Document:

SALE
      AND PURCHASE AGREEMENT

    

    IN
      RELATION TO THE OWNERSHIP INTEREST 

    

    OF

    

    HANGZHOU
      HOLLYSYS AUTOMATION CO., LTD.

    

    BETWEEN

    

    OSCAF
      INTERNATIONAL CO., LTD

    

    AND

    

    GIFTED
      TIME HOLDINGS LIMITED

    

    

    

    

    

    
      
        

      

    

    

    Dated:
      January 12, 2006 

    
      
        

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
      SALE
      AND PURCHASE AGREEMENT
      (Hereinafter referred as “this Agreement”) is entered into on the 12th
      day of
      January 2006.

     

    BETWEEN:-

    

    
      	
              (1)

            	
              OSCAF
                INTERNATIONAL CO., LTD,
                (Hereinafter referred as “Party A”), a company incorporated in Cayman
                Islands with limited liability;

            

    

    

    
      	
              (2)

            	
              GIFTED
                TIME HOLDINGS LIMITED,
                (Hereinafter referred as “Party B”), a company incorporated in the British
                Virgin Islands with limited
                liability.

            

    

    

     

    (Party
      A
      and Party B may be referred
      as“Party
      A
      and B” or “both Parties” together, or “the Party” or “each Party”
individually under
      this Agreement)

    

    WHEREAS:-

    

    
      	(A)  	
              As
                of the date of this Agreement,
                Party A is the registered owner of Hangzhou HollySys Automation Co.,
                Ltd.
                (Hereinafter referred as "HZ HollySys") holding 30% of the entire
                ownership interest in HZ HollySys;
                and

            

    

    
       

    

    
      	(B)  	
              Party
                A agrees that Party A shall sell 30% ownership interest in HZ HollySys
                to
                Party B in accordance with the conditions set forth in this Agreement.
                Party B agrees that Party B shall purchase the 30% ownership interest
                in
                HZ HollySys.

            

    

    

    Therefore,
      Party A and Party B enter into this Agreement based on the following
      conditions:-

    

    
      	
              1.

            	
              DEFINITIONS

            

    

    

    
      	
              1.1

            	
              In
                this Agreement, unless otherwise expressed or required by context,
                the
                following words and expressions shall have the respective meanings
                set
                opposite thereto as follows:-

            

    

     

    
      	 	
              Expression

            	
              Meaning

            

    

    
      

      
        	 	
                "This Agreement"

              	
                Sales
                  and Purchase Agreement dated [12th January 2006] and its appendix
                  entered
                  into between the Party A and Party
                  B

              

      

      
        

        
          	 	
                  "HZ
                    HollySys"

                	
                  Hangzhou
                    HollySys Automation Co., Ltd. Party A holds 30% of the entire
                    ownership
                    interest in HZ HollySys

                

        

        
          

          
            	 	
                    "Transaction"

                  	
                    the
                      transaction with respect to the sale and purchase of the 30%
                      ownership
                      interest in HZ HollySys between Party A and Party B in accordance
                      with the
                      conditions set forth in this
                      Agreement

                  

          

          
             

            
              
                
                

              

              
                
                

                
                  

                

              

              
                
                

              

            

             

            
              	 	
                      "Sale
                        Share"

                    	
                      the
                        fully paid share which is legally and beneficially owned
                        by Party A,
                        representing 30% of the entire issued share capital of HZ
                        HollySys as at
                        the date of this Agreement

                    

            

            
              

              
                	 	
                        "Consideration"

                      	
                        the
                          agreed total consideration payable by Party B to Party
                          A for the sale and
                          purchase of the Sale Share in accordance with the condition
                          3 set forth in
                          this Agreement

                      

              

              
                

                
                  	 	
                          "Signature
                            Date"

                        	
                          the
                            official date for signature of this Agreement stated
                            in this
                            Agreement

                        

                

                
                  
                    

                    
                      	 	
                              "Effective
                                Date"

                            	
                              the
                                date upon the fulfillment of all the conditions specified
                                in this
                                Agreement 

                            

                    

                    
                      
                        

                        
                          	 	
                                  "Business
                                    Day"

                                	
                                  a
                                    day on which banks are open for business other
                                    than (i) a Saturday or a
                                    Sunday; or (ii) a "general holiday"

                                

                        

                        
                          
                            

                            
                              	 	
                                      "RMB"

                                    	
                                      Renminbi,
                                        the legal currency of the P.R.China

                                    

                            

                             

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      	
              2.

            	
              SALE
                AND PURCHASE OF THE SALE SHARE

            

    

    

    
      	
              2.1

            	
              Party
                A agrees that Party A shall sell the Sale Share to Party B in accordance
                with the terms and conditions set forth in this Agreement. Party
                B agrees
                that Party B shall purchase the Sale Share in accordance with the
                terms
                and conditions set forth in this
                Agreement.

            

    

     

    
      	
              3.

            	
              CONSIDERATION

            

      

      
        	
                3.1

              	
                Both
                  Parties agree that the total consideration payable by Party B to
                  Party A
                  for the sale of the Sale Share shall be RMB
                  60,474,000.

              

        

        
          	
                  3.2

                	
                  Both
                    Parties agree that Party B shall pay the consideration of the
                    Sale Share
                    to Party A or any third party designated by Party A by issuing
                    common
                    stock with equivalent value of the Sale Share, representing 7,966
                    shares
                    of Party B’s common stock, which take 15.932% of its total outstanding
                    stocks. 

                

           

        

      

    

    
      	
              4.

            	
              PARTY
                A’S RIGHTS AND OBLIGATIONS

            

    

    

    
      	
              4.1

            	
              Party
                A has the right, power and authority to sell and transfer the Sale
                Share.

            

      

      
        	
                4.2

              	
                Party
                  A is the sole beneficial owner of the Sale Share which shall be
                  transferred and assigned to Party B pursuant to the terms of this
                  Agreement free from all claims, charges, liens, encumbrances, third
                  party
                  rights, disputes, litigations and arbitrations of any kind
                  whatsoever;

              

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	
                  4.3

                	
                  Party
                    A has not entered into any contracts or agreements which may
                    conflict with
                    this Agreement. Party A shall not transfer any rights and obligations
                    under this Agreement to any third party.

                

          

          
            	
                    4.4

                  	
                    Party
                      A agrees to take all and any necessary actions, executes and
                      delivers any
                      legal documents (including any necessary approvals from the
                      government
                      authorities) to complete the transaction
                      hereunder.

                  

          

           

        

      

    

    
      	
              5.

            	
              PARTY
                B’S RIGHTS AND OBLIGATIONS

            

    

    

    
      	
              5.1

            	
              Party
                B is fully capable of entering into this Agreement and performing
                all
                obligations and duties hereunder;

            

    

    
      

      
        	
                5.2

              	
                Party
                  B shall fully pay the consideration to Party A in time pursuant
                  to the
                  terms in this Agreement.

              

      

      
        

        
          	
                  5.3

                	
                  Party
                    B has not entered into any contracts or agreements which may
                    conflict with
                    this Agreement. The Purchase shall not transfer any rights and
                    obligations
                    under this Agreement to any third
                    party.

                

        

        
          

          
            	
                    5.4

                  	
                    During
                      the period from the signature date of this Agreement to the
                      completion
                      date of the transaction hereunder, Party B agrees that Party
                      B shall not
                      propose or enter into any negotiations or discussions or enter
                      into any
                      letter of intend, agreements or understandings which may conflict
                      with the
                      transaction
                      hereunder.

                  

          

        

      

    

    
      

      
        	
                6.

              	
                DEFAULT 

              

      

      
        
          

          
            	
                    6.1

                  	
                    After
                      effective date of this Agreement, it may constitute default,
                      if either
                      Party is in breach, nonperforming, or partly performing terms
                      of this
                      Agreement, or is in breach of any warranties, representations
                      and
                      undertakings of this Agreement. The non-defaulting Party can
                      allow the
                      defaulting Party to cure such default in a reasonable time
                      period. If the
                      defaulting Party does not cure within the reasonable time period,
                      the
                      non-defaulting Party shall be entitled to terminate the Agreement,
                      and
                      hold the defaulting Party liable for all the damages and economic
                      loss
                      resulting from the defaulting Party’s default. The economic loss shall not
                      exceed the amount that defaulting Party could anticipate or
                      should
                      anticipate as of the date of this
                      Agreement.

                  

          

          
            
              

              
                	
                        7.

                      	
                        
                          FORCE
                            MAJEURE 

                        

                      

              

              
                
                  

                  
                    	
                            7.1

                          	
                            Neither
                              Party shall be liable to the other for any delay or
                              failure to perform its
                              obligation under this Agreement, if such failure or
                              delay is due to force
                              majeure.

                          

                  

                  
                    
                      

                      
                        	
                                8.

                              	
                                
                                  GOVERNING
                                    LAW AND DISPUTE
                                    RESOLUTION

                                

                              

                      

                      
                        
                           

                          
                            
                              
                              

                            

                            
                              
                              

                              
                                

                              

                            

                            
                              
                              

                            

                          

                           

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      	
              8.1

            	
              Any
                dispute arising out of this Agreement shall be resolved by both Parties
                through mutual negotiation. If both Parties could not reach an agreement,
                either Party may initiate legal action in the competent
                jurisdiction.

            

    

    

    
      	
              8.2

            	
              This
                Agreement shall be governed by and construed in accordance with the
                laws
                of PRC.
                

            

    

     

    
      	
              9.

            	
              EFFECTIVE

            

      

      
        	
                9.1

              	
                Upon
                  and after all of the following conditions have been satisfied and
                  fulfilled, this Agreement shall come into
                  effective:

              

        

        
          	
                  9.1.1

                	
                  This
                    Agreement has been signed by both Parties’ legal representatives or
                    authorized persons;

                

          

          
            	
                    9.1.2

                  	
                    The
                      transaction in this Agreement has been approved by the Board
                      of HZ
                      HollySys;

                  

            

            
              	
                      9.1.3

                    	
                      This
                        Agreement has been approved by the original government authorities.
                        

                    

               

            

          

        

      

    

    
      	
              10.

            	
              CONFIDENTIALITY

            

    

    

    
      	
              10.1
                

            	
              Save
                as required by any applicable law, court order or other regulatory
                requirements, none of the parties hereto shall make, any press or
                other
                announcement or release or disclose any information, document and
                data
                concerning this Agreement or the transaction herein referred to or
                disclose the identity of the other parties hereto (save disclosure
                to
                their respective professional advisers under a duty of confidentiality)
                without the prior written consent of the other parties
                hereto.

            

    

     

    
      	
              11.

            	
              MODIFICATION,
                TERMINATION, SUPPLEMENTARY 

            

      

      
        	
                11.1
                  

              	
                
                  The
                    modification of this Agreement shall not be effective without
                    written
                    agreement through negotiation. If both Parties could not reach
                    an
                    agreement, this Agreement remains effective. Any modification,
                    construction or renunciation to this Agreement shall be invalid
                    if without
                    a written agreement signed by both
                    Parties.

                

              

        

        
          	
                  11.2 

                	
                  
                    If
                      either party is in breach of this Agreement, non-default party
                      may
                      terminate this Agreement. Both Parties may agree to cancel
                      this Agreement
                      with written agreement. 

                  

                

          

          
            	
                    11.3

                  	
                    
                      This
                        Agreement may terminate in the following circumstances: (i)
                        Both Parties
                        agree to terminate this Agreement; (ii) Non-default party
                        terminates this
                        Agreement pursuant to the terms and conditions of this Agreement;
                        (iii)
                        the transaction under this Agreement has been
                        completed.

                    

                  

            

            
              	
                      11.4 

                    	
                      
                        Both
                          Parties may sign supplemental agreement regarding to related
                          matters of
                          this Agreement. Supplemental agreement and this Agreement
                          have the same
                          effect.

                      

                    

            

             

          

        

      

    

    
      	
              12.

            	
              MISCELLANEOUS

            

    

    

    This
      Agreement is executed in four copies, two copies for each Party, and both
      Parties may execute the duplicate.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Parties hereto have caused their duly authorized
      representatives to execute this Agreement.

     

     

    
      	 	 	 	 
	/s/ Liu
              Yangshen	 	 	 
	
              For and on behalf of

              OSCAF INTERNATIONAL CO.,
                LTD 

              in the presence of Director

            	 	 	
            
	 	 	 	 

    

     

    
      
        	 	 	 	 
	/s/ 
Qiao
                Li 	 	 	 
	
                For and on behalf of

                GIFTED TIME HOLDINGS
                  LIMITED

                in the presence of DirectorExhibit
        10.8

      

      List
        of Exhibits Schedules to Stock Purchase Agreement

      

      Exhibit
        A
        - HollySys Subsidiary Matters

      Exhibit
        B
        - HollySys Stockholders

      Exhibit
        C
        - Beneficiaries of Purchase Price

      Exhibit
        D
        - Chardan Sub Merger Agreement

      Exhibit
        E
        - Form of Stock Consignment Agreement

      Exhibit
        F
        - Form of Employment Agreement

      

      HollySys
        Holdings Schedules

      

      Schedule
        1.3 - Earn-Out Shares for HollySys Stockholders

      Schedule
        3.1(a) - List of HollySys Stockholders

      Schedule
        3.1(b) - Capitalization

      Schedule
        3.2 - Organizational Jurisdictions of Gifted Time Holdings

      Schedule
        3.3(b) - Conflicts

      Schedule
        3.4 - Consents and Approvals

      Schedule
        3.5 - Licenses and Permits

      Schedule
        3.6 - Taxes, Tax Returns and Audits

      

      Beijing
        HollySys, Hangzhou HollySys and HollySys Subsidiary
        Schedules

      

      Schedule
        4.2 - Organizational Jurisdictions of Beijing HollySys, Hangzhou HollySys,
        and
        HollySys Subsidiary

      Schedule
        4.3 - Conflicts 

      Schedule
        4.4 - Consents and Approvals

      Schedule
        4.5 - 2005 and September Financial Statements

      Schedule
        4.6 - Undisclosed Liabilities

      Schedule
        4.7 - Real Property

      Schedule
        4.8 - Personal Property

      Schedule
        4.9 - Non Real Estate Leases

      Schedule
        4.12 - Contracts, Obligations and Commitments 

      Schedule
        4.13 - Licenses and Permits

      Schedule
        4.14(a) - Intellectual Property

      Schedule
        4.14(b) - Other Intellectual Property Rights

      Schedule
        4.14(c) - Software

      Schedule
        4.14(d) - Out-Bound Licenses

      Schedule
        4.14(e) - In-Bound Licenses

      Schedule
        4.14(g) - Royalty Bearing Licenses

      Schedule
        4.14(i) - Current or Threatened Proceedings

      Schedule
        4.15 - Title and Condition of Assets

      Schedule
        4.16 - Taxes, Tax Returns and Audits

      Schedule
        4.17 - List of Changes

      Schedule
        4.18 - Employee Plans and Labor Matters

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Schedule
        4.21 - Related Transactions

      Schedule
        4.23 - Insurance

      Schedule
        4.24 - Litigation

      Schedule
        4.25 - Settled Litigation

      

      Chardan
        Schedules

      

      Schedule
        5.6(b) - Unaudited-unreviewed balance sheet

      

      Schedule
        9.3(a) - List of Stock Consignment Agreements

      Schedule
        9.3(d) - Consents

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