MASTER ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

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MTS SYSTEMS CORP | Lixin Company | MTS SYSTEMS (SHANGHAI) CO, LTD | SHANGHAI SANS TESTING MACHINE CO, LTD | SHENZHEN SANS MATERIAL TESTING CO, LTD

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Title: MASTER ASSET PURCHASE AGREEMENT
Date: 10/2/2008
Industry: Scientific and Technical Instr. Sector: Technology

Exhibit 2.1

MASTER ASSET PURCHASE AGREEMENT

by and between

SHENZHEN SANS MATERIAL TESTING CO., LTD.

SHENZHEN SANS MEASUREMENT TECHNIQUE CO., LTD.

SHANGHAI SANS TESTING MACHINE CO., LTD.

HUANG ZHIFANG

LEI QING’AN

ZHAO HEPING

AN JIANPING

SHANG ZHIXIN

and

MTS SYSTEMS (SHANGHAI) CO., LTD.

April 28, 2008

Table of Contents

		Page
ARTICLE I	DEFINITION AND INTERPRETATION	2

ARTICLE II	SALE AND PURCHASE, PURCHASE PRICE AND OTHER RELATED MATTERS	9

ARTICLE III	CLOSING	12

ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND OWNERS	13

ARTICLE V	REPRESENTATIONS AND WARRANTIES OF THE PURCHASER	33

ARTICLE VI	COVENANTS	34

ARTICLE VII	CONDITIONS PRECEDENT TO THE PURCHASER’S OBLIGATIONS	36

ARTICLE VIII	CONDITIONS PRECEDENT TO THE SELLERS’ AND OWNERS’ OBLIGATIONS	38

ARTICLE IX	INDEMNIFICATION	38

ARTICLE X	TERMINATION OF AGREEMENT	43

ARTICLE XI	INFORMATION, RECORDS AND ASSISTANCE POST-CLOSING	44

ARTICLE XII	POST-CLOSING UNDERTAKINGS	45

ARTICLE XIII	MISCELLANEOUS	46

Exhibit [A] Excluded Assets

Exhibit [B] Tangible Acquired Assets

Exhibit [C] Intellectual Property Acquired Assets

Exhibit [D] Acquired Material Contracts

Exhibit [E] Assumed Liabilities

Exhibit [F] Excluded Liabilities

Exhibit [G] Form of Consent Letter

Exhibit [H] Form of Authorization Letter

Exhibit [I] Form of Escrow Agreement

Exhibit [J] Form of Non-Compete Agreements

Exhibit [K] Form of Non-Solicitation Agreements

Exhibit [L] Form of Transition Services Agreement

Exhibit [M] Form of Employment Agreement

Exhibit [N] List of Retained Employees

Exhibit [O] Form of Intellectual Property Transfer Agreement

Exhibit [P] Form of Owned Property Transfer Agreement

Exhibit [Q] Sellers’ and Owners’ Disclosure Schedules

MASTER ASSET PURCHASE AGREEMENT

This MASTER ASSET PURCHASE AGREEMENT (this “ Agreement” ), is made on April 28, 2008 (the “ Execution Date ”) by and among:

(1) SHENZHEN SANS MATERIAL TESTING CO., LTD. , a domestic limited liability company duly organized and existing under the laws of the PRC, with its registered address at Floor 1-5, A5 Workshop, Tongle Road, Nanshan District, Shenzhen, PRC (“ SANS Material” );

(2) SHENZHEN SANS MEASUREMENT TECHNIQUE CO., LTD. , a domestic limited liability company duly organized and existing under the laws of the PRC, with its registered address at Room 218, Floor 2, Lixin Company Building, Xinwei Village, Xili County, Shennan District, Shenzhen, PRC (“ SANS Measurement” );

(3) SHANGHAI SANS TESTING MACHINE CO., LTD. , a domestic limited liability company duly organized and existing under the laws of the PRC, with its registered address at 1463 Hu Nan Road, Bei Cai County, Pudong New Area, Shanghai, PRC (“ SANS Shanghai” );

(referred to collectively as the “ Sellers” )

(4) HUANG ZHIFANG , a Chinese citizen with identity card number of [ 440301196310104131 ];

(5) LEI QING’AN , a Chinese citizen with identity card number of [ 620502196206162332 ];

(6) ZHAO HEPING , a Chinese citizen with identity card number of [ 620502196312262310 ];

(7) AN JIANPING , a Chinese citizen with identity card number of [ 620502196512022311 ];

(8) SHANG ZHIXIN , a Chinese citizen with identity card number of [ 620522196110160012 ];

(referred to collectively as the “ Owners” )

(9) MTS SYSTEMS (SHANGHAI) CO., LTD. , a wholly foreign-owned company duly organized and existing under the laws of the PRC, with its legal address at No. 481 Guiping Road, Building #23, 200233, Shanghai, PRC (“ MTS Shanghai ” or the “ Purchaser” ).

The Sellers, Owners and Purchaser collectively referred to as the “ Parties ” and each of them individually a “ Party ”.

RECITALS

WHEREAS, the Sellers own directly, beneficially and of record, all the rights and interests in the Acquired Assets;

WHEREAS, the Owners are five major shareholders to each of the Sellers;

WHEREAS, the Sellers wish to transfer to the Purchaser and the Purchaser wishes to acquire from the Sellers all of the Sellers’ interests in the Acquired Assets upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Parties agree that MTS Shangai shall, at its own discretion, transfer any and all the rights and obligations as of the Purchaser hereinunder to its Affiliates in the PRC, i.e., Shanghai WFOE and Shenzhen WFOE (to be determined). For the Acquired Assets, Shanghai WFOE would acquire the assets under the name of SANS Shanghai while Shenzhen WFOE would acquire the assets under the names of SANS Material and SANS Measurement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual representations, warranties and covenants set forth herein, the Parties hereby agree as follows:

ARTICLE I
DEFINITION AND INTERPRETATION

1.1 For purposes of this Agreement:

“ Acquired Assets ” refers, for the purpose of this Agreement, to all real estate, furniture and fixtures, facilities, property, machinery and equipment, automobiles, inventory, accounts receivable, advances from customers, other receivables, intellectual property, patents, trademarks, trade secrets, copyrights, domain names, goodwill, product designs, bills of material, customer lists, customer contacts, sales channels, computer software, data files and all computer hardware and peripherals of the Sellers, including certain physical and intellectual property of Jinan SANS Testing Machine Co., Ltd. excluding cash, short-term investments and the Excluded Assets set forth in Exhibit [A].

“ Adjustment Report ” shall have the meaning set forth in Section 2.4(b).

“ Affiliate ” shall mean (A) in the case of an individual, (i) the members of the immediate family (including parents, siblings and children) of the individual, (ii) the individual’s spouse, and (iii) any Business Entity that directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with any of the foregoing individuals, or (B) in the case of a Business Entity, another Business Entity or a Person that directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with the Business Entity.

“ Ancillary Agreements ” shall mean, collectively, the Escrow Agreement, the Non-Compete Agreements, Non-Solicitation Agreements, any Employment Agreements, the Transition Services Agreement, any transfer agreements of Intellectual Property and Owned Property, any transfer agreements of Contracts, the Side Agreement and all other documents, instruments and

certificates executed and/or delivered in connection with the transactions contemplated hereby.

“ Assumed Liabilities” shall mean all the short-term and long-term liabilities of the Sellers reflected in the balance sheet as of the Balance Sheet Date and other liabilities incurred in the Ordinary Course of Business from the Balance Sheet Date through the Closing, other than the Excluded Liabilities.

“ Balance Sheet Date ” shall mean December 31, 2007.

“ Basis ” shall mean any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the basis for any specified consequence.

“ Business ” shall mean the business operation of the Sellers.

“ Business Day ” shall mean any day excluding Saturday, Sunday and any day on which banking institutions located in Beijing, PRC are authorized or required by law or other governmental action to be closed.

“ Business Entity ” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm, enterprise, legal person, or other enterprise, association, organization or entity.

“ Cash ” shall mean all cash and cash equivalents (including marketable securities and short-term investments) calculated in accordance with GAAP.

“ Claim Notice ” shall have the meaning set forth in Section 9.3(a).

“ Claimed Amount ” shall have the meaning set forth in Section 9.3(a).

“ Closing ” shall have the meaning set forth in Section 3.1(a).

“ Closing Date ” shall have the meaning set forth in Section 3.1(a).

“ Closing Date Balance Sheet ” shall mean the balance sheet of each of the Sellers as of the Closing, as determined in accordance with Section 2.4(a).

“Closing Notice” shall have the meaning set forth in Section 7.9.

“ Confidential Information ” shall have the meaning set forth in Section 6.1.

“ Confidentiality Agreement ” shall have the meaning set forth in Section 6.5(b).

“ Contract ” shall mean, with respect to any Person, any contract, agreement, deed, mortgage, lease, license, commitment, undertaking, arrangement or understanding, written or oral, or other document or instrument to which or by which such Person is a party or otherwise subject or bound or to which or by which any asset, property or right of such Person is subject or bound.

“ Controlling Party ” shall have the meaning set forth in Section 9.3(d).

“ Damages ” shall include any loss, damage, injury, Liability, claim, demand, settlement, judgment, award, fine, penalty, tax, fee (including reasonable fees and expenses of attorneys, accountants, financial advisors and other experts and other expenses of litigation), charge, cost (including reasonable costs of investigation) or reasonable expense of any nature.

“ Employee Benefit Plan” shall have the meaning set forth in Section 4.17(a).

“ Environmental Claim ” shall have the meaning set forth in Section 4.19(b).

“ Environmental Law ” shall mean any Law of any Governmental Entity relating to the environment or health and safety, including pertaining to (i) treatment, storage, disposal, generation, transportation, manufacture, processing, use, distribution or handling of Hazardous Materials; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of Hazardous Materials; and (v) the protection of natural resources, wild life, marine sanctuaries and wetlands, including all endangered and threatened species.

“ Escrow Agent ” shall have the meaning set forth in Section 2.3(a)(ii).

“ Escrow Agreement ” shall have the meaning set forth in Section 2.3(a)(ii).

“ Escrow Amount ” shall have the meaning set forth in Section 2.3(a)(ii).

“ Excluded Assets ” shall mean all the other assets other than the Acquired Assets.

“ Excluded Contracts ” shall mean all Contracts not covered as part of the Acquired Assets.

“ Excluded Liabilities” shall mean the liabilities incurred, arising from or related to taxes attributable to the acquisition of the Acquired Assets, fees and expenses incurred in connection with the transaction hereof, all taxes payable whether or not reflected in the balance sheet, any taxes or other benefits or payables owed to employees or on behalf of employees and all liabilities not covered as part of the Assumed Liabilities.

“Execution Date” shall mean the date on which the Agreement hereof is duly signed.

“ Financial Statements ” shall have the meaning set forth in Section 4.6(a).

“ Free Financial Aid ” shall mean any financial aid obtained by the Sellers from any Governmental Entity for free under certain Contracts.

“ GAAP ” shall mean generally accepted accounting principles in the United States.

“ Governmental Entity ” shall mean any of the following: (i) national, state, province, county, municipality, district or other jurisdiction of any nature; (ii) local, municipal, foreign or other government; or (iii) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization,

unit, body or entity and any court or other tribunal).

“ Hazardous Materials ” shall mean any chemicals, pollutants or contaminants defined or regulated by any PRC Environmental Law, hazardous substances, solid and hazardous wastes, toxic materials, oil or petroleum and petroleum products or byproducts or constituents thereof, or any other material subject to the regulations under any PRC Environmental Law.

“ Indebtedness ” shall mean (i) all indebtedness for borrowed money or for the deferred purchase price of property or services (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured), including the current portion of such indebtedness, but excluding trade accounts payable in the Ordinary Course (ii) all obligations evidenced by notes, bonds, debentures or similar instruments and (iii) all capital lease obligations.

“ Indemnified Party ” shall have the meaning set forth in Section 9.3(a).

“ Indemnifying Party ” shall have the meaning set forth in Section 9.3(a).

“ Independent Auditor ” shall have the meaning set forth in Section 2.4(b).

“ Intellectual Property ” or “IP” shall mean, on a worldwide basis, (i) all inventions, technology developments, discoveries, concepts and ideas documented in writing (no matter patentable or not and no matter reduced to practice or not) and all patents including invention, utility model and design patents, patent applications of the afore three types of patents, relevant technical disclosures/descriptions and all corresponding certificates of the afore three types of patents, as well as the rights to file for, and to claim priority to, any such patent rights, (ii) all trademarks, service marks, trade dress, logos, trade names and corporate names, no matter registered or not, and all other indicia of source, together with all goodwill associated with any of the foregoing, and registrations and applications for registration thereof, including all extensions, modifications and renewals of the same, (iii) all registered and unregistered copyrights in both published and unpublished works, along with all moral rights, and applications for registration thereof, (iv) all computer software, data and documentation, internet domain names, internet keywords and corresponding registration rights, uniform resource locators, internet or worldwide web sites or protocol addresses, and all related content, programming, and security passwords or codes, (v) all trade secrets including confidential business information, no matter reduced to practice or not, know-how, formulae, drawings and technical plans, schematics, prototypes, designs, models, manufacturing and production processes and techniques, research and development information, data and databases, unpublished and confidential copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (vi) all other proprietary rights relating to any of the foregoing and (vii) all copies and tangible embodiments of any of the foregoing, in each case including the items set forth in any part of Schedule 4.13 and confirmed by the Parties in Exhibit [C] hereto.

“ Law ” shall mean any laws, administrative regulations, local regulations, autonomous regulations and separate regulations, rules of the departments under the State Council and of the local governments as specified in Article 2 of the Legislation Law of the People’s Republic of China.

“ Lease ” shall have the meaning set forth in Section 4.14(b).

“ Leased Real Property ” shall have the meaning set forth in Section 4.14(b).

“ Legal Proceeding ” shall mean any action, suit, litigation, arbitration or proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving any court or other Governmental Entity or any arbitrator or arbitration panel.

“ Liability ” shall mean any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due).

“ Lien ” shall mean any mortgage, debenture, rent charge, deed of trust, deed to secure debt, pledge, security interest, encumbrance (whether securing the repayment of monies or other obligations or Liability of the Sellers, charge, assessment, claim, condition, equitable interest, indenture, option, hypothecation, judgment, attachment, restriction on transfer, right-of-way, easement, title defect, lease, encroachment, right of first option, right of pre-emption or right of first refusal or other lien (whether arising by contract or by operation of law), other than (i) the liens arising or incurred in the Ordinary Course if the underlying obligations are not yet due and payable, and (ii) liens for Taxes that arise solely by operation of Law but are not yet due and payable; provided, that none of the foregoing will individually or in the aggregate impair the operation of the Business or the continued use of the assets of the Sellers following the Closing Date.

“ Material Adverse Effect ” shall mean an effect that is or could reasonably be expected to be (a) materially adverse to the assets, liabilities, condition (financial or otherwise), results of operation or prospects of the Sellers or (b) materially impair or delay the consummation of the transactions contemplated hereby, solely in the judgment of MTS based on certain provisions hereinunder.

“ Material Contracts ” shall have the meaning set forth in Section 4.12(a).

“ Material Customers ” shall have the meaning set forth in Section 4.25(b).

“ Material Suppliers ” shall have the meaning set forth in Section 4.25(a).

“ Non-Compete Agreements ” shall have the meaning set forth in Section 3.2(i).

“ Non-Controlling Party ” shall have the meaning set forth in Section 9.3(d).

“ Non-Solicitation Agreement ” shall have the meaning set forth in Section 3.2(i).

“ Objection Notice ” shall have the meaning set forth in Section 9.3(b).

“ Ordinary Course ” means an action taken by a Person that: (a) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person; (b) does not require authorization by the board of directors or shareholders of such Person (or by any Person or group of Persons exercising similar

authority); and (c) is similar in nature, scope and magnitude to actions customarily taken in the ordinary course of the normal, day-to-day operations of other Persons that are in the same line of business as such Person.

“ Owned Property ” shall have the meaning set forth in Section 4.14(a).

“ Permits ” shall mean any license, permit, approval, authorization, certificate of authority, qualification or similar document or authority that has been issued or granted by a Governmental Entity.

“ Person ” shall mean any individual, Business Entity or Governmental Entity.

“ PRC” shall mean the People’s Republic of China.

“ Public Official or Entity ” means (i) any officer, employee, agent, representative, department, agency, de facto official, corporate entity, instrumentality or subdivision of any government, military or international organization, or (ii) any candidate for federal, state, local or foreign public office, any political party or any official of a political party.

“ Purchase Price ” shall have the meaning set forth in Section 2.2.

“ Purchaser Indemnitees ” shall have the meaning set forth in Section 9.1.

“ Records ” shall have the meaning set forth in Section 11.1(a).

“ Representatives ” shall mean, with respect to any Person, the partners, members, directors, officers, employees, agents or other representatives of such specified Person, including financial advisors, consultants and counsel.

“ Response ” shall have the meaning set forth in Section 9.3(b).

“ Sanctioned Countries ” shall have the meaning set forth in Section 4.27.

“ SANS Changchun ” shall mean Changchun SANS Testing Machine Co., Ltd. which is one of the Affiliates to the Sellers hereof.

“ SANS Jinan ” shall mean Jinan SANS Testing Machine Co., Ltd. which is one of the Affiliates to the Sellers hereof.

“ Sellers’ Indemnitees ” shall have the meaning set forth in Section 9.2.

“ Sellers’ Knowledge ” or words of similar import, shall mean the knowledge or notice that Sellers and each of the Owners currently have or should have had after having made a good faith inquiry directed to such managers, members, officers, directors, shareholders, and supervisors of the Sellers as would be reasonably likely to have information relating to the fact in question, in the case of any failure to make such an inquiry.

“ Tax Representations ” shall have the meaning set forth in Section 9.4(b).

“ Tax Returns ” means any report, return or other information required (including any attachments or schedules required to be attached to such report, return or other information) to be supplied to a taxing authority or a third party in connection with Taxes.

“ Taxes ” means any net income, individual income, sales, withholding, goods and services, resources, stamp, turnover adds-on, value added or other tax or customs duties or amount imposed by any governmental or taxing authority, or any interest, any penalties, additions to tax or additional amounts incurred or accrued under applicable tax Law or properly assessed or charged by any governmental or taxing authority, in each case, whether disputed or not.

“ Third Party Contracts” shall have the meaning set forth in Section 4.13(l).

“ Title Representations ” shall mean the representations and warranties of the Sellers contained in Section 4.4 and Section 4.9.

“ Transition Services Agreement ” shall have the meaning set forth in Section 3.2(j).

“ Uncollectable Accounts Receivable ” shall have the meaning set forth in Section 4.6(b).

“ Unlimited Representations ” shall have the meaning set forth in Section 9.4(b).

1.2 In this Agreement, unless the context otherwise requires:

(a) references to a person shall be construed so as to include any individual, firm, corporate body (wherever incorporated), government, state or agency of a state or any joint venture, association, partnership, works council or employee representative body (whether or not having separate legal personality);

(b) the headings are inserted for convenience only and shall not affect the construction of this Agreement;

(d) references to one gender include all genders;

(e) references to times of the day are to local time in Beijing, PRC unless otherwise stated; and

(f) any phrase introduced by the terms including, include, in particular or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms.

1.3 Except as otherwise expressly provided in this Agreement, any express reference to an enactment (which includes any legislation in any jurisdiction) includes references to:

(a) that enactment as amended, extended or applied by or under any other enactment before or after the date of this Agreement;

(b) any enactment which that enactment re-enacts (with or without modification); and

(c) any subordinate legislation (including regulations) made (before or after the date of this Agreement) under that enactment, as re-enacted, amended, extended or applied as described in paragraph (a) above, or under any enactment referred to in paragraph (b) above.

1.4 The schedules comprise schedules to this Agreement and form part of this Agreement.

ARTICLE II
SALE AND PURCHASE, PURCHASE PRICE
AND OTHER RELATED MATTERS

2.1 Sale and Purchase .

(a) On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Purchaser shall purchase from the Sellers, and the Sellers shall sell, transfer, assign, convey and deliver to the Purchaser, all right, title and interest in and to the Acquired Assets (except for the Excluded Assets set forth in Exhibit [A] ), free and clear of all Liens, including without limitation to:

(i) transferring all its rights, titles and interests in and to all tangible Acquired Assets (as set forth in Exhibit [B] ) to the Purchaser;

(ii) transferring all its rights, titles and interests in and to all IP Acquired Assets (as set forth in Exhibit [C] ) to the Purchaser;

(iii) assigning all rights and obligations in the Material Contracts (including all IP-related Contracts) (as set forth in Exhibit [D] ) to the Purchaser; and

(iv) delivering to the Purchaser the Ancillary Agreements relating to the Acquired Assets that are in the possession of the Sellers and their Affiliates. The adequacy of the deliverables is subject to joint approval by the Purchaser and the Sellers.

(b) On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Purchaser shall assume from the Sellers all the Assumed Liabilities set forth in Exhibit [E] (except for the Excluded Liabilities set forth in Exhibit [F] ).

2.2 Purchase Price . The purchase price (the “ Purchase Price ”) for the Acquired Assets of the Sellers shall be an amount equal to fourty-one million eight hundred thousand U.S. Dollars ($41,800,000) in total, covering all the Acquired Assets, Assumed Liabilities and consideration payable to the Sellers and the Owners for their non-compete obligations after the Closing.

2.3 Payment of Purchase Price .

(a) The Purchaser shall pay to the Sellers an amount equal to the Purchase Price as follows:

(i) At Closing, thirty percent (30%) of the Purchase Price, in the amount of twelve million fifty-four hundred U.S. Dollars ($12,540,000), shall be paid to the Sellers;

(ii) At Closing, fifteen percent (15%) of the Purchase Price in the amount of six million two hundred seventy thousand U.S. Dollars ($6,270,000) (the “ Escrow Amount ”) shall be paid to an escrow agent mutually acceptable to the Sellers and the Purchaser (the “ Escrow Agent ”) by wire transfer of immediately available funds, to be held by the Escrow Agent pursuant to the terms and conditions of an escrow agreement (the “ Escrow Agreement ”) in the form attached hereto as Exhibit [I] for the purpose of covering the potential liabilities as a result of failure of the Sellers and the Owners to meet their indemnification obligations within two (2) years after Closing ;

(iii) Within three (3) months after Closing, upon the satisfaction of the post-closing undertakings as set forth in Article 12 hereof whereby the Acquired Assets have been duly and completely transferred from the Sellers to the Purchaser, fifty percent (50%) of the Purchase Price in the amount of twenty million nine hundred thousand U.S. Dollars ($20,900,000) shall be paid to the Sellers; and

(iv) The remaining five (5) percent (5%) of the Price, in the amount of two million ninety thousand U.S. Dollars ($2,090,000), shall be paid by the Purchaser to the Sellers upon the completion of due transfer of the title and certificates pertaining to all the Owned Property.

(b) Following the Closing, the Sellers or the Purchaser, as appropriate, shall make the payment, if any, required by Section 2.4.

(c) The exchange rate used to convert the Purchase Price into Chinese RMB will be based on the exchange rate published by the People’s Bank of China on March 31, 2008 which was 7.012. The Parties will equally share the RMB price difference due to exchange rate changes between March 31, 2008 and the Closing Date.

2.4 Post Closing Adjustment .

(a) Within sixty (60) days after the Closing Date, the Purchaser shall prepare and deliver to the Sellers an audited balance sheet for each of the Sellers (the “ Closing Date Balance Sheet ”). The Closing Date Balance Sheet shall be prepared in accordance with GAAP.

(b) The Sellers and their accountants may review the work papers used in the preparation of the Purchaser’s calculation of the Closing Date Balance Sheet and the Purchaser may make available to the Sellers and their accountants all such work papers and other documents and information related thereto as may be reasonably requested by the Sellers or their accountants, subject to the execution by the Sellers and its accountants of any non-disclosure agreement reasonably

requested by the Purchaser. The Purchaser’s calculation of the Closing Date Balance Sheet delivered to the Sellers shall become final for all purposes of this Agreement unless, within thirty (30) days after the receipt of such calculation by the Sellers, the Purchaser receives written notice of the Sellers’ disagreement of the Purchaser’s calculation of the Closing Date Balance Sheet along with the Sellers’ determination of the Closing Date Balance Sheet, consistent with the terms of Section 2.4, and a detailed explanation as to the reasons for such disagreement (the “ Adjustment Report ”). If the Purchaser and the Sellers are unable to agree on the Closing Date Balance Sheet within thirty (30) days after such notice is delivered, the Purchaser and the Sellers agree that a mutually acceptable independent accounting firm of nationally recognized standing (the “ Independent Auditor ”) shall make the final determination of the Closing Date Balance Sheet. The determination by the Independent Auditor of the Closing Date Balance Sheet shall be final and binding on the Purchaser and the Sellers.

(c) If the Independent Auditor determines that the Sellers are entitled to less than fifty percent (50%) of the total amount of the adjustment claimed by the Sellers in the Adjustment Report, the Sellers shall pay all of the Independent Auditor’s fees and expenses in connection with this Section 2.4. If the Independent Auditor determines that the Sellers are entitled to more than fifty percent (50%) of the total amount of the adjustment claimed by the Sellers in the Adjustment Report, the Purchaser shall pay all of the Independent Auditor’s fees and expenses in connection with this Section 2.4. If the Independent Auditor determines that the Sellers are entitled to fifty percent (50%) of the total amount of the adjustment claimed by the Sellers in the Adjustment Report, the Sellers and the Purchaser shall each pay one-half of the Independent Auditor’s fees and expenses in connection with this Section 2.4.

(d) In the event that the Acquired Assets minus Assumed Liabilities on the Closing Date Balance Sheet exceeds Acquired Assets minus Assumed Liabilities on the GAAP based balance sheet as of the Balance Sheet Date, the Purchase Price shall be increased on a dollar-for-dollar basis on the difference provided, however, that no adjustment will be made unless the total net adjustment exceeds US$25,000 in the aggregate. If the total net adjustment exceeds US$25,000 in the aggregate, the adjustment will be made for the entire amount, not just the amount over US$25,000.

(e) In the event the Acquired Assets minus Assumed Liabilities on the GAAP based balance sheet as of the Balance Sheet Date exceeds Acquired Assets minus Assumed Liabilities on the Closing Date Balance Sheet, the Purchase Price shall be decreased on a dollar-for-dollar basis on the difference provided, however, that no adjustment will be made unless the total net adjustment exceeds US$25,000 in the aggregate. If the total net adjustment exceeds US$25,000 in the aggregate, the adjustment will be made for the entire amount, not just the amount over US$25,000.

2.5 Withholding . Upon the confirmation of both the Purchaser and the Sellers, the Purchaser shall be entitled to deduct and withhold from any and all payments made under this Agreement such amounts as may be required to be deducted and withheld under applicable Laws. To the extent such amounts are withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such amounts would have otherwise been paid.

ARTICLE III
CLOSING

3.1 Closing Date .

(a) The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at MWE China Law Offices at 10:00 a.m., in Shanghai, PRC on July 31, 2008 (the “ Closing Date ”). The Closing will be deemed effective as of the close of business on the Closing Date.

(b) All proceedings to be taken and all documents to be executed and delivered by all parties at the Closing shall be deemed to have been taken and executed simultaneously and no proceedings shall be deemed to have been taken nor documents executed or delivered until all have been taken, executed and delivered.

3.2 Deliveries by the Sellers . At the Closing, the Sellers shall deliver or cause to be delivered to the Purchaser the following items:

(a) Resolution of Shareholders’ Meeting for each of the Sellers consenting to the transfer of the Acquired Assets to the Purchaser approved by respective shareholders of at least 2/3 voting rights;

(b) Resolution of Board of Directors for each of the Sellers unanimously approving the transfer of the Acquired Assets to the Purchaser;

(c) title or ownership certificates on any of the Acquired Assets, if any;

(d) any and all the third party consent, waiver or the like relating to the transfer of the Acquired Assets to the Purchaser, including without limitation to consents of opposite parties to the Contracts, consents of banks, consent of joint IP rights owners and so forth, the form of consent letter is attached hereto as Exhibit [G] ;

(e) to be provided for Purchaser’s information only, the authorization letter executed by each and all unregistered employee shareholders of the Sellers authorizing Mr. Xiao Honglong as the full-fledged representative in confirming the transaction hereinunder as well as the reimbursement for the appreciation value of the interest in the shares held by such unregistered employee shareholders (such value to be shared with and reasonably confirmed by the Purchaser), the form of the authorization letter is attached hereto as Exhibit [H] ;

(f) to the extent obtainable in the jurisdiction of incorporation of each Seller, the articles of association (or equivalent organizational document) of each Seller certified as of the most recent practicable date by the appropriate Governmental Entity in its jurisdiction of incorporation;

(g) to the extent obtainable in the relevant jurisdictions, a certificate from the appropriate Governmental Entity as to the good standing (or equivalent status) of each Seller as of the most recent practicable date in its jurisdiction of incorporation and all jurisdictions in which such Seller is qualified or licensed to do business;

(h) the Escrow Agreement in the form attached hereto as Exhibit [I] , duly executed by the Sellers;

(i) non-compete agreements in the form attached hereto as Exhibit [J] (the “ Non-Compete Agreements ” ) and non-solicitation agreements in the form attached hereto as Exhibit [K] (the “ Non-Solicitation Agreement ”) duly executed by the Sellers, each of the Owners, and/or certain employees identified by the Purchaser;

(j) the transition services agreement in the form attached hereto as Exhibit [L] (the “ Transition Services Agreement ”) duly executed by the Sellers and each of the Owners; and

(m) such other documents as the Purchaser or its counsel may reasonably request, including the interview required under the relevant US law for public companies and completion of relevant questionnaire as the Purchaser or its counsel may reasonably request, to demonstrate satisfaction of the conditions and compliance with the agreements set forth in this Agreement whereby the Sellers shall endeavor to meet such reasonable requirements.

3.3 Deliveries by the Purchaser . At the Closing, the Purchaser shall deliver to the Sellers the following items:

(a) the Escrow Agreement, duly executed by the Purchaser and the Escrow Agent;

(b) form of employment agreement as attached hereto as Exhibit [M] for retaining the existing employees of the Sellers; and

(c) the list of the employees of the Sellers retained by the Purchaser as Exhibit [N] .

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND OWNERS

The Sellers and the Owners represent and warrant to the Purchaser that the statements contained in this Article IV are true, correct and complete as of the Closing Date, with descriptions and/or exceptions detailed in the Sellers’ and Owners’ Disclosure Schedule as attached hereto as Exhibit [Q] .

4.1 Organization, Qualification, Commitment and Power .

(a) Each of the Sellers is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization, as set forth on Schedule 4.1(a)(i) . Each of the Sellers is duly qualified to conduct business and is in good standing under the Laws of each jurisdiction in which the nature of its business or the ownership or leasing of its assets or properties requires such qualification. And each of the Sellers is in strict legal compliance with the Laws of each jurisdiction, in which any Permit issued by the Governmental Entity has been duly obtained. Schedule 4.1(a)(i) lists each jurisdiction in which any of the Sellers has a manufacturing facility, a sales or services office, a warehouse location or an independent sales representative. Each of the Sellers has all requisite power and authority to carry on the Business and to own and use the assets and properties owned and used by it. The Sellers have furnished to the Purchaser true and complete copies of each Seller’s organizational documents, each as amended and as in effect on the Effective Date hereof. None of the Sellers is in violation of any provision of its organizational documents. Schedule 4.1(a) (ii) sets forth a true and complete list of all of the directors and officers of each Seller. There has been no resolution, petition or order for the winding up of each Seller or any official action or public announcement in respect of the revocation of the business license, if applicable, of each Seller, and there is no event which might render any such business license liable to be revoked by any Governmental Entity. The authorized business scopes or purposes of the Sellers, as set forth in their respective organizational documents, and as approved by the relevant Governmental Entities, are sufficient to permit the Sellers to conduct their businesses as presently conducted and as will be conducted immediately after the Closing.

(b) Each of the Sellers has passed the annual inspection as required by the relevant Governmental Entity due up to the Closing and fully fulfilled its commitment to any Governmental Entity and/or any opposite party to the Material Contracts, including without limitation to the commitment under Free Financial Aid sponsored by the Governmental Entity. For the purpose aforementioned, each of the Sellers is entitled to and has owned any and all the Intellectual Property incurred as a result of or in connection with the projects under the Free Financial Aid. There is no constraint or limitation under certain Contracts for the Free Financial Aid regarding the disposal of the Intellectual Property by the Sellers at their own discretion.

(c) Each of the Sellers is privately owned by the Owners and other existing shareholders without shareholding interest of any Governmental Entity.

4.2 Authorization of Transaction . Each of the Sellers has all requisite power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it is a party and to perform its respective obligations hereunder and thereunder. The execution and delivery by each of the Sellers of this Agreement and the Ancillary Agreements and the consummation by each of the Sellers of the transactions contemplated hereby and

thereby have been duly and validly authorized by all necessary action on the part of each of the respective Sellers. This Agreement has been, and each of the Ancillary Agreements to which the Sellers are a party are or will be, duly and validly executed and delivered by each of the respective Sellers. This Agreement constitutes, and each of the Ancillary Agreements to which each of the respective Sellers is a party, when executed and delivered by such Seller, will constitute, the valid and legally binding obligation of such Seller, enforceable against such Seller in accordance with its terms, assuming the due authorization, execution and delivery by the Purchaser.

4.3 Noncontravention . Neither the execution and delivery of this Agreement or any of the Ancillary Agreements by any Seller, nor the consummation by any Seller of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the organizational documents of each Seller, (b) require on the part of each Seller any filing with, or any Permit, authorization, notice of any Governmental Entity regarding, in particular, the Owned Property, Leased Real Property, Intellectual Property, Material Contracts, (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any Contract, franchise or permit to which each Seller is a party or by which each Seller or any of the Owner is bound, (d) result in the imposition of any Lien upon any of the assets of the Sellers or (e) violate any Law applicable to the Sellers.

4.4 Title to Interests . The Sellers own beneficially and of record all the rights and interests in the Acquired Assets, free and clear of all Liens, as set forth on Exhibit [B], [C] and [D] .

4.5 Affiliates . Each Seller or each of the Owners owns, beneficially and of record, the issued and outstanding shares of capital stock, registered capital or other equity interests of each of the Affiliates as set forth on Schedule 4.5(a), including without limitation SANS Jinan and SANS Changchun , in each case free and clear of all Liens. Except as set forth on Schedule 4.5(b) , neither each of the Sellers nor any of the Owners own, directly or indirectly, any equity interest in any Person or has any outstanding shareholder’s loan to any Person.

4.6 Financial Statements .

(a) Set forth on Schedule 4.6(a)(i) is a correct and complete copy of the following financial statements (collectively, the “ Financial Statements ”) including the audited balance sheets and statements of income and changes in Sellers’ equity, as of and for the years ended December 31, 2005, 2006 and 2007. The Financial Statements (i) have been prepared in accordance with the Chinese accounting principles, (ii) fairly present the financial condition of the Sellers as of such dates and the results of operations and cash flows of the Sellers for such periods, and (iii) are consistent with the books and records of the Sellers, except that the interim Financial Statements may not contain all footnotes and presentation items as required by the Chinese accounting principles and are subject to normal year-end adjustments (which were not and will not be individually or in the aggregate, material in amount). Each Seller has prepared the financial projections and data

set forth on Schedule 4.6(a)(ii) in good faith and believes such projections reflect a reasonable estimate of the performance of the Sellers for the periods presented.

(b) Subject to any of the reserves set forth therein, the accounts receivable shown on the Financial Statements are valid and genuine, are calculated in accordance with the Chinese accounting principles, have arisen solely out of bona fide transactions in the Ordinary Course, are not subject to any prior assignment or Lien except as set forth on Schedule 4.6(b)(i), and, to the Sellers’ Knowledge, are not subject to valid defenses, set-offs or counter claims. The accounts receivable are collectible in accordance with their terms at their recorded amounts, subject only to the reserve for doubtful accounts on the Financial Statements. Since the Balance Sheet Date, there have not been any write-offs of any receivables as uncollectible or increases in uncollectable accounts receivable (the “ Uncollectable Accounts Receivable ”). Schedule 4.6(b)(ii) sets forth an aged list of unpaid accounts and notes receivable owing to the Sellers as of the Balance Sheet Date, with the last known address of the trade debtors of the Sellers.

(c) The inventory of the Sellers consists of items of a quality and quantity useable or saleable in the Ordinary Course, except for obsolete or slow moving items and items below standard quality, all of which have been written down on the books of the Sellers to net realizable market value or have been provided for by adequate reserves. All items included in the inventory of the Sellers are the property of the Sellers. No items included in the inventory of the Sellers have been pledged as collateral. The inventory of the Sellers shown on the balance sheets included in the Financial Statements are valued on a basis consistent with prior years.

(d) Schedule 4.6(d) sets forth a true, correct and complete list of all Assumed Liabilities of the Sellers (by creditor and dollar amount) as of the Execution Date.

4.7 Events Subsequent to the Execution Date . Since the Execution Date, the Sellers have conducted the Business only in the Ordinary Course and, since such date, (a) there has not been any Material Adverse Effect, nor has there occurred any event or development which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, and (b) neither each of the Sellers or each of the Owners has taken, or agreed to take, any of the following actions:

(i) incurred or guaranteed any Liability other than in the Ordinary Course or in connection with the performance or consummation of this Agreement;

(ii) incurred or committed to incur any capital expenditures in excess of US$20,000 in the aggregate;

(iii) leased, licensed, sold, transferred, pledged, mortgaged, encumbered or permitted to be encumbered any asset associated with the Business other than sales of inventory in the Ordinary Course;

(iv) waived or released any material right or claim with respect to the Business;

(v) changed any annual accounting period or adopted or changed any accounting method, principle or practice;

(vi) made any acquisition, by means of merger, consolidation or otherwise, of securities or all or substantially all of the assets of any other Person other than in the Ordinary Course;

(vii) made any loans, advances or capital contributions to, or investments in, any other Person;

(viii) amended or terminated any Material Contract, entered into any Material Contract other than those Contracts of sales and/or purchase necessary for the Business operation of the Sellers in the Ordinary Course;

(ix) made or changed any election with respect to Taxes, changed any Tax accounting period, adopted or changed any method of accounting, filed any amended Tax Return, entered into a closing agreement with any taxing authority, surrendered any right to claim a refund for Taxes, consented to an extension of the statute of limitations applicable to any Tax, claim or assessment, or took any other similar action (or omitted to take any action);

(x) accelerated, delayed or postponed its collection of accounts receivable or its payment of any accounts payable or other Liabilities other than in the Ordinary Course;

(xi) paid, discharged, settled or satisfied any claims, Liabilities, obligations or litigation (whether or not commenced prior to the date of this Agreement) outside the Ordinary Course;

(xii) increased the compensation or remuneration, bonus or other benefits payable or provided or to become payable or to be provided to any director, officer, other employee or independent contractor of the Sellers;

(xiii) changed the key employees of any of the Sellers; or

(xiv) agreed, either orally or in writing, to do any of the things described in the preceding clauses (i) through (xiii) of this Section 4.7.

4.8 Undisclosed Liabilities . None of the Sellers has any Liabilities except for (i) Liabilities fully reflected or reserved for on the Financial Statements and (ii) current Liabilities (none of which are material), which have arisen since the date of the Financial Statements in the Ordinary Course and will be fully reflected or reserved for in connection with the calculation of the Closing Date Balance Sheet.

4.9 Title and Related Matters .

(a) The Sellers have good and marketable title to, or a valid leasehold interest in, all of the properties and assets used in the Business, free and clear of all Liens. At

the Closing, the Purchaser is acquiring good and marketable title to the Acquired Assets free and clear of all Liens.

(b) The assets owned and leased by the Sellers include all assets, properties, Contracts and rights necessary or desirable to conduct the Business as currently conducted and as conducted as of the Closing Date. All such assets are suitable for the purposes for which they are being used as of the Closing Date, and are: (i) in good operating condition and repair, ordinary wear and tear excepted, (ii) free from latent and patent defects, and (iii) in conformity with all applicable Laws relating to their use and operation. Each item of tangible personal property owned or used by each of the Sellers immediately prior to the Closing Date is owned or available for use by such Seller on identical terms and conditions immediately subsequent to the Closing Date. There are no material items of maintenance, repair or replacement incurred as a result of the abnormal use before the Closing Date with respect to the tangible personal property owned or used by or to be owned or used by such Seller which will be, or are likely to be, required in the six (6)-month period immediately following the Closing Date.

4.10 Legal Compliance . Except as set forth on Schedule 4.10 , the Sellers are in compliance, and have at all times in the past five (5) years complied, with all applicable Laws and have not engaged, and are not currently engaging in any activity or omitting to take any action, as a result of which either Seller is or will be in violation of any applicable Law. Except as set forth on Schedule 4.10 , no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed or commenced within the statute of limitation requirements under the applicable Law against, or to the Sellers’ Knowledge, threatened against any Seller alleging any failure to so comply.

4.11 Tax Matters .

(a) Each Seller has complied in all material respects with all Laws relating to Taxes and has timely filed all Tax Returns required to be filed by such Seller in accordance with applicable Laws. All such Tax Returns were true, correct and complete in all material respects when filed.

(b) All Taxes of each Seller due and payable with respect to any Tax Return (whether or not shown as due on such Tax Return) or otherwise payable by such Seller have been paid. The unpaid Taxes of such Seller do not exceed the reserve for current Taxes (excluding any reserve established to reflect timing differences between book and Tax items) set forth in the Financial Statements (without regard to any notes thereto) as adjusted for the passage of time through the Closing Date.

(c) Each Seller has provided to the Purchaser true, correct and complete copies of (i) all income Tax Returns and other material Tax Returns filed by such Seller for the past five (5) years and (ii) all notices of deficiencies, notices of proposed adjustments, notices of assessments, revenue agent reports, closing agreements, settlement agreements, information document requests, protests and any other similar document, notice or correspondence, in each case, that such Seller (or any

of its Representatives) have received from, sent to, or entered with any taxation authority in the past five (5) years or that relates to any Tax or Tax Return which is not closed by the applicable statute of limitations. No claim has been made in the past five (5) years that each Seller has not properly paid Taxes or filed Tax Returns, including in any jurisdiction in which such Seller does not file a Tax Return.

(d) There are no liens for Taxes on any assets of the Sellers, other than liens for Taxes not yet due and payable.

(e) None of the Sellers has ever been a member of any consolidated, combined or unitary group for state, local or foreign Tax purposes. None of the Sellers is liable for Taxes of any other Person as a result of successor liability, transferee liability, joint and several liability, contractual liability, secondary liability or otherwise.

(f) No state, local or foreign Tax audits or other administrative proceedings, discussions or court proceedings are presently in progress or pending, or to the Sellers’ Knowledge, threatened with regard to any Taxes or Tax Returns of the Sellers. None of the Sellers has a private letter ruling, technical advice, application for a change of any method of accounting, or other similar requests presently pending with any Governmental Entity.

(g) The Sellers have (i) withheld all required amounts from their employees, agents, contractors and nonresidents and remitted such amounts to the proper agencies; and (ii) paid all employer contributions and premiums.

(h) None of the Sellers has executed or filed with any Governmental Entity (whether state, local or foreign) any agreement or other document extending or having the effect of extending the period for assessment, reassessment or collection of any Taxes, and no power of attorney granted by each of the Sellers with respect to any Taxes is currently in force.

(i) None of the Sellers (nor any predecessor entity) is (or has ever) engaged in a trade or business for income Tax purposes in any jurisdiction other than the jurisdiction in which they are currently organized.

(j) None of the Sellers has, since the Balance Sheet Date, made or incurred any obligation to make any payments of an income nature other than as required in the Ordinary Course which will not be wholly deductible for Tax purposes in the accounting period in which they have been or will be made.

(k) No Governmental Entity has agreed to operate under any special arrangement (being an arrangement which is not based on a strict application of the relevant Law) in relation to the Tax affairs of each of the Sellers, whether in respect of benefits provided to its officers or employees or in relation to the valuation of stocks or depreciation of assets or in respect of any administrative or other matter whatsoever.

(l) On a disposal of any asset of each of the Sellers for a consideration equal to the value attributed to that asset in the Financial Statements, no Liability for Tax will arise which is not fully provided for in the Financial Statements, specifically, the Purchaser will not assume any Liability for Tax which should be assumable by the Sellers arising from or in connection with the transfer of Owned Property or Leased Real Property by the Sellers.

(m) None of the Sellers has claimed any relief in respect of Taxes which will or may be withdrawn as a result of the Closing nor will the entering into of this Agreement or the Closing give rise to a Liability for Tax for each of the Sellers which would not otherwise have arisen.

4.12 Contracts .

(a) Schedule 4.12(a) sets forth a true and complete list of all of the following Contracts to which either Seller is a party to or bound by (collectively, the “ Material Contracts ”) as part of the Acquired Assets:

(i)		each Contract for the purchase of materials, supplies, goods, equipment, services or other assets involving in the case of any such Contract over the life of the Contract, including purchase orders in the Ordinary Course;

(ii)		each Contract for the sales of products of the Sellers over the life of the Contract;

(iii)		each Contract of sales with warranty period of more than one (1) year;

(iv)		each Contract used or related to any processing trade business engaged in by the Sellers;

(v)		each trust indenture, mortgage, deed of trust, deed to secure debt, promissory note, loan agreement, letter of credit or other Contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with GAAP;

(vi)		each Contract limiting the freedom of the Sellers to engage or compete in any line of business or in any geographic area;

(vii)		each Contract pursuant to which either Seller is a lessor of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property involving in the case of any such Contract annual lease payments;

(viii)		each Contract with a sales representative, including agents and distributors;

(ix)		each Contract of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the Liabilities, obligations or Indebtedness of any other Person;

(x)		each Lease;

(xi)		each Contract for the purchase or sale of any real property;

(xii)		each Contract concerning a partnership or joint venture;

(xiii)		each Contract with a change-in-control or similar provision that will require a consent of, or notice to, a third party as a result of the transactions contemplated by this Agreement;

(xiv)		each consulting or similar Contract;

(xv)		each

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