
      include, to the extent that you and Chadbourn agree necessary or advisable,
      assisting and advising you with respect to (1) performing valuation analyses,
      (2) identifying potential investors acceptable to you and establishing meetings
      with such persons or entities, (3) coordinating the process by which you will
      select the ultimate investor(s) in the Company, (4) supporting the Company
      in
      its negotiation of the terms and agreements effecting the purchase of
      Securities, and (5) rendering such assistance as the Company may reasonably
      request. The Company is responsible for compliance with all applicable
      securities laws, including the Securities Act of 1933 as well as the preparation
      of appropriate offering materials. 

    

    Any
      written or oral advice provided by us pursuant to this engagement will be
      treated by the Company as confidential, will be solely for the information
      and
      assistance of the Company and its advisors in connection with their
      consideration of a sale of securities and purchase of assets and will not be
      reproduced, summarized, described or referred to, or furnished to any other
      party or used for any other purpose, except in each case with our prior written
      consent or as required by law. 

    

    Confidentiality.
      In
      connection with the Offering, the Company and Chadbourn will provide each other
      with information that is non-public, confidential or proprietary in nature.
      All
      information about the disclosing party furnished by the disclosing party to
      the
      receiving party or its directors, officers, employees, agents or
      representatives, including without limitation attorneys, accountants,
      consultants and financial advisors (collectively, "representatives"), and all
      analyses, compilations, data, studies or other documents prepared by the
      receiving party or its representatives containing, or based in whole or in
      part
      on, any such furnished information is hereinafter referred to as the
      "Confidential Information;” provided; that, Confidential Information shall not
      include information, which is (i) available to the public other than as a result
      of a disclosure in breach of this letter; (ii) becomes available to the
      receiving party on a non-confidential basis from a source other than the
      Company, (iii) known to you the receiving party on a non-confidential basis
      prior to such disclosure or (iv) required to be disclosed as a matter of
      law.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
      Company and Chadbourn agree that the Confidential Information will be kept
      confidential by them and their respective representatives and will not be
      disclosed for a period of two years from the date hereof, without the prior
      written consent of the disclosing party. 

    

    Compensation.
      In
      connection with this engagement, you will pay us a cash fee of eight percent
      (8.0%) of
      gross
      proceeds from all sales of Securities sold in the Offering (the “Success
      Fee”).
      As
      additional compensation for our services hereunder, you will upon consummation
      of the Offering issue to Chadbourn a warrant to purchase a number of shares
      of
      common stock of the Company equal to 10% of all shares of Securities sold in
      the
      Offering at an exercise price per share equal to 100% of the price per share
      paid by investors in the Offering. The warrant will be immediately exercisable
      and will contain the same registration rights with respect to the common stock
      of the Company underlying the warrant (or any securities into which the common
      stock of the Company may be converted or for which it may be exchanged) as
      are
      granted to investors in the Offering. The warrant will be exchangeable (so
      that
      shares of the common stock of the Company would be issued upon surrender of
      the
      warrant, without tender of any cash, on a net exercise basis), have a term
      of 5
      years from the date of issuance and have such other terms and conditions as
      shall be mutually agreed upon. Our fees will not be reduced by any obligation
      that you may have to any other broker, finder or placement agent.

    

    Reimbursement.
      In
      addition, you will promptly reimburse us for all of our reasonable legal fees
      and expenses (which shall not exceed $5,000 without your prior consent) and
      for
      our travel and other reasonable out-of-pocket expenses (which shall not exceed
      $2,000 without your prior consent) whether or not there is a closing under
      the
      Offering. These reasonable expenses shall be paid upon receipt by you of an
      invoice from us. 

    

    Term.
      The
      term of our engagement will begin on the date hereof and continue for 12 months.
      However, either of us may terminate our engagement earlier upon 30 days prior
      written notice. Any earlier termination of our engagement will not affect your
      obligation to pay our fees or reimburse our expenses. 

    

    Upon
      termination, we may provide you with a list (the “Investor List”) of all
      potential investors contacted by us. If within 12 months following the
      expiration or earlier termination of our engagement, you sell equity or
      equity-linked securities to any investor in the Offering or any investor on
      the
      Investor List (if provided), you will pay us the Success Fee described under
      “Compensation” above.  

    

    Indemnification.
      Because
      we will be acting on your behalf, you will indemnify us and related persons
      according to the indemnification and contribution provisions in Annex
      A.
      Your
      obligations in Annex
      A
      will
      remain operative regardless of any termination or completion of our services
      hereunder.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Miscellaneous.
      We are
      a full service securities firm and, therefore, we may from time to time effect
      transactions for our own account or for the account of our customers and hold
      positions in securities or options on securities of the Company and other
      companies that may be the subject of our services. This letter agreement will
      not limit or restrict our ability to engage in such transactions with respect
      to
      either the Company’s securities or any other entity’s securities.

    

    We
      will
      provide our financial advice, written or oral, exclusively for the information
      of your Board of Directors and senior management, who will make all decisions
      regarding whether and how to pursue any opportunity or transaction. Your Board
      of Directors and senior management will base their decisions on our advice
      as
      well as on the advice of their legal, tax and other business advisors and other
      factors that they consider appropriate. Accordingly, as an independent
      contractor we will not assume the responsibilities of a fiduciary to you or
      your
      stockholders in connection with the performance of our services. 

    

    This
      letter agreement, together with the attached agreement on indemnification and
      contribution, contains our entire agreement concerning the proposed transaction
      and supersedes any prior understandings and agreements. 

    

    This
      letter agreement will be binding upon and inure to the benefit of you, us,
      each
      Indemnified Person (as defined in Annex
      A)
      and our
      respective successors and assigns and nothing herein is intended to confer
      upon
      any person, other than you, us, each Indemnified Person and our respective
      successors and assigns, any rights, remedies, obligations or
      liabilities.

    

    This
      letter agreement shall be governed by and construed in accordance with the
      laws
      of the state of California.

    

    Any
      dispute arising out of or relating to this letter agreement (including any
      annex) will exclusively be submitted to an arbitrator for binding and conclusive
      resolution. The arbitration will be in Santa Clara County, California and will
      be administered by JAMS. The arbitrator will be a former or retired judge
      selected from a list of those affiliated with JAMS. The arbitrator will have
      the
      authority to permit discovery and to follow the procedures that he or she
      determines to be appropriate. The arbitrator will have no power to award
      consequential (including lost profits), punitive or exemplary damages. The
      parties will advance the forum fees and other costs of the arbitration equally,
      but the arbitrator will have the discretion as part of his or her final award
      to
      apportion some or all of the costs of the arbitration among the parties. The
      arbitrator will also have the discretion to direct, as part of his or her final
      award, that a party recover some or all of its attorneys' fees. You and we
      consent to personal jurisdiction and venue in the federal or state courts
      located in California for purposes of enforcement of any arbitration
      award.

    

    Any
      waiver of any right or obligation hereunder must be in writing signed by the
      party against whom such waiver is sought to be enforced. Any amendment hereto
      must be in writing signed by you and us.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    After
      reviewing this letter agreement, please confirm that it is in accordance with
      your understanding by signing and returning to us the enclosed
      copy.

    

    
      	
              Very
                truly yours,

            	 
	 	 	 
	
              CHADBOURN
                SECURITIES, INC.

            	 
	 	 	 
	 	 	 
	
              By:

            	 	 
	
              Laird
                Q. Cagan

            	 
	
              Managing
                Director

            	 
	 	 	 
	 	 	 
	
              Accepted
                and Agreed as of the date set forth above:

            	 
	 	 	 
	
              PROCERA
                NETWORKS, INC.

            	 
	 	 	 
	 	 	 
	
              By:

            	 	 
	
              Douglas
                J. Glader

            	 
	
              Chairman
                and CEO 

            	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Annex
      A

     

    Client
      agrees to indemnify and hold harmless Chadbourn Securities Inc. (“Chadbourn”),
      together with its affiliates and their respective control persons, directors,
      officers, employees and agents, (“Indemnified Persons”), to the full extent
      lawful against any and all claims, losses, damages, liabilities, costs and
      expenses as incurred (including all reasonable fees and disbursements of counsel
      and all reasonable travel and other out-of-pocket expenses reasonably incurred
      in connection with the investigation of, preparation for and defense of any
      pending or threatened claim, action, proceeding or investigation and any
      litigation or other proceeding arising therefrom, to which an Indemnified Person
      may become subject) (collectively, “Damages”) arising out of or related to any
      actual or proposed Private Placement or Chadbourn’s engagement hereunder;
provided,
      however,
      that there shall be excluded from such indemnification any such portion of
      such
      Damages as are found in a final judgment by a court of competent jurisdiction
      to
      have resulted solely from the willful misconduct or gross negligence on the
      part
      of the Indemnified Person, other than any action undertaken at the request
      or
      with the consent of Client. The foregoing indemnification obligation is in
      addition to, and not in limitation of, any other rights Chadbourn may have,
      including but not limited to any right of contribution. In the event that the
      foregoing indemnity is unavailable or insufficient to hold harmless an
      Indemnified Person, then Client shall contribute to amounts paid or payable
      by
      an Indemnified Person in respect of such Damages in such proportion as
      appropriately reflects the relative benefits received by it on the one hand
      and
      Chadbourn on the other. If applicable law does not permit allocation solely
      on
      the basis of benefits, then such contribution shall be made in such proportion
      as appropriately reflects both the relative benefits and relative fault of
      the
      parties and other relevant equitable considerations. The foregoing is subject
      to
      the limitation that in no event shall Chadbourn’s aggregate contributions in
      respect of Damages exceed the amount of fees actually received by Chadbourn
      pursuant to this Agreement. For purposes hereof, relative benefits to Client
      and
      Chadbourn of the Private Placement or other similar transaction shall be deemed
      to be in the same proportion that the total value paid or received or
      contemplated to be paid or received by Client and/or its security holders in
      connection with the Private Placement or other similar transaction bears to
      the
      fees paid to Chadbourn pursuant to its engagement in respect of such Private
      Placement. Chadbourn
      shall promptly notify Client of any claim or threatened claim being asserted
      against Chadbourn which would give rise to an indemnification hereunder, and
      agrees that Client shall have the right to participate in the defense of any
      such claim and, to the extent that Client shall wish, to assume and control
      the
      defense thereof and shall pay as incurred the fees and disbursements of such
      counsel related to such proceeding. In any such proceeding, Chadbourn shall
      have
      the right to retain its own counsel reasonably satisfactory to Client at
      Client’s expense, it being understood that Client shall not, in connection with
      any one such claim or action or separate but, substantially similar or related
      claims or actions in the same jurisdiction arising out of the same general
      allegations or circumstances, be liable for the reasonable fees and expenses
      of
      more than one separate firm of attorneys, for all the Indemnified Persons unless
      the defense of one Indemnified person is unique or separate from that of another
      Indemnified Person subject to the same claim or action. Client will not enter
      into any waiver, release or settlement with respect to any threatened or pending
      claim, action, proceeding or investigation or settle any litigation arising
      therefrom in respect of which indemnification hereunder may be sought (whether
      or not Indemnified Persons are a formal party thereto) without the prior written
      consent of Chadbourn (which consent shall not be unreasonably withheld or
      delayed), unless such waiver, release or settlement includes an unconditional
      release of Chadbourn from any and all liability arising out of such threatened
      or pending claim, action, proceeding, investigation or litigation.Exhibit 10.1

    
      

    

     

    EXHIBIT
      10.1

    MANUFACTURING
      LICENSING AGREEMENT

    

    THIS
      AGREEMENT made effective as of May 1, 2005,

    

    BETWEEN:

    

    HUIZHOU
      SOUTHERN RARE EARTH METAL MATERIAL CO., LTD.
      with a
      business address located at 75, Zhongkai Hi-Tech Industrial Development Zone,
      Huizhou, Guangdong, China

    

    (the
      "Licensor") 

    

    AND:

    

    SOUTHERN
      RARE EARTH METAL MATERIAL CO., LTD.
      with a
      business address located at ***,

    

    (the
      "Licensee")

    

    WHEREAS:

    

    
      	
              A.

            	
              The
                Licensor is the owner of the buildings, plants, land, equipment,
                inventory, patents, patents pending, trademarks, copyrights, any
                right to
                patent, trademark or copyright in any country, title, engineering
                designs,
                concepts, models, prototypes, parts, manufacturing machines and tools,
                trade secrets, designs, parts, test equipment for, equipment required
                for
                use with, inventory, customer lists, supplier lists and key contacts
                and
                other information, know-how and show-how associated with rare earth
                metal
                extraction, processing and production located at Huizhou, Guangdong
                and
                Wan An Jiangxi, People's Republic of China (collectively, the "Processing
                Technology and Facilities").

            

    

    

    
      	
              B.

            	
              The
                Licensee operates within the People's Republic of China (the "PRC")
                and
                specializes in the research, development and manufacture of rare
                earth
                metals of standard and high purity, alloys and other materials used
                in
                production of automobiles, computers, batteries and
                electronics.

            

    

    

    THIS
      AGREEMENT WITNESSES THAT
      in
      consideration of $1.00 (the receipt and sufficiency of which is hereby
      acknowledged), the parties agree as follows:

    

    INTERPRETATION

    

    
      	1.	
              Construction
                and Interpretation. In this Agreement, unless inconsistent with or
                excluded by the context:

            

    

    

    
      	 	
              (a)

            	
              any
                heading, index, table of contents or marginal note used in this Agreement
                is for convenience only and will not limit or affect the interpretation
                or
                construction of this Agreement;

            

    

    

    
      	 	
              (b)

            	
              singular
                words will include the plural and plural words will include the
                singular;

            

    

    

    
      	 	
              (c)

            	
              a
                reference to a person will include a company or other corporation
                and a
                reference to a company or other corporation will include a
                person;

            

    

    

    
      	 	
              (d)

            	
              a
                word importing a particular gender will include each other gender;
                and

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	
              (e)

            	
              a
                reference to a party to this Agreement includes that party's heirs,
                executors, administrators, successors and permitted
                assigns.

            

    

    

    
      	
              2.

            	
              Definitions.
                In this Agreement, unless inconsistent with or excluded by the
                context:

            

    

    

    
      	 	
              (i)

            	
              "Affiliate"
                means, with respect to any entity, any other entity which directly
                or
                indirectly controls or is controlled by or is under direct or indirect
                common control with such first mentioned
                entity;

            

    

    

    
      	 	
              (b)

            	
              "Agreement"
                means this Agreement and all schedules to this Agreement and all
                specifications referred to in this
                Agreement;

            

    

    

    
      	 	
              (c)

            	
              "Intellectual
                Property" means any intellectual property relating to the Processing
                Technology and Facilities, including any patent, patent application,
                copyright, industrial design, trademark, any fights to patent, copyright,
                industrial design or trademark in any country, engineering designs,
                concepts, models, trade secrets, know-how and show how, and includes
                any
                new technology or the products as may hereafter be developed or acquired
                by the Licensee;

            

    

    

    
      	 	
              (d)

            	
              "Processing
                Technology and Facilities" means the buildings, plants, land, equipment,
                inventory, patents, patents pending, trademarks, copyrights, any
                right to
                patent, trademark or copyright in any country, title, engineering
                designs,
                concepts, models, prototypes, parts, manufacturing machines and tools,
                trade secrets, designs, parts, test equipment for, equipment required
                for
                use with, inventory, customer lists, supplier lists and key contacts
                and
                other information, know-how and show-how associated with rare earth
                metal
                extraction, processing and production located at Huizhou, Guangdong
                and
                Wan An Jiangxi, People's Republic of China as further described in
                Schedule "A" attached hereto;

            

    

    

    
      	 	
              (e)

            	
              "Term"
                means the period specified in section 15 of this Agreement and any
                renewal
                period of the term;

            

    

    

    
      	 	
              (f)

            	
              "Territory"
                means the world;

            

    

    

    
      	 	
              (g)

            	
              "Trade-Mark"
                means and trade-mark or trade-name as may be adopted for use on the
                Products in the Territory from time to time; and
                

            

    

    

    
      
        
          	3.	
                  Entire
                    Agreement. The Licensor and the Licensee acknowledge that this
                    Agreement
                    constitutes
                    the entire agreement between the Licensor and the Licensee as
                    to its
                    subject matter and replaces and supersedes all prior or contemporaneous
                    agreements and understandings, whether written or
                    oral.

                

        

      

    

    

    
      	
              4.

            	
              Variation
                of Agreement. Any variation or modification or waiver of the terms
                or
                conditions of this Agreement will be in writing and will be duly
                executed
                by the Licensor and the Licensee
                respectively.

            

    

    

    
      	
              5.

            	
              Severance.
                Each word, phrase, sentence, paragraph and section of this Agreement
                is
                severable and if a court in any jurisdiction determines that any
                such
                provision is unenforceable, illegal or void in that jurisdiction
                the court
                may sever that provision which becomes inoperative and such severance
                will
                not affect the operation of any other provisions of this Agreement
                nor the
                operation of that provision in any other
                jurisdiction.

            

    

    
      
        
        

      

      
        Page
          2

        
          

        

      

      
        
        

      

    

    
      	
              6.

            	
              Waiver.
                The failure of either party hereto at any time to enforce any provision
                of
                this Agreement will not affect its rights thereafter to require complete
                performance by the other party, nor will the waiver of any breach
                of any
                provision be taken or held to be a waiver of any subsequent breach
                of any
                such provision or be a waiver of the provision itself. In order for
                any
                waiver to be effective, it must be in writing and signed by an authorized
                officer of the party.

            

    

    

    
      	
              7.

            	
              Laws.
                This Agreement will be governed by, and construed in accordance with,
                the
                laws of the PRC.

            

    

    

    LICENSE

    

    
      	
              8.

            	
              Grant
                of License. In consideration of an up-front licensing fee of 7,000,000
                common shares in the capital stock of China Granite Corporation at
                a
                deemed price of US$1.25 per common share (the "Licensing Fee Shares")
                to
                be paid within 10 business days following the execution of this Agreement
                by all parties and the execution of a certain consulting agreement
                between
                He Wulin and the Licensee, the Licensor hereby grants to the Licensee
                the
                sole and exclusive right, license and authority to use the Processing
                Technology and Facilities for the Term in the
                Territory;

            

    

    

    
      	
              9.

            	
              Licensing
                Fee Shares. The Licensor acknowledges that the Licensing Fee Shares
                are
                subject to resale restrictions under applicable securities legislation
                in
                the United States and it is the responsibility of the Licensor to
                determine what steps, if any, must be carried out in respect of complying
                with all applicable requirements;

            

    

    

    
      	
              10.

            	
              Exclusive
                Rights. The rights of the Licensee for the production of rare earth
                metals
                will be sole and exclusive, and the Licensor will not, unless requested
                in
                writing by the Licensee, directly or indirectly engage in any business
                related to the Processing Technology and Facilities in the Territory
                during the Term, nor license, authorize or permit any third party
                to
                engage in such business in the Territory during the
                Term.

            

    

    

    
      	
              11.

            	
              Transfer
                Option. The Licensor hereby grants to the Licensee the option to
                acquire
                all assets now or in the future comprising the Processing Technology
                and
                Facilities at the current locations of Huizhou, Guangdong and Wan
                An
                Jiangxi, People's Republic of China at any time during the Term following
                the payment of the Licensing Fee Shares for the purchase price of
                US$1.00
                provided
                that Licensor concurrently assumes all obligations and liability
                of a loan
                owing to the China Construction Bank, in an amount not to exceed
                RMB25,450,000

            

    

    

    
      	
              12.

            	
              Assignment
                of Rights. The Licensor acknowledges that the respective rights and
                obligations pursuant to this Agreement may be assigned by the Licensee
                upon (i) prior written notification to the Licensor (the "Assignment
                Notice") and (ii) execution by the assignee of an instrument assume
                all
                rights, duties, or obligations under this Agreement and the delivery
                of
                such instrument to the Licensor (the "Assignment Instrument"). Provided
                that the Assignment Notice and the Assignment Instrument have been
                delivered to the Licensor, this Agreement shall be deemed to have
                been
                assigned with the full force and effect that the assignee under the
                Assignment Instrument shall assume all rights, duties, or obligations
                under this Agreement and the Licensee shall be fully released and
                discharged from all rights, duties, or obligations
                hereunder.

            

    

    
      
        
        

      

      
        Page
          3

        
          

        

      

      
        
        

      

    

    
      	
              13.

            	
              Confidential
                Information. The Licensee acknowledges that its entire knowledge
                of the
                Technology and the business of the Licensor, including, without
                limitation, the contents of any Documents (defined as all drawings,
                specifications, blueprints, programs and other material in electronic
                form
                or otherwise relating in any manner to the Intellectual Property
                or the
                Technology) and periodic updates or revisions, in effect from time
                to time
                and the designs, plans, prototypes, specifications, standards and
                operating procedures for the Technology, will be derived from information
                disclosed to the Licensee by the Licensor in confidence and that
                the
                Documents and such other information are confidential information
                and/or
                trade secrets of the Licensor (all of which is herein collectively
                called
                the "Licensor Confidential Information") except where such information
                is
                in the public domain or is information describing generally accepted
                business, engineering or manufacturing practices. Accordingly, the
                Licensee agrees that it will maintain the absolute confidentiality
                of the
                Intellectual Property, the Documents and such other information,
                both
                during and after the term of this Agreement, disclosing same to other
                employees of the Licensee only to the extent necessary for compliance
                with
                this Agreement.

            

    

    

    All
      Licensor Confidential Information obtained by the Licensee shall be considered
      confidential and will not be disclosed by the Licensee to any person without
      the
      prior written consent of the Licensor. The Licensor will provide reasonable
      confidentiality agreements to be signed by the Licensee and all employees or
      sub-contractors of the Licensee to whom any Licensor Confidential Information
      will be disclosed, and the Licensee will provide or obtain signatures of such
      confidentiality agreements as the case may be.

    

    During
      the course of its relationship with the Licensor, the Licensee or its
      subsidiaries or associates or their employees, agents or consultants may
      disclose certain proprietary or confidential information to the Licensor or
      its
      subsidiaries or associates or their employees, agents or consultants. The
      proprietary or confidential information may be oral or written, may be of a
      technical or commercial nature, may take the form of plans, drawings, processes,
      formulae, schedules, reports, projections, analyses, programs, prints,
      recordings, lists or other compilations of information, and may relate to the
      Licensee, its vendors, employees, stockholders or customers. All of such
      proprietary information and confidential information is herein collectively
      called the "Licensee Confidential Information".

    

    Any
      Licensee Confidential Information obtained by the Licensor will be considered
      confidential and will not be disclosed by the Licensor to any person without
      the
      prior written consent of the Licensee.

    

    The
      Licensee agrees that the Licensor Confidential Information, and all rights
      to
      the Licensor Confidential Information, which has been or will be disclosed
      to
      the Licensee, as well any improvement or technology using, relating to or
      incorporating the Licensor Confidential Information shall remain the exclusive
      worldwide property of the Licensor, and shall be held in trust for the benefit
      of the Licensor. The Licensee agrees that it will not, directly or indirectly,
      deal with, use, or exploit the Licensor Confidential Information without the
      Licensor's prior written consent. With regard to any improvement or new
      technology using, relating to or incorporating the Licensor Confidential
      Information, the Licensee agrees to assign to the Licensor all right, title
      and
      interest in such improvements or technology, any copyright, trademark,
      industrial design, patent applications and copyrights, trademarks, industrial
      designs, patents granted thereto, the sole right to file such applications
      worldwide and the Licensee agrees to assist the Licensor in obtaining reissues,
      divisions, renewals or extensions of any such applications and to do any act
      required to aid the Licensor in obtaining and enforcing proper intellectual
      property protection.

    
      
        
        

      

      
        Page
          4

        
          

        

      

      
        
        

      

    

    The
      foregoing restrictions do not apply to information which:

    

    
      	 	
              (a)

            	
              at
                the time of disclosure was in the public domain as evidenced by a
                printed
                publication or otherwise;

            

    

    

    
      	 	
              (b)

            	
              after
                disclosure becomes part of the public domain by publication or otherwise,
                other than by action of the disclosing
                party;

            

    

    

    
      	 	
              (c)

            	
              was
                in the possession of the disclosing party at the time of disclosure
                by the
                disclosing party and was not acquired, directly or indirectly, from
                the
                non-disclosing party; or

            

    

    

    
      	 	
              (d)

            	
              the
                disclosing party rightfully receives from an independent third party
                who
                did not receive such information, directly or indirectly, from the
                other
                party with limitation or restriction on its
                use.

            

    

    

    The
      obligations contained in this Article will continue the termination of this
      Agreement or any confidentiality agreements.

    

    The
      products or proceeds of the services performed by the Licensee under this
      Agreement including, but not limited to, Documents, written materials, programs,
      documentation, designs, discs and tapes shall be and remain the property of
      the
      Licensor and the Licensee shall be able to use such written materials, programs,
      documentation, designs, discs and tapes for the purposes of carrying out its
      obligations under this Agreement while the Agreement is in effect.

    

    The
      Licensee will have no right to sue for infringement of any of the Intellectual
      Property or any rights therein or relating thereto. The Licensee will, however,
      notify the Licensor immediately of any alleged, possible, or suspected
      infringement, passing off, or challenge to the use of any of the Intellectual
      Property or claim by any person to any rights in any similar trade marks or
      names of which the Licensee is or becomes aware. The Licensee will have no
      power, right or authority to settle or compromise any such claim by a third
      party without the prior written consent of the Licensor. The Licensee
      acknowledges that the Licensor will have the sole discretion to take such action
      as it deems appropriate and the right to exclusively control any litigation
      or
      other proceeding, administrative or otherwise, arising out of any such
      infringement, passing off, challenge or claim or otherwise relating to any
      of
      the Intellectual Property. The Licensee agrees to execute any and all
      instruments and documents, render such assistance and do such acts and things
      as
      may, in the opinion of the Licensor, acting reasonably, be necessary or
      advisable to protect and maintain the interests of the Licensor in any such
      litigation or proceedings or to otherwise protect and maintain the interest
      of
      the Licensor in the Intellectual Property.

    

    Should
      any action, claim or suit be commenced against the Licensee which alleges that
      the ownership or use of the Technology or the Intellectual Property infringes
      the patent, copyright, industrial design, trademark or other intellectual
      property interests or claims of a third party, the Licensor will indemnify
      and
      save the Licensee harmless from any and all such actions, claims or suits,
      and
      will indemnify the Licensee for any costs incurred in defending any such action,
      claim or suit on a solicitor and his own client basis. 

    

    
      
        
        

      

      
        Page
          5

        
          

        

      

      
        
        

      

    

    
      	
              14.

            	
              No
                Agency or Joint Venture. Nothing in this Agreement constitutes or
                deems
                the parties to be partners or joint venturers in relation to the
                Processing Technology and Facilities, nor to create the relationship
                of
                principal and agent or master and servant between the parties, or
                any
                other form of legal association which would impose liability upon
                one
                party for any act or failure to act by the other
                party.

            

    

    

    
      	
              15.

            	
              Term.
                The term (the "Term") of this Agreement and of the rights, authorities
                and
                licenses granted to the Licensee pursuant to this Agreement will
                be a
                period of twenty five (25) years from the date of this Agreement,
                provided
                that the Licensee is not in breach or default of any of the terms
                or
                conditions contained in this
                Agreement.

            

    

    

    
      	
              16.

            	
              Renewal.
                Subject to written mutual agreement between the Licensee and the
                Licensor,
                this Agreement may be renewed.

            

    

    

    LICENSEE'S
      OBLIGATIONS -- MANUFACTURE

    

    
      	
              17.

            	
              Licensee
                covenants and agrees:

            

    

    

    
      	 	
              (a)

            	
              that
                it shall carry on its business and maintain such quality standards
                so as
                to preserve and enhance the goodwill of Licensor, and in furtherance
                of
                these objects to maintain good relations with all customers and potential
                customers of the Products and Licensor and use its best efforts to
                detect
                and correct customer
                dissatisfaction;

            

    

    

    
      	 	
              (b)

            	
              that
                it shall use its best efforts to meet delivery times as required,
                and
                implement and maintain quality control policies and strategies as
                established by Licensor and amended from time to time by
                Licensor;

            

    

    

    
      	 	
              (c)

            	
              that
                it shall comply with the laws of any jurisdiction in which Licensee
                is
                carrying on business in any manner and be responsible for the costs
                associated with the business related to the Processing Technology
                and
                Facilities, including paying all applicable taxes, levies, tariffs,
                custom
                duties, brokerage fees, insurance premiums, and other costs and levies
                charged, assessed or levied in connection with the extraction, processing
                and production of rare earth metals;
                and

            

    

    

    
      	 	
              (d)

            	
              that
                it shall communicate promptly to the representatives of Licensor
                any
                concerns relating to quality control or any matter relating to the
                standards established by Licensor.

            

    

    

    
      	 	
              (e)

            	
              Licensor
                has the authority to inspect Licensee's premises and records with
                regard
                to product quality and Licensee shall provide Licensor with such
                reports
                and information relating to Licensee's activities as may be reasonably
                requested by Licensor. 

            

    

    
      
        
        

      

      
        Page
          6

        
          

        

      

      
        
        

      

    

    INTELLECTUAL
      PROPERTY

    

    
      	
              18.

            	
              Ownership
                of Intellectual Property. The Licensee acknowledges that the Licensor
                is
                the sole and beneficial proprietor of the Intellectual
                Property.

            

    

    

    
      	
              19.

            	
              Use
                of Name. Use of name or other proprietary trade dress of the Licensor
                or
                any of its subsidiaries by the Licensee shall be subject to the prior
                written approval of the Licensor or any of its
                subsidiaries.

            

    

    

    
      	
              20.

            	
              No
                Copies. The Licensee shall not copy, reverse engineer, decompile,
                disassemble, reconstruct, decrypt, modify, update, enhance, supplement,
                translate or adapt the intellectual property related to the Processing
                Technology and Facilities and shall take all reasonable precautions
                so as
                no to allow other parties to do so.

            

    

    

    
      	
              21.

            	
              Improvements.
                Any improvements to the Processing Technology and Facilities, regardless
                of the source, are the property of the Licensor or any of its subsidiaries
                unless otherwise agreed in writing, and shall be communicated promptly
                to
                the Licensor or any of its
                subsidiaries.

            

    

    

    
      	
              22.

            	
              Licensor's
                Representations. The Licensor represents and warrants to the Licensee
                that:

            

    

    

    
      	 	
              (a)

            	
              it
                is the sole owner of the Processing Technology and Facilities; free
                and
                clear of
                all encumbrances except for the loan described in paragraph 11
                above. 

            

    

    

    
      	 	
              (b)

            	
              such
                Processing Technology and Facilities do not infringe on the intellectual
                property of any other person; 

            

    

    

    
      	 	
              (c)

            	
              such
                Processing Technology and Facilities is currently capable of extracting,
                processing and producing but not limited to the following products
                of a
                industrial and scientific laboratory quality and
                grade:

            

    

    

    
      	 	
              (i)

            	
              Light
                Rare Earths: Lanthanum (La), Praseodymium (Pr) and Neodymium
                (Nd).

            

    

    
      	 	
              (ii)

            	
              Heavy
                Rare Earths: Samarium (Sm), Gadolinium (Gd), Terbium (Tb), Dysprosium
                (Dy), Holium (Ho), Erbium (Er) and (the non- rare earth) Yttrium
                (Y).
                

            

    

    
      	 	
              (iii)

            	
              High
                Purity: Sm, Eu, Gd, Tb, Dy, Ho, Er, Thulium (Tm), Ytterbium (Yb),
                Lutetium
                (Lu), Y, Scandium (Sc) and the following alloys; Pr-Nd, Dy-Fe, Y-Al
                and
                Sc-Al.

            

    

    
      	 	
              (iv)

            	
              Target
                materials: High-purity materials fabricated to a specific size and
                shape
                for use as sputtering targets.

            

    

    
      	 	
              (v)

            	
              Functional
                materials: magnetostrictive alloys (REMA-CN), and magneto-optic
                alloys.

            

    

    

    
      	 	
              (d)

            	
              that
                the Licensor will, at its sole expense, take all reasonable steps
                to
                secure and protect the intellectual property related to the Processing
                Technology and Facilities, including without limitation the defense
                of any
                claims against the Licensee in relation to the Processing Technology
                and
                Facilities. 

            

    

    
      
        
        

      

      
        Page
          7

        
          

        

      

      
        
        

      

    

    FORCE
      MAJEURE

    

    
      	
              23.

            	
              Definition
                of Force Majeure. For the purpose of this Agreement, force majeure
                means
                any act, event or cause, except in relation to obligations to make
                payments under this Agreement, beyond the reasonable control of the
                party
                affected by that force majeure including, without limitation, any
                act of
                God or any public enemy, fire, flood, explosion, landslide, epidemic,
                breakdown of or damage to plant, equipment or facilities, inability
                to
                obtain or unavailability of or damage to materials, ingredients or
                supplies, strikes, labor disputes, war, sabotage, riot, insurrection,
                civil commotion, national emergency and martial law, expropriation,
                restraint, prohibition, embargo, decree or order of any government,
                governmental authority or court.

            

    

    

    
      	
              24.

            	
              Notice
                of Force Majeure. A party (in this Agreement called the "Affected
                Party")
                will inform the other party in writing within seven days of becoming
                affected by any force majeure that has or is likely to have any
                substantial detrimental effect on the ability of the Affected Party
                to
                perform any or all of the terms and conditions contained in this
                Agreement
                and will give particulars of the force majeure and the likely duration
                of
                the force majeure and of any likely or resulting disability or effect
                of
                that force majeure.

            

    

    

    
      	
              25.

            	
              Time
                for Performance. The time for performance of the obligations of an
                Affected Party, other than obligations to make payments under this
                Agreement, will be extended for the period of the force majeure if
                appropriate.

            

    

    

    TERMINATION

    

    
      	
              26.

            	
              Termination
                on Default. If either the Licensee or the Licensor is in breach or
                default
                of the terms or conditions contained in this Agreement and does not
                rectify or remedy that breach or default within 120 days from the
                date of
                receipt of notice by the other party requiring that default or breach
                to
                be remedied, then the other party may give to the party in default
                a
                notice in writing terminating this Agreement but without in any way
                limiting or affecting the rights or liabilities of the parties or
                either
                of them that have accrued to the date of
                termination.

            

    

    

    
      	
              27.

            	
              Termination
                in Other Events. Without in any way limiting any other provision
                of this
                Agreement, either the Licensee or the Licensor may terminate this
                Agreement by notice in writing to the other on any of the following
                events:

            

    

    

    
      	 	
              (a)

            	
              if
                an order is made by a court or other competent authority for the
                winding
                up or dissolution of the other
                party;

            

    

    

    
      	 	
              (b)

            	
              if
                a resolution of the members of the other party is passed for the
                winding
                up or dissolution of the other party;

            

    

    

    
      	 	
              (c)

            	
              if
                a receiver-manager is appointed for or in respect of the assets or
                undertaking or property of the other party comprising in whole or
                in part
                the assets or undertaking or property of that other party employed
                in its
                business or activities pursuant to this
                Agreement;

            

    

    

    
      	 	
              (d)

            	
              if
                an assignment is made by that other party of any of its property,
                assets
                or undertakings of or engaged in the business or activities of that
                party
                pursuant to this Agreement for the benefit of its
                creditors;

            

    

    

    
      	 	
              (e)

            	
              if
                the other party ceases substantially or threatens to cease substantially
                carrying on business;

            

    

    
      
        
        

      

      
        Page
          8

        
          

        

      

      
        
        

      

    

    
      	 	
              (f)

            	
              if
                all or any of the assets or undertaking of the other party employed
                in
                whole or in part in its business or activities pursuant to this Agreement
                is seized or taken in execution by a mortgagee, encumbrancer or pursuant
                to any warrant or process of execution of a judgment;
                or

            

    

    

    
      	 	
              (g)

            	
              if
                the other party is insolvent or is deemed to be insolvent for the
                purposes
                of or pursuant to any relevant legislation relating to insolvency
                or to
                corporations and so that the party may be or may be liable to be
                wound up
                or dissolved.

            

    

    

    GENERAL

    

    
      	
              28.

            	
              Notices.
                All notices or other communications required or permitted to be given
                under this Agreement must be in writing and delivered by courier
                or
                facsimile to the address for
                each party as specified above or in the case of delivery by facsimile,
                as
                follows: 

            

    

    

    -
      if to
      the Licensee:

    2642
      Collins Avenue, Suite 305, Miami Beach, FL 33140, USA

    Fax:
      1
      305 538 2603

    

    -
      if to
      the Licensor:

    75
      Zhongkai Hi Tech Development Zone, Huizhou, Guangdong, PRC

    Fax:
      86
      516 260 638

    

    Either
      party may designate a substitute address for the purpose of this section by
      giving written notice in accordance with this section. Any notice delivered
      in
      this fashion will be deemed to have been given when it is actually
      received.

    

    
      	
              29.

            	
              Time
                of Essence. Time is of the essence of this
                Agreement.

            

    

    

    
      	
              30.

            	
              Further
                Assurances. Each of the parties hereby covenants and agrees that
                at any
                time and from time to time it will, upon the request of the other
                party,
                do, execute, acknowledge and deliver or cause to be done, executed,
                acknowledged and delivered all such further acts, deeds, assignments,
                transfers, conveyances, powers of attorney and assurances as may
                be
                required for the better carrying out and performance of all the terms
                of
                this Agreement.

            

    

    

    
      	
              31.

            	
              Each
                party recognizes that the employees of the other party, and such
                employees' loyalty and service to such party, constitute a valuable
                asset
                of such party. Accordingly, each party agrees not to make any offer
                of
                employment to, nor enter into a consulting relation with, any person
                who
                was employed by the other party within three years after the cessation
                of
                such person's employment by the other
                party.

            

    

    

    
      	
              32.

            	
              Subject
                to the limitations hereinbefore expressed, this Agreement will enure
                to
                the benefit of and be binding upon the parties and their respective
                successors and assigns.

            

    

    

    
      	
              33.

            	
              This
                Agreement (including referenced Schedules) sets forth the entire
                understanding between the parties and supersedes all prior agreements,
                proposals, representations, warranties and all other communications
                between the Licensee and the Licensor relating to the subject matter
                hereof. Other than as specifically provided in this Agreement, there
                are
                no oral or written conditions, representations, warranties, undertakings
                or agreements between the Licensee and the Licensor. No modifications
                to
                this Agreement will be binding unless executed in writing by the
                parties.
                No waiver of any provision of this Agreement will be construed as
                a waiver
                of any other provision hereof nor shall such a waiver be construed
                as a
                continuing waiver. This Agreement may be executed in one or more
                counterparts, each of which will be deemed an original, but all of
                which
                together constitute one and the same instrument. This Agreement will
                be
                governed by the laws of the People's Republic of China. If any clause
                or
                provision of this Agreement is declared invalid or unenforceable,
                the
                remainder of this Agreement will remain in full force and effect.
                Headings
                used in this Agreement are for reference purposes only and will not
                be
                deemed to be a part of this Agreement. This Agreement will not be
                construed as creating a partnership, joint venture or agency relationship
                between the parties or any other form of legal association which
                would
                impose liability upon one party for any act or failure to act by
                the other
                party.

            

    

    
      
        
        

      

      
        Page
          9

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF the parties have executed this Agreement as at the day first
      above written. 

    

    HUIZHOU
      SOUTHERN RARE EARTH METAL MATERIAL CO., LTD

    

    

    ______________________

    Per:
      Authorized Signatory

    

    SOUTHERN
      RARE EARTH METAL MATERIAL CO., LTD.

    

    

    ______________________

    Per:
      Authorized Signatory

    
      
        
        

      

      
        Page
          10

        
          

        

      

      
        
        

      

    

    Schedule
      "A"

     

    
      
        	
                Fixed
                  Assets Sheet of 2004 

              	 	 	 	 
	 	 	 	 	 
	
                Name
                  of Fixed Assets 

              	
                Initial
                  Using Date

              	
                Original
                  Value 

              	
                Accumulated
                  Depreciation 

              	
                Net
                  Value 

              
	
                House
                  & Buildings 

              	 	 	 	 
	
                Electricity
                  House 

              	
                5/1/1998

              	
                25,126
                  

              	
                5,348
                  

              	
                19,777
                  

              
	
                Tennis
                  Court 

              	
                11/1/2001

              	
                88,213
                  

              	
                5,704
                  

              	
                82,509
                  

              
	
                Workshop
                  

              	
                11/1/2001

              	
                8,770,119
                  

              	
                567,134
                  

              	
                8,202,985
                  

              
	
                Office
                  Building & dormitory 

              	
                11/1/2001

              	
                4,373,775
                  

              	
                282,837
                  

              	
                4,090,938
                  

              
	
                Electrolyze
                  Workshop 

              	
                11/1/2001

              	
                194,987
                  

              	
                12,609
                  

              	
                182,378
                  

              
	
                Magnesium
                  Crucible House 

              	
                11/2/2001

              	
                1,554
                  

              	
                100
                  

              	
                1,453
                  

              
	
                Rebuilding
                  of Return Pipe 

              	
                11/3/2001

              	
                5,857
                  

              	
                379
                  

              	
                5,478
                  

              
	
                Electricity
                  Chang Project 

              	
                11/4/2001

              	
                389,549
                  

              	
                25,191
                  

              	
                364,358
                  

              
	
                Cement
                  road surface 

              	
                5/1/2003

              	
                623,600
                  

              	
                31,925
                  

              	
                591,675
                  

              
	
                Plant
                  Fence 

              	
                5/2/2003

              	
                401,800
                  

              	
                20,570
                  

              	
                381,230
                  

              
	
                Basketball
                  Court 

              	
                5/3/2003

              	
                80,000
                  

              	
                4,096
                  

              	
                75,904
                  

              
	
                Football
                  Court 

              	
                5/4/2003

              	
                38,000
                  

              	
                1,945
                  

              	
                36,055
                  

              
	
                Dining-room
                  & Warehouse 

              	
                5/5/2003

              	
                2,880,000
                  

              	
                147,440
                  

              	
                2,732,560
                  

              
	
                Fountain
                  

              	
                5/6/2003

              	
                350,000
                  

              	
                17,918
                  

              	
                332,082
                  

              
	
                Park
                  Fund 

              	
                5/7/2003

              	
                813,400
                  

              	
                41,642
                  

              	
                771,758
                  

              
	
                Trim
                  fund 

              	
                5/8/2003

              	
                620,000
                  

              	
                31,741
                  

              	
                588,259
                  

              
	
                Subtotal:
                  

              	 	
                19,655,979
                  

              	
                1,196,580
                  

              	
                18,459,399
                  

              
	
                Machines
                  & Equipment 

              	 	 	 	 
	
                Revolving
                  Vacuum PumpEX-15 

              	
                6/1/1998

              	
                4,470
                  

              	
                2,349
                  

              	
                2,121
                  

              
	
                Revolving
                  Vacuum PumpEX-16 

              	
                6/2/1998

              	
                4,470
                  

              	
                2,349
                  

              	
                2,121
                  

              
	
                Revolving
                  Vacuum PumpEX-17 

              	
                6/3/1998

              	
                4,470
                  

              	
                2,349
                  

              	
                2,121
                  

              
	
                Vacuum
                  Engine Pump 

              	
                6/1/1999

              	
                8,100
                  

              	
                4,256
                  

              	
                3,844
                  

              
	
                Electrolyze
                  Elevator 

              	
                12/1/1997

              	
                5,000
                  

              	
                2,829
                  

              	
                2,171
                  

              
	
                Electrolyze
                  Elevator 

              	
                12/2/1997

              	
                5,000
                  

              	
                2,829
                  

              	
                2,171
                  

              
	
                Argon
                  Arc Solder Machine 

              	
                5/1/1998

              	
                40,157
                  

              	
                21,099
                  

              	
                19,058
                  

              
	
                Fluoride
                  Furnace 

              	
                12/1/1995

              	
                176,719
                  

              	
                128,563
                  

              	
                48,156
                  

              
	
                Fluoride
                  Furnace 

              	
                12/2/1995

              	
                176,719
                  

              	
                128,563
                  

              	
                48,156
                  

              
	
                Electric
                  Arc Furnace 

              	
                1/1/1995

              	
                94,459
                  

              	
                75,718
                  

              	
                18,741
                  

              
	
                Electric
                  Arc Furnace 

              	
                5/1/1995

              	
                62,249
                  

              	
                48,641
                  

              	
                13,608
                  

              
	
                Fluoride
                  Furnace 

              	
                12/1/1997

              	
                159,929
                  

              	
                90,493
                  

              	
                69,436
                  

              

      

       

      
        
          
          

        

        
          Page
            11

          
            

          

        

        
          
          

        

      

       

      
        	
                Fluoride
                  Furnace 

              	
                12/2/1997

              	
                159,929
                  

              	
                90,493
                  

              	
                69,436
                  

              
	
                Fluoride
                  Furnace 

              	
                12/3/1997

              	
                159,929
                  

              	
                90,493
                  

              	
                69,436
                  

              
	
                Fluoride
                  Furnace 

              	
                11/1/2001

              	
                21,080
                  

              	
                5,112
                  

              	
                15,968
                  

              
	
                Fluoride
                  Furnace 

              	
                11/2/2001

              	
                21,080
                  

              	
                5,112
                  

              	
                15,968
                  

              
	
                Fluoride
                  Furnace 

              	
                11/3/2001

              	
                21,080
                  

              	
                5,112
                  

              	
                15,968
                  

              
	
                Sintering
                  Furnace 

              	
                7/1/1994

              	
                29,458
                  

              	
                24,804
                  

              	
                4,654
                  

              
	
                Sintering
                  Furnace 

              	
                7/2/1994

              	
                29,458
                  

              	
                24,804
                  

              	
                4,654
                  

              
	
                Lathe
                  

              	
                5/1/1995

              	
                11,650
                  

              	
                9,025
                  

              	
                2,625
                  

              
	
                Lathe
                  

              	
                12/1/2000

              	
                9,500
                  

              	
                3,072
                  

              	
                6,428
                  

              
	
                Lathe
                  

              	
                7/1/2000

              	
                14,800
                  

              	
                5,284
                  

              	
                9,516
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-01 

              	
                11/1/2001

              	
                97,491
                  

              	
                23,642
                  

              	
                73,849
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-02 

              	
                11/2/2001

              	
                97,491
                  

              	
                23,642
                  

              	
                73,849
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-03 

              	
                6/1/1993

              	
                213,404
                  

              	
                199,815
                  

              	
                13,590
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-04 

              	
                6/2/1993

              	
                210,087
                  

              	
                196,709
                  

              	
                13,378
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-05 

              	
                10/1/1996

              	
                140,000
                  

              	
                92,419
                  

              	
                47,581
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-06 

              	
                12/1/1996

              	
                102,000
                  

              	
                65,960
                  

              	
                36,040
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-07 

              	
                12/2/1996

              	
                102,000
                  

              	
                65,960
                  

              	
                36,040
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-08 

              	
                12/1/1997

              	
                125,181
                  

              	
                70,832
                  

              	
                54,349
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-09 

              	
                12/2/1997

              	
                125,181
                  

              	
                70,832
                  

              	
                54,349
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-10 

              	
                2/1/1999

              	
                104,360
                  

              	
                49,209
                  

              	
                55,151
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-11 

              	
                2/2/1999

              	
                104,360
                  

              	
                49,209
                  

              	
                55,151
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-12 

              	
                11/1/2001

              	
                97,491
                  

              	
                24,298
                  

              	
                73,193
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-13 

              	
                11/2/2001

              	
                97,491
                  

              	
                24,298
                  

              	
                73,193
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-14 

              	
                11/3/2001

              	
                97,491
                  

              	
                24,298
                  

              	
                73,193
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-15 

              	
                11/4/2001

              	
                97,491
                  

              	
                24,298
                  

              	
                73,193
                  

              
	
                Vacuum
                  Carbon Pipe FurnaceT-16 

              	
                11/5/2001

              	
                97,491
                  

              	
                24,298
                  

              	
                73,193
                  

              
	
                Huge
                  Vacuum Carbon Pipe FurnaceT-1 

              	
                2/1/1999

              	
                240,437
                  

              	
                113,373
                  

              	
                127,064
                  

              
	
                Vacuum
                  Induction FurnaceZ-03 

              	
                11/1/1994

              	
                226,516
                  

              	
                184,626
                  

              	
                41,890
                  

              
	
                Vacuum
                  Induction FurnaceZ-04 

              	
                10/1/1996

              	
                135,426
                  

              	
                89,400
                  

              	
                46,026
                  

              
	
                Vacuum
                  Induction FurnaceZ-05 

              	
                2/1/2000

              	
                258,132
                  

              	
                100,851
                  

              	
                157,281
                  

              
	
                Vacuum
                  Induction FurnaceZ-09 

              	
                2/1/1999

              	
                121,574
                  

              	
                49,136
                  

              	
                72,438
                  

              
	
                Intermediate
                  Frequency FurnaceZ-01 

              	
                6/1/1998

              	
                304,642
                  

              	
                160,064
                  

              	
                144,578
                  

              
	
                Intermediate
                  Frequency FurnaceZ-02 

              	
                6/2/1998

              	
                304,642
                  

              	
                160,064
                  

              	
                144,578
                  

              
	
                Distillation
                  Furnace 

              	
                7/1/1994

              	
                65,000
                  

              	
                54,731
                  

              	
                10,269
                  

              
	
                Distillation
                  Furnace 

              	
                1/1/1995

              	
                75,626
                  

              	
                60,622
                  

              	
                15,004
                  

              

      

       

      
        
          
          

        

        
          Page
            12

          
            

          

        

        
          
          

        

      

       

      
        	
                Hydraulic
                  Pressure Machine 

              	
                6/1/1993

              	
                71,469
                  

              	
                66,436
                  

              	
                5,033
                  

              
	
                Hydraulic
                  Pressure Machine 

              	
                5/1/1995

              	
                75,143
                  

              	
                58,210
                  

              	
                16,933
                  

              
	
                Hydraulic
                  Pressure Machine 

              	
                7/1/2000

              	
                71,000
                  

              	
                25,348
                  

              	
                45,652
                  

              
	
                Silicon
                  Commutating Electronalyze Equipment 

              	
                12/1/1999

              	
                353,034
                  

              	
                147,994
                  

              	
                205,039
                  

              
	
                Silicon
                  Commutating Electronalyze Equipment 

              	
                12/2/1999

              	
                353,034
                  

              	
                147,994
                  

              	
                205,039
                  

              
	
                Alteration
                  & Extension of Silicon Commutating Electronalyze Equipment
                  

              	
                2/1/1999

              	
                5,294
                  

              	
                2,496
                  

              	
                2,798
                  

              
	
                Deoxidizing
                  Vacuum Furnace 

              	
                10/2/2003

              	
                485,000
                  

              	
                45,738
                  

              	
                439,262
                  

              
	
                Deoxidizing
                  Filter 

              	
                10/2/2003

              	
                428,000
                  

              	
                40,363
                  

              	
                387,637
                  

              
	
                Sintering
                  Furnace 

              	
                12/1/2000

              	
                194,400
                  

              	
                62,856
                  

              	
                131,544
                  

              
	
                Manual
                  Grinding Machine 

              	
                4/1/2004

              	
                7,540
                  

              	
                406
                  

              	
                7,134
                  

              
	
                Subtotal:
                  

              	 	
                6,904,623
                  

              	
                3,373,774
                  

              	
                3,530,849
                  

              
	
                Electronic
                  Equipment 

              	 	 	 	 
	
                Cell
                  phone 

              	
                6/1/1999

              	
                7,500
                  

              	
                7,275
                  

              	
                225
                  

              
	
                Nokia
                  3210 

              	
                8/1/1999

              	
                4,440
                  

              	
                4,307
                  

              	
                133
                  

              
	
                Computer
                  

              	
                3/1/1998

              	
                22,000
                  

              	
                21,340
                  

              	
                660
                  

              
	
                Computer
                  TCL 

              	
                6/1/1999

              	
                9,999
                  

              	
                9,699
                  

              	
                300
                  

              
	
                Computer
                  

              	
                4/1/2001

              	
                14,816
                  

              	
                10,539
                  

              	
                4,277
                  

              
	
                Duplicating
                  Machine 

              	
                7/1/2000

              	
                13,000
                  

              	
                11,139
                  

              	
                1,861
                  

              
	
                Electrograph
                  

              	
                12/1/1999

              	
                3,850
                  

              	
                3,735
                  

              	
                116
                  

              
	
                Ge
                  Li Air-Conditioner 

              	
                6/1/2000

              	
                6,790
                  

              	
                5,928
                  

              	
                862
                  

              
	
                Color-TV
                  TCL 

              	
                9/1/2000

              	
                3,900
                  

              	
                3,216
                  

              	
                684
                  

              
	
                Water-Purifying
                  Machine 

              	
                8/1/2002

              	
                3,000
                  

              	
                1,358
                  

              	
                1,642
                  

              
	
                Laser
                  Printer 

              	
                10/1/2003

              	
                2,000
                  

              	
                453
                  

              	
                1,547
                  

              
	
                Cell
                  phone 

              	
                2/1/2004

              	
                2,230
                  

              	
                601
                  

              	
                1,629
                  

              
	
                Cell
                  phone 

              	
                12/1/2004

              	
                4,550
                  

              	
                -
                  

              	
                4,550
                  

              
	
                Subtotal:
                  

              	 	
                98,075
                  

              	
                79,588
                  

              	
                18,487
                  

              
	
                Transport
                  Facilities 

              	 	 	 	 
	
                Wu
                  Shi LinStation Wagon 

              	
                6/1/1995

              	
                132,451
                  

              	
                122,053
                  

              	
                10,397
                  

              
	
                Jin
                  Bei Microbus 

              	
                9/1/1999

              	
                170,500
                  

              	
                86,827
                  

              	
                83,673
                  

              
	
                Ao
                  Li Car 

              	
                6/1/2000

              	
                629,071
                  

              	
                143,639
                  

              	
                485,432
                  

              
	
                Ao
                  Li Car Addition 

              	
                11/1/2001

              	
                15,425
                  

              	
                5,375
                  

              	
                10,050
                  

              
	
                Subtotal:
                  

              	 	
                947,447
                  

              	
                357,895
                  

              	
                589,552
                  

              
	
                Total
                  up: 

              	 	
                27,606,123
                  

              	
                5,007,836
                  

              	
                22,598,287
                  

              

      

    

    

      
        
          
          

        

        
          Page
            13

          
            

          

        

        
          
          

        

      

    

     

    Huizhou
      Zhengda Accountant Office Co., Ltd

    Huizhou
      Zhengda Accountant Office Evaluation and Judging No.
      (2005)

    Assets
      Evaluation Report

    

    Huizhou
      South Rare Earth Metal Material Co., Ltd:

    Committed
      by Huizhou South Rare Earth Metal Material Co., Ltd, according to national
      regulations of assets evaluation, on the basis of impersonality, independency,
      equity and science, by the recognized assets evaluation methods, Huizhou Zhengda
      Accountant Office has performed assets evaluation of housing and annexes with
      an
      area of 11,431.88
      square meters, 289 units (sets) of equipment, 3 vehicles and 65,978 square
      meters land using right, “for providing assets value gist for existing
      shareholders and prospective investors or other users to learn the evaluating
      of
      company’s current assets” . Evaluating persons of this office have carried out
      checking on the sport, market survey, inquiry and verification of the entrusted
      assets by necessary procedure, working out fair reflection of market value
      of
      committed assets on Feb 28th,
      2005.
      We are now showing the assets evaluation circumstances and results as
      following:

    

    
      	
              1.

            	
              Consigner
                and Property Owner:

            

    

    The
      consigner and property owner is Huizhou South Rare Earth Metal Material Co.,
      Ltd. (hereafter SREMMC). SREMMC is registered at Huizhou Industrial and
      Commercial Administration Bureau as a limited company in Aug 16th,
      1994.
      Registered number of corporation license is 4413002000961. Registered fund
      is
      6,000,000 Yuan, RMB. Paid-up capital is 6,000,000 Yuan, RMB, including
      5,400,000Yuan provided by He Wulin, which account for 90%, and 6,000,000 Yuan
      provided by He Lunxian accounting for 10%. Paid-up capital is validated by
      assets checking report “ Orient Accountant Office Checking (2003) No.451” of
      Huizhou Orient Accountant Office. Company address: No.75 district, Zhongkai
      new
      hi- tech industrial development zone, Huizhou. Business range: processing,
      sale:
      rare earth metals, rare earth compound, no-ferrous metals, ferrous metals and
      their alloy. Sale: hardware instrument, mineral products and construction
      materials. Company deals with the export of its own products and export of
      necessary Equipment, fittings and original assistant materials, except for
      the
      national limited or prohibited products.

    

    
      	
              -

            	
              Purpose
                of evaluation:

            

    

    Purpose
      of this assets evaluation is “for providing assets value gist for existing
      shareholders and prospective investors or other users to learn the evaluating
      of
      company’s current assets”

    

    
      	
              -

            	
              Range
                and Object of Evaluation:

            

    

    Range:
      289 units (sets) machinery equipment and office equipment, house buildings
      with
      an area of 10,831.67 square meters located in No.75 district, Zhongkai new
      hi-tech development zone in Huizhou, 26,503 square meters land using right,
      eight houses in Jinbao Career Homestead with total area of 599.76, and SREMMC
      Wanan subsidiary with an area of 39,475 square meters.

    

    
      	
              -

            	
              Evaluation
                benchmark date:

            

    

    Evaluation
      benchmark date of this project is Feb 28th,
      2005.

    
      
        
        

      

      
        Page
          14

        
          

        

      

      
        
        

      

    

     

    Evaluation
      benchmark
      date is
      fixed according to the evaluation purpose and consigner’s require; the valid
      price standard of evaluation benchmark
      date is
      the price-choosing standard of this evaluation.

     

    
      	
              -

            	
              Evaluation
                principle:

            

    

    According
      to state assets management and relative regulations of evaluation, we follows
      working principle of independence, science and objectivity, principle of
      property right interest main body change, principle of persistent operation,
      principle of substitution and principle of open market, and recognized
      principles of other countries. 

    

    
      	
              -

            	
              Evaluation
                Gist:

            

    

    
      	 	
              1.

            	
              State
                Department order No.91 of 1991 State Assets Evaluation Administration
                Methods and State Evaluation Administration Methods Implementation
                Detailed Rules constituted by State Assets Administration
                Bureau;

            

    

    

    
      	 	
              2.

            	
              No.3
                (1996) Document issued by China Assets Evaluation Association-Manipulation
                Criterion Opinion on Assets Evaluation (trial)

            

    

    

    
      	 	
              3.

            	
              Ministry
                of Finance financial evaluation No.91document(1999)-Basic Content
                and
                Format of Assets Evaluation Temporary Regulations and State Assets
                Evaluation Administration Issues
                Regulations;

            

    

    

    
      	 	
              4.

            	
              State
                Department Office “State Department Office(2001) No.102 “-Notice of
                Forwarding Work Comments on State Assets Evaluation Administration
                Methods
                Reformation and Strengthening Assets Evaluation Supervising and
                Management;

            

    

    

    
      	 	
              5.

            	
              State
                criterion-Real Estate Evaluation Criterion, issued by Construction
                Department on Feb 12th,
                1999. 

            

    

    

    
      	 	
              6.

            	
              Houses
                and land property materials provided by
                consigner;

            

    

    

    
      	 	
              7.

            	
              Norm
                land price of Huizhou state land and market price of construction
                material;

            

    

    

    
      	 	
              8.

            	
              Huizhou
                Urban Norm Land Price Criterion and Implement Methods; Huizhou Urban
                Norm
                Land Price Criterion Adjustment Project, Huizhou Urban land Complex
                Distinction Chart, Wanan Norm Land Price Criterion and Implement
                Methods,
                all issued by Huizhou State Land
                Bureau.

            

    

    

    
      	 	
              9.

            	
              Price
                information of mechanical and electrical products;
                

            

    

    
      
        
        

      

      
        Page
          15

        
          

        

      

      
        
        

      

    

    
      	 	
              10.

            	
              Operation
                Entrusting Agreement signed between Huizhou
                South Rare Earth Metal Material Co., Ltd and our accountant
                office;

            

    

    

    
      	 	
              11.

            	
              General
                ration of Guangdong construction
                project;

            

    

    

    
      	 	
              12.

            	
              Evaluating
                person spot checking records and other materials regarding the evaluation
                project.

            

    

    

    
      	
              -

            	
              Evaluation
                methods:

            

    

    Evaluate
      status in quo and purpose of varieties of assets
      according to the entrusting agreement.

    1. Evaluate
      the land property by means of norm land price coefficient amending
      method.

    

    1norm
      land
      price coefficient amendment method to evaluate the land price=norm land price
      ×
cubage
      rate amendment coefficient × development extent amendment coefficient ×
amendment coefficient of jointing road condition × amendment coefficient of
      using years.

    2Land
      value=land price × land area.

    

    2.Evaluate
      houses and machinery equipment by means of re-establish cost
      method.

    1    Evaluated
      value = re-establish cost × new-part proportion%.

    new-part
      proportion = prospective using years available÷(used years+ prospective using
      years available) ×100%. 

    

    
      	 	
              Prospective
                using years available take “ technical depreciation”, “functional
                wastage”, and “equipment erosion by alkalescence matters” into
                consideration.

            

    

    
      	 	
              re-establish
                cost of house = installation cost + beginning-phase project cost
                + special
                item cost + tax + capital interest + developer
                profit.

            

    

    re-establish
      cost of equipment=equipment purchasing price+ equipment transport cost +
      equipment installation cost + equipment debugging cost.

    

    
      	
              -

            	
              Evaluation
                process:

            

    

    According
      to the principles and regulations of assets evaluation, the main procedure
      of
      evaluation as follow: 

    

    
      	 	
              1.

            	
              Sign
                Assets Evaluation Agreement with consigner, to make clear the purpose
                of
                assets evaluation, evaluation date, evaluating range and rights,
                responsibilities and obligations of both
                sides.

            

    

    

    
      	 	
              2.

            	
              Direct
                consigner to conduct assets checking, filling assets checking form
                and
                collecting and preparing materials.

            

    

     

    
      	 	
              3.

            	
              Chose
                evaluating method to carry out evaluation on entrusted assets according
                to
                evaluation purpose, gist and conditions of evaluated
                object.

            

    

    
      
        
        

      

      
        Page
          16

        
          

        

      

      
        
        

      

    

    
      	 	
              4.

            	
              Evaluating
                persons compose the evaluation account, analyzing evaluation results,
                complete assets evaluation list, and collect work manuscript.
                

            

    

    

    
      	 	
              5.

            	
              Person
                in charge of Project write evaluation report, and submit it to consigner
                after auditing.

            

    

    

    
      	-	
              Evaluation
                conclusion of land property, house property, mechanic equipment and
                vehicles.

            

    

    

    Estimate
      per evaluating. The evaluation value of evaluated assets on Feb 28, 2005
      (evaluating date) is RMB72,004,200.00. For details please see Assets Evaluation
      Collection List (list 1-5).

    

    
      	
              -

            	
              Explanations
                for special items:

            

    

    
      	 	
              1.

            	
              For
                potential other flaws that might affect evaluating result, consigner
                did
                not show special explanation. As evaluating persons cannot learn
                with
                their professional experience, evaluating institute and persons will
                not
                assume relative responsibilities.

            

    

    

    
      	 	
              2.

            	
              Evaluation
                value” here means evenhanded evaluation comments provided for the report
                under the premise of existing purpose unchanged and continuing operating
                of evaluated assets, and the unchanging of exterior economic circumstances
                of evaluating date.

            

    

    

    
      	 	
              3.

            	
              The
                evaluation mostly rely on relative material provided by consigner
                and
                property owner, including certificates. Huizhou South Rare Earth
                Metal
                Material Co., Ltd is responsible of authenticity, objectivity and
                legality.

            

    

    

    
      	 	
              4.

            	
              This
                evaluating result is reflection of existing evenhanded market value
                according to open market under this evaluating purpose, without
                consideration of future potential mortgage and debt , and influence
                on
                evaluation value by super addition paid price of special dealer;
                At
                meantime, this report did not consider the influence caused by the
                changes
                of state microeconomic policy and other force
                majeure.

            

    

    

    
      	 	
              5.

            	
              The
                evaluation is carried out under the principle of impersonality, fair,
                scientific and independence. There is no benefit relation between
                our
                office and evaluating persons and consigner. Evaluating persons
                scrupulously abide by occupational criterion in the process of evaluation
                and did a fair evaluation.

            

    

    

    
      	 	
              6.

            	
              Houses
                with an area of 10,831.67 square meters in No.75 district, Zhongkai
                new
                hi-tech industrial zone in Huizhou and another land of 26,503 square
                meters, which are entrusted to be evaluated, have been mortgaged
                to
                commercial bank respectively. Eight sets of houses with total area
                of
                599.76 square meters of Jinbao Career Homestead are mortgage houses.
                Three
                vehicles that are entrusted to be evaluated have registered under
                individual name. 

            

    

    
      
        
        

      

      
        Page
          17

        
          

        

      

      
        
        

      

    

    
      	
              -

            	
              Important
                proceedings after evaluating benchmark date of evaluation
                report:

            

    

    
      	 	
              1.

            	
              If
                assets price standard change great, and result in evident influence
                on
                assets evaluation value, consigner should retain evaluation institute
                to
                re-confirm evaluation value in time.

            

    

    

    
      	 	
              2.

            	
              If
                assets quantity changes after evaluation benchmark date, within valid
                evaluating period, consigner should take full consideration and make
                corresponding adjustment when assets are in actual evaluating
                transaction.

            

    

    

    
      	 	
              3.

            	
              Due
                to the changes of assets quantity and price standard, consigner should
                take full consideration in actual evaluating when the evaluation
                purpose
                is actualizes, and make corresponding
                adjustment.

            

    

    

    
      	
              -

            	
              Validity
                of evaluation report:

            

    

    Premise
      and supposed conditions for establishment of evaluation report.

    

    
      	 	
              1.

            	
              All
                the materials provided by enterprise are true and
                reliable.

            

    

    

    
      	 	
              2.

            	
              There
                is no great changes of existing laws, regulations, policies and economic
                circumstances that enterprise abide by

            

    

    

    
      	 	
              3.

            	
              No
                other big adverse influence caused by unresistable and unforeseeable
                factors.

            

    

    

    
      	
              -

            	
              Legal
                validity: 

            

    

    
      	 	
              1.

            	
              Our
                office will not assume responsibilities of any results caused by
                any
                economic behavior that has no business of this evaluation purpose
                by
                consigner using this report.

            

    

    

    
      	 	
              2.

            	
              There
                are some attachments and they are important components of this report,
                having the same legal validity of the
                report.

            

    

    

    
      	
              -

            	
              Valid
                period of evaluation
                conclusion:

            

    

    The
      evaluation report will go into legal effect according to laws and regulations.
      The valid period of evaluation conclusion is on year on and from evaluation
      benchmark date, namely Feb 28th
      of 2005
      to Feb 27th
      of 2006.

    

    
      	
              -

            	
              Using
                range of evaluation
                report:

            

    

    
      
        
          	
                	1.	
                  This
                    evaluation report is only for consigner use for this evaluation.
                    Consigner
                    has the using right of the evaluation report; witch cannot be
                    open or
                    provided to others without permission of evaluation
                    institute.

                

        

      

    

    
      
        
        

      

      
        Page
          18

        
          

        

      

      
        
        

      

    

    
      	 	
              2.

            	
              the
                report cannot be provided to any other organizations or individuals
                without permission of evaluation institute, except audit department
                and
                consigner. All or partial content of the report cannot be published
                on any
                public media.

            

    

    

    
      	
              -

            	
              Raising
                Date of evaluation report

            

    

    Raising
      Date of the evaluation report is Mar 21st,
      2005.

    

    Assets
      Evaluation Institute: Huizhou Zhengda Accountant Office Co., Ltd 

    Evaluation
      Project Principal: Deng Hongchang (China registered assets evaluator)

    Evaluation
      report checker: Hefang (China registered assets evaluator) 

    Legal
      representative: Deng Hongchang

     

    Page
      19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00098-of-00352.parquet"}]]