20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007.

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-30134

CDC Corporation

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

c/o CDC Corporation Limited

33/F Citicorp Centre

18 Whitfield Road

Causeway Bay, Hong Kong

852-2893-8200

e-mail: investor_relations@cdccorporation.net

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Class A common shares

Indicate the number of outstanding shares of each of the Issuer’s class of capital or common stock as of the close of the period covered by this Annual Report:

Class of shares	Number outstanding as of March 31, 2008
Class A common shares	106,992,519

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  x     Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

U.S. GAAP  x    International Financial Reporting Standards  ¨    Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨  Item 17    ¨  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

			Page
PART I.			1
	Item 1.	Identity of Directors, Senior Management and Advisors	6
	Item 2.	Offer Statistics and Expected Timetable	6
	Item 3.	Key Information	6
	Item 4.	Information on the Company	52
	Item 4A.	Unresolved Staff Comments	93
	Item 5.	Operating and Financial Review and Prospects	94
	Item 6.	Directors, Senior Management and Employees	139
	Item 7.	Major Shareholders and Related Party Transactions	161
	Item 8.	Financial Information	164
	Item 9.	The Offer and Listing	165
	Item 10.	Additional Information	166
	Item 11.	Quantitative and Qualitative Disclosures About Market Risk	182
	Item 12.	Description of Securities Other Than Equity Securities	185
PART II.
	Item 13.	Defaults, Dividend Arrearages and Delinquencies	186
	Item 14.	Material Modifications to the Rights Of Security Holders and Use of Proceeds	186
	Item 15.	Controls and Procedures	186
	Item 15T	Controls and Procedures	191
	Item 16.	[Reserved]	191
	Item 16A.	Audit Committee Financial Expert	191
	Item 16B.	Code of Ethics	191
	Item 16C.	Principal Accountant Fees and Services	192
	Item 16D.	Exemptions from the Listing Standards for Audit Committees	192
	Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	193
PART III.
	Item 17.	Financial Statements	194
	Item 18.	Financial Statements	194
	Item 19.	Exhibits	194
SIGNATURES

PART I.

General Introduction

In April 2005, we changed our name from “chinadotcom corporation” to “CDC Corporation”. Concurrently, in April 2005, our then 81%-owned subsidiary listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, changed its name from “hongkong.com Corporation” to “China.com Inc.” Throughout this Annual Report, we use the new names of these companies.

Furthermore:

• All references herein to “China.com” refer to China.com Inc. and its subsidiaries, as applicable.

• In this Annual Report, except as otherwise specified, all references to “we,” “us,” “our,” the “Company” or “CDC” refer to CDC Corporation and our consolidated subsidiaries.

• In this Annual Report, any reference to “US GAAP” means the United States generally accepted accounting principles. The consolidated financial statements provided herein have been prepared in accordance with US GAAP.

• Unless indicated otherwise, any reference to “U.S.$”, “US$”, or “$” is to United States dollars.

Several of our affiliated entities and subsidiaries have been organized under the laws of the People’s Republic of China (the “PRC” or “Greater China”) with Chinese names and do not have official English names. Some of these entities which are organized under the laws of the PRC are referred to in this Annual Report with their English names, such as Beijing Newpalm Technology Co., Ltd., Beijing Wisecom Technology Co., Ltd., Beijing China.com Technology Services Co., Ltd., Beijing He He Technology Co., Ltd., and Shenzhen KK Technology Ltd. and Beijing TimeHeart Information Technology Limited for Timeheart. We have occasionally referred to these entities in our contracts, other arrangements and audited financial statements as Beijing Newpalm Information Technology Co., Ltd., or Beijing Newpalm, Beijing Wisecom Information Technology Co., Ltd., or Beijing Wisecom, Beijing China Net Communication Technology Service Ltd,, or Beijing China.com, Beijing He He Technology Co., Ltd., or Beijing He He, Shenzhen KK Technology Ltd. and Beijing TimeHeart Information Technology Limited, or Beijing TimeHeart.

References in this Annual Report to Xinhua are to Xinhua News Agency.

CDC Software Factory™, CDC Global Services™, CDC MarketFirst™, CDC Supply Chain™, Respond Centerpoint^®, Saratoga CRM™, and The Customer Driven Company™ are trademarks of CDC Corporation and/or its subsidiaries or affiliates. All other trade names, trademarks or service marks appearing in this Annual Report are the property of their respective owners and not the property of CDC Corporation or any of its subsidiaries or affiliates.

Forward-Looking Statements

This Annual Report contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, and Section 21E of the Securities Exchange Act of 1934, as amended, about us and our subsidiaries that are subject to risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward looking statements. Forward looking statements may be identified by the use of words such as “may,” “will,” “expect,” “anticipate,” “intend,” “estimate,” “plan,” “continue,” or “believe” or other words of similar meaning or future or conditional verbs such as “should,” “would” and “could.” Forward-looking statements include, among other things, discussions of our expected business outlook, future operations, financial performance, pending acquisitions, financial strategies, future working capital needs and projected industry trends, as well as our strategies for growth, product development, regulatory approvals and compliance, market position and expenditures.

Forward-looking statements are only predictions and are not guarantees of performance. Forward-looking statements are based on current expectations of future events and are based on our current views and

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assumptions regarding future events and operating performance. These assumptions could prove inaccurate, or unknown risks or uncertainties could materialize, which could cause our actual results to differ materially from our expectations or predictions. Many of these factors are beyond our ability to control or predict.

We have made forward-looking statements concerning the following, among others:

• our goals and strategies in each of our present and target markets, and our plans for expansion;

• our competitive strengths in each of our present and target markets, including our competitive advantages, strengths and opportunities in emerging growth and other geographic markets;

• expectations and targets for our results of operations;

• our business prospects;

• our beliefs regarding our sales and distribution networks, the outcome of litigation matters and our compliance with all applicable regulations and policies;

• our business prospects and the results of our strategic partnerships;

• our development capabilities and our ability to build and maintain relationships with licensors;

• the expected growth of the enterprise software, online games and internet and media markets, and the expectations of the customers and consumers in these industries;

• the pace of change in the enterprise software, online games, internet and media markets, and the need for research and development;

• the demand for, and utility, flexibility and characteristics of, our enterprise software, online games, internet and media products and services;

• our relationships with our present and future customers, as well as our cross-selling opportunities; and

• our acquisition and expansion strategy.

These statements are based on management’s current expectations and are subject to risks and uncertainties and changes in circumstances. Factors that could cause actual results to differ materially from those anticipated in the forward looking statements include, but are not limited to, risks associated with the following:

Factors Relating to our Overall Business and International Operations

• our ability to operate in markets in which we lack experience and have a limited operating history;

• our ability to achieve and/or sustain sufficient revenue growth, effectively manage our internal restructuring objectives, continue to expand through acquisitions, integrate the operations of the various businesses we have acquired, and manage our exposure to increased regulatory and other risks in domestic and foreign jurisdictions;

• our ability to grow our businesses organically in the future, manage distinct business segments several of which are quite disparate in, among other things, purpose, scope and location, manage costs, particularly as a result of our past and present acquisition strategy, adapt to a rapidly changing operating environment, remediate existing, and avoid experiencing future, material weaknesses in our internal controls over financial reporting, access funds and manage revenue and expense fluctuations;

• our ability to access capital in the future;

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• uncertain social, economic and political climate in Asia, the U.S. and throughout the rest of the world, and the possibility that such climate may deteriorate; and

• increased global competition in all of our business segments.

Factors Relating to our Enterprise Software and Global Services Businesses

• the development and licensing of software in general, including potential delays in software development and technical difficulties that may be encountered in the development or use of our software;

• the development of new software technologies and applications or services affecting our current and future business;

• our ability to efficiently expand or restructure our software sales organization;

• our ability to take advantage of opportunities to market and sell our enterprise software products and services to customers directly and through distribution channels and business partners in emerging markets;

• our ability to maintain and manage our contracts with our business services and other customers, as well as our ability to manage risks efficiently, successfully develop, market and sell enterprise software products for specific targeted vertical industries, offer high quality services and support, and protect intellectual property rights for our software products; and

• our ability to accurately estimate the costs of our global services engagements which are billed on a fixed price basis.

Factors Relating to our Online Games Business

• the distribution, development and licensing of online games generally, including potential delays in software development and technical difficulties that may be encountered in the development of online games we may distribute;

• our dependence on three online games for substantially all of our online games revenue;

• our ability to maintain and build relationships with our current and potential future licensors of online games, correctly identify and implement our growth strategies, license or develop and launch new games, and manage the effects thereof on our existing game or games, detect and avoid programming errors, avoid piracy of our online games and adapt to changes in applicable regulations and consumer tastes;

• the development of new networking technologies and online games which affect our current and future business;

• the future growth of the online games market in the PRC and other countries;

• our ability to efficiently expand or restructure our distribution network, take advantage of opportunities to market the online games we license and distribute to customers directly and through distribution channels and business partners, and protect intellectual property rights for any of the online games we develop or license; and

• our ability to accurately estimate the costs of marketing, distributing and operating any online games we offer.

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Factors Relating to our China.com Businesses

• our ability to obtain accurate and timely information regarding customer usage levels, manage the effects of network transmission failures, satisfy customers and the mobile network operators, avoid sanctions and penalties by regulators and the mobile network operators, effectively compete, and avoid competition with the mobile network operators and obtain content from third parties;

• our ability to maintain up-to-date datasets in our database marketing business; and

• our ability to survive changes in political, economic, legal and social environment in the PRC, including the Chinese government’s specific policies with respect to foreign investment in the telecommunications, internet and online games industries, economic growth, inflation, foreign exchange and the availability of credit.

Factors Relating to our Online Games and China.com Segments as a Result of Conducting Operations in the People’s Republic of China

• our ability to manage risks relating to content which we may provide or communicate, or which may be provided, displayed or communicated by third parties;

• the governmental control of currency conversion and exchange rates;

• our contractual arrangements with our PRC-related entities, which may be difficult or impossible to enforce or may not be compliant with all applicable laws, rules and regulations; and

• our ability to comply and maintain compliance with all applicable licensing, regulatory and business requirements, including, without limitation, tax and insurance regulations.

Factors Relating to our Intellectual Property, Personnel, Technology and Network

• our ability to adequately protect or enforce our intellectual property rights through litigation or other means, to use our intellectual property free of infringement by third parties, and our ability to avoid infringing others’ intellectual property;

• the ability of our licensors to avoid infringement claims by third parties;

• our ability to attract and maintain key and skilled employees, and our ability to provide adequate compensations and incentives for them;

• product liability claims; and

• hacking, viruses, spamming and other disruptions by third parties, as well as the risk of illegal game servers, software and hardware systems failures, service interruptions, and the dependability of the internet and telecommunications infrastructure in the PRC.

Factors Relating to our Class A Common Shares

• major and strategic shareholders, whose interests may differ from those of our other shareholders, substantially changing their holdings of our common shares;

• the continued volatility of the market price for our common shares;

• the potential effect of our outstanding senior exchangeable convertible notes on our business, financial position and the market price of our common shares;

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• our status as a foreign private issuer and the regulations applicable to us relating to our foreign private issuer status, as well as our PFIC and investment company status and changes thereto;

• the potential dilutive effect of any potential issuance of a large number of additional shares that we may make; and

• risks relating to a shareholder’s ability to enforce its rights against us and our officers and directors since we are a Cayman Islands company.

All forward looking statements contained in this Annual Report are based upon information available to management as of the date of this Annual Report, and you are cautioned not to place undue reliance on any forward looking statements which speak only as of the date of this Annual Report. We assume no obligation to update or alter the forward-looking statements made herein whether as a result of new information, future events or otherwise. You should read these statements in conjunction with the risk factors disclosed under in Item 3.D., Key Information, Risk Factors in this Annual Report.

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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following selected consolidated financial data of CDC and our subsidiaries should be read in conjunction with our consolidated balance sheets as of December 31, 2006 and 2007, and the related consolidated statements of operations, cash flows and shareholders’ equity for the three years ended December 31, 2005, 2006 and 2007 and the notes thereto, together referred to as the Consolidated Financial Statements, included in Item 18, Financial Statements, and the information included in Item 5, Operating and Financial Review and Prospects. The Consolidated Financial Statements have been prepared and presented in accordance with US GAAP.

For the year ended December 31, 2007, we reported operating results in five business segments, “Software,” “Global Services,” “CDC Games,” “China.com,” and “Mobile Services and Applications”. During 2005 we reorganized our business into two core business units, CDC Software and China.com, and during 2006 we further reorganized our business to add a third core business unit, CDC Games. The operations of Software and Global Services are included in the CDC Software business unit, the operations of CDC Games are included in the CDC Games business unit, and the operations of Mobile Services and Applications and China.com are included in the China.com business unit in all years presented. See “Note 22 – Segment Information” in Item 18, Financial Statements for additional disclosure of segment information.

During 2004 and 2005, we discontinued the operations of certain of our subsidiaries. The operating results of the discontinued operating units were retroactively reclassified as a loss from operations of discontinued subsidiaries, net of tax, in all periods presented in this Annual Report.

The following selected consolidated financial data of CDC and our subsidiaries is derived from our audited financial data, after adjustment for the reclassification of discontinued operations and segment reporting for the years ended December 31, 2005, 2006 and 2007.

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CONSOLIDATED INCOME STATEMENT DATA:	Year ended December 31,
	(in thousands, except share and per share data)
	2003			2004			2005			2006			2007
Revenue:
CDC Software	$	53,368		$	150,575		$	201,490		$	240,821		$	349,037
China.com		24,483			31,877			43,384			41,927			19,751
CDC Games		—			—			—			26,780			33,596
		77,851			182,452			244,874			309,528			402,384
Cost of Revenue:
CDC Software		(32,899	)		(74,801	)		(95,238	)		(119,732	)		(182,961	)
China.com		(6,209	)		(7,916	)		(18,711	)		(17,099	)		(9,040	)
CDC Games		—			—			—			(10,631	)		(20,108	)
		(39,108	)		(82,717	)		(113,949	)		(147,462	)		(212,109	)
Gross profit		38,743			99,735			130,925			162,066			190,275
Sales and marketing expenses		(609	)		(4,067	)		(47,611	)		(59,313	)		(76,513	)
Research and development expenses		—			(13,825	)		(22,788	)		(19,981	)		(23,836	)
General and administrative expenses		(30,997	)		(76,259	)		(56,608	)		(64,548	)		(93,531	)
Amortization expenses		(6,829	)		(8,919	)		(6,084	)		(8,315	)		(12,657	)
Restructuring and other charges		—			(3,760	)		(1,667	)		(6,274	)		(11,258	)
Goodwill impairment		—			—			—			—			(71,096	)
Total operating expenses		(38,435	)		(106,830	)		(134,758	)		(158,431	)		(288,891	)
Operating income (loss)		308			(7,095	)		(3,833	)		3,635			(98,616	)
Other income, net		16,345			6,988			6,735			12,579			(14,118	)
Income (loss) before income taxes		16,653			(107	)		2,902			16,214			(112,734	)
Income tax benefit (expenses)		448			(3,375	)		(4,957	)		(3,062	)		(10,850	)
Income (loss) before minority interests		17,101			(3,482	)		(2,055	)		13,152			(123,584	)
Minority interests in losses (income) of consolidated subsidiaries		(2,257	)		(925	)		(1,409	)		(2,312	)		18,551
Income (loss) from continuing operations		14,844			(4,407	)		(3,464	)		10,840			(105,033	)
Discontinued operations:
Loss from operations of discontinued subsidiaries, net of tax		924			(1,560	)		(50	)		—			—
Net income (loss)	$	15,768		$	(5,967	)	$	(3,514	)	$	10,840		$	(105,033	)
Basic and diluted earnings (loss) per share from continuing operations (1)	$	0.14		$	(0.04	)	$	(0.03	)	$	0.10		$	(0.98	)
Basic and diluted earnings (loss) per share (1)	$	0.15		$	(0.06	)	$	(0.03	)	$	0.10		$	(0.98	)
Weighted average number of shares:
Basic		100,532,594			105,898,392			111,085,657			107,950,544			107,160,474
Diluted		103,199,421			105,898,392			111,085,657			109,079,391			107,160,474

(1) The computation of diluted earnings (loss) per share did not assume the conversion of the Company’s warrants for 2003 and its stock options for 2004, 2005 and 2007 because their inclusion would have been anti-dilutive due to the required two class method of fully diluted per share used by the Company. 2,263,642 and 16,200,579 weighted average shares related to the convertible notes were not included in the 2006 and 2007 diluted earnings per share calculations, respectively, because to do so would have been antidilutive.

CONSOLIDATED BALANCE SHEET DATA:	As of December 31,
	(in thousands, except share data)
	2003		2004		2005		2006		2007
Cash and cash equivalents	$	55,508	$	110,206	$	93,719	$	223,548	$	142,218
Restricted cash		238		3,886		1,886		1,996		9,066
Available-for-sale debt securities (1)		282,145		104,159		115,881		122,914		74,595
Working capital (2)		270,451		177,602		75,447		240,878		152,660
Total assets		553,074		677,946		619,326		857,433		803,601
Total Debt (3)		26,826		63,781		26,249		186,636		208,797
Total shareholders’ equity		395,701		449,976		446,705		454,623		358,824

(1) Available-for-sale debt and equity securities include short and long-term available-for-sale debt and equity securities.

(2) Working capital represents current assets less current liabilities.

(3) Total debt includes short and long term bank loans, convertible notes and related embedded derivatives.

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B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with other information included or incorporated by reference in this Annual Report in your decision as to whether or not to invest in our common stock. If any of the following risks or uncertainties actually occurs, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall, and you may lose all or part of the money you paid to buy our common stock.

Risks Relating to Our Overall Business

Because our business model and strategy have evolved, we lack experience and have a limited operating history in our new markets and we may not be successful in meeting the needs of customers in these markets. Our operating results could fall below expectations, resulting in a decrease in our stock price.

We began in June 1997 as a pan-Asian integrated Internet company. Our business model and strategy have evolved with a new focus and goal to be a global company focused on enterprise software and business services through our CDC Software business unit, on online games through our CDC Games business unit and on internet and media services through our China.com business unit. You will not be able to evaluate our prospects solely by reviewing our past businesses and results, but should consider our prospects in light of the changes in our business focus. Each of our targeted markets is rapidly changing, and we may not successfully address the challenges in our new lines of business or adapt our business model and strategy to meet the needs of customers in these markets. If we fail to modify our business model or strategy to adapt to these markets, our business could suffer.

We have incurred losses in prior periods, may incur losses in the future and cannot provide any assurance that we can achieve or sustain profitability.

We have incurred operating losses in three of our last 5 fiscal years and net losses in three of our last 5 fiscal years as follows:

	2003		2004			2005			2006		2007
	(in thousands)
Operating income (loss)	$	308	$	(7,095	)	$	(3,833	)	$	3,635	$	(98,616	)
Net income (loss)	$	15,768	$	(5,967	)	$	(3,514	)	$	10,840	$	(105,033	)

Our operating losses and net losses may increase in the future, and we may not achieve or sustain operating profitability or net profitability. We may continue to incur operating losses and post net losses in the future due to several factors, including:

• planned acquisition activities related to the growth and development of our three core business units, CDC Software, CDC Games and China.com;

• continuing effects of acquisition-related adjustments including intangible asset amortization, stock compensation and deferred tax expense;

• a high level of planned operating expenditures, including costs we expect to incur as a result of our ongoing efforts to comply with the regulations promulgated under the Sarbanes-Oxley Act of 2002; and

• increased investment activities related to our new businesses as we seek to achieve organic growth, which may include:

• increased sales and marketing costs; and

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• greater levels of product development expenses.

In addition, while, from time to time, we have experienced sequential quarterly increases in revenues, we cannot be certain that revenue growth will occur or continue in the future. We may see a reversal of any sequential growth in quarterly revenues due to several factors, including:

• any decisions to dispose of business units, subsidiaries, products or services which we no longer believe to be central to our new business model and strategy, which would decrease our revenue base;

• a substantial portion of our software license revenue is recognized in the last month of a quarter, and often in the last weeks or days of a quarter, which may result in increased volatility in quarterly revenues if customers decide to defer or cancel orders or implementations, particularly large orders or implementations, from one quarter to the next;

• the delay of new software product releases which can result in a customer’s decision to delay execution of a contract or, for contracts that include the new software release as an element of the contract, will result in deferral of revenue recognition until such release;

• the potential or actual loss of key clients and key personnel;

• our failure to increase market awareness of our company, our brands and our products and services; and

• a slowdown in the U.S., European, Asian and/or other economic markets.

These factors could also adversely affect our ability to achieve or sustain profitability. We may not generate sufficient revenue to achieve or sustain profitability, or that we can sustain or increase profitability on a quarterly or annual basis. Even though our revenue is difficult to predict, we base our decisions regarding our operating expenses on anticipated revenue trends. Many of our expenses are relatively fixed, and we may not be able to quickly reduce spending in response to lower than expected revenue growth. As a result, revenue shortfalls could result in significantly lower income or result in a greater loss than anticipated for any given period, which could result in a decrease in our stock price. If revenue does not meet our expectations, or if operating expenses exceed what we anticipate or cannot be reduced accordingly, our business, results of operations and financial condition will be materially and adversely affected.

Our strategy of expansion through acquisitions or investments has been and will continue to be costly, may not be effective, and we may realize losses on our investments.

As a key component of our business and growth strategy, we have acquired and invested in, and may continue to acquire and invest in, companies and assets that we believe will enhance our business model, revenue base, operations and profitability, particularly relating to our strategy in enterprise software, global services and online games. Our acquisitions and investments have resulted in, and will continue to result in, the use of significant amounts of cash, the incurrence of debt, dilutive issuances of our common shares and amortization expenses related to certain intangible assets, each of which could materially and adversely affect our business, results of operations and financial condition.

Our continued international acquisitions and investments may expose us to additional regulatory and political risks, and could negatively impact our business prospects.

Our expansion throughout international markets exposes us to the following risks, any of which could negatively impact our business prospects:

• adverse changes in regulatory requirements, including export restrictions or controls;

• potentially adverse tax and regulatory consequences;

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• differences in accounting practices and investment requirements;

• different cultures which may be relatively less accepting of our business;

• difficulties in staffing and managing operations;

• differences and inconsistencies in legal interpretations, laws, rules and regulations;

• greater legal uncertainty and difficulty in complying with such laws and regulations;

• tariffs and other trade barriers;

• changes in the general economic and investment climate affecting valuations and perception of our business sectors;

• political instability and fluctuations in currency exchange rates; and

• different seasonal trends in business activities.

During each of 2003, 2004, 2006 and 2007, we depended more on acquisitions for our increase in revenues than the organic growth of our businesses. We may not be successful in increasing our revenues through organic growth or through acquisitions and may lose our investment if we do not successfully integrate the businesses we acquire.

• During 2003, our acquisitions included the acquisition of Praxa, an Australian information technology outsourcing and professional services organization; the acquisition of Palmweb Inc. which operates Newpalm, a provider of mobile services and applications in China; and the acquisition of IMI, an international provider of software to the supply chain management sector principally in Europe and the United States.

• During 2004, our acquisitions included the acquisition of Pivotal Corporation, or Pivotal, a customer relationship management (CRM) company focused on mid-sized enterprises; the acquisition of Group Team Investments Limited, which holds Beijing He He Technology Co. Ltd. which operated Go2joy, a mobile services and applications provider based in Beijing, China; and the acquisition of Ross Systems, Inc., or Ross, an ERP company focused on the food and beverage, life sciences, chemicals, metals and natural products industries.

• During 2006, our acquisitions included a number of enterprise software and business solutions companies, including: c360 Solutions, Inc., a provider of add-in products and development tools for Microsoft Dynamics CRM platform; MVI Holdings Limited, a real-time performance management solutions provider; DB Professionals, Inc., an outsourced IT support and consulting services provider based in Oregon; Vis.align, Inc., an enterprise solutions and IT services provider based in Pennsylvania; and OST International, an outsourced IT support and consulting services provider based in Illinois.

• During 2007, our acquisitions included Respond Group Limited, an enterprise class complaints, feedback and customer service solutions provider in the U.K.; Saratoga Systems, an enterprise CRM and wireless CRM applications provider in the U.S.; the assets of PlanTec Pty Ltd and a majority interest in Vectra Corporation, information technology service providers in Australia; Catalyst International, an integrated supply chain execution solutions and services provider; and Snapdragon Consulting Pty. Ltd., a service provider focused on Microsoft CRM in October 2007.

Between 2003 and 2004, our consolidated net revenues increased 134%, or approximately $104.6 million, from $77.9 million in 2003 to $182.5 million in 2004 primarily due to the acquisitions of Ross, Pivotal, and Go2joy, as well as the inclusion of a full year of results from acquisitions made in 2003. Between 2004 and 2005, our consolidated net revenues increased 34%, or approximately $62.4 million,

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from $182.5 million in 2004 to $244.9 million primarily from the inclusion of Ross, Pivotal and Go2joy for the full year in 2005 and increased sales volumes in certain key products as discussed under the section entitled “Results of Operations” in Item 5, Operating Financial Review and Prospects. Between 2005 and 2006, our consolidated net revenues increased 26.4% or approximately $64.6 million, from $244.9 million in 2005 to $309.5 million in 2006, primarily as a result of acquisition related activities. Between 2006 and 2007, our consolidated net revenues increased 30% to, or approximately $92.9 million, from $309.5 million to $402.3 million, primarily as a result of acquisition-related activities.

Our ability to achieve organic growth in our businesses is subject to a number of risks and uncertainties, including the following:

• our investments in sales and marketing, research and development and personnel training could require significant resources and may not ultimately prove successful in generating organic growth;

• we may not be successful in introducing our products and services into new markets, such as the emerging markets, including China and India, targeted by our Software Group; and

• our strategy to sell new products to our existing customer base, which has expanded through acquisitions, may not be successful or as profitable as we expect. Our customers sometimes do not find our other enterprise software applications to be as attractive as the ones they have previously purchased. In addition, the revenues generated from these sales are often less than that of an independent third-party software supplier.

Although we have experienced revenue growth in the past, primarily due to acquisitions, if we are unable to achieve organic growth in our businesses, there will be a material and adverse effect on our business, results of operations and financial condition. We cannot assure you that we will be able to achieve organic growth in our business.

As discussed above, from 2004 to 2007, we expanded our operations rapidly, both in size and scope, and during 2008 and in the future need to integrate, manage and protect our interests in the businesses we acquire. We may experience difficulties in integrating, assimilating and managing the operations, technologies, intellectual property, products and personnel of our acquired businesses individually and cumulatively, and may need to reorganize or restructure our operations to achieve our operating goals. This may include creating or retaining separate units or entities within each of our operating segments. Our failure to integrate and manage our acquired businesses successfully could delay the contribution to profit that we anticipate from these acquisitions, and could have a material adverse effect on our business, results of operations and financial condition.

We intend to continue to evaluate and pursue strategic acquisitions. We may incur significant costs in our efforts to engage in strategic transactions and these expenditures may not result in successful acquisitions. Furthermore, we may be unable to integrate our past or future acquisitions successfully, which could result in increased costs, divert management’s attention and materially and adversely affect our business, results of operations and financial condition.

We intend to continue to evaluate and pursue strategic acquisitions that can, among other things, broaden our customer base, provide enhanced geographic presence and provide complementary technical and commercial capabilities.

We believe that attractive acquisition candidates currently exist in our target markets for each of our business segments, and we continuously consider a number of transactions, some of which would be material to our operations and financial condition if consummated. Our ability to complete future acquisitions depends upon a number of factors that are not entirely within our control, including our ability

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to identify suitable acquisition candidates, negotiate acceptable terms, conclude satisfactory agreements and secure financing. We may incur significant costs arising from our efforts to engage in strategic transactions and these expenditures may not result in the successful completion of acquisitions.

We also may be unable to integrate our past or future acquisitions successfully. In order to realize the benefits anticipated from each acquisition, we need to conform the operational, managerial and financial controls, procedures and policies between our corporate headquarters and the businesses we have acquired, which may divert management’s attention, increase transaction costs and reduce employee morale. Our ability to integrate past and future acquisitions is subject to a number of risks, including:

• our inability to retain and integrate key employees and manage employee morale;

• our inability to integrate or combine different corporate cultures;

• our inability to effectively integrate products, research and development, sales, marketing, accounting and finance functions and other support operations;

• our inability to maintain focus on our day-to-day operations;

• the discovery of unanticipated liabilities or other contingencies that we did not identify during the course of our due diligence investigations;

• potential claims filed by terminated employees or contractors; and

• our inability to adapt to local market conditions and business practices.

We could be prevented from, or significantly delayed in, achieving our strategic goals if we are unable to complete strategic transactions or successfully integrate acquired businesses. Our failure to complete strategic transactions or to integrate and manage acquired businesses successfully may materially and adversely affect our business, results of operations and financial condition.

The process of integrating our acquisitions has required, and will continue to require, significant resources, particularly in light of potential regulatory requirements and operational demands. Integrating these acquisitions in the past has been time-consuming, expensive and disruptive to our business. This integration process has strained our managerial resources, resulting in the diversion of these resources from our core business objectives and may do so in the future. Failure to achieve the anticipated benefits of these acquisitions or to successfully integrate the operations of these entities has harmed and could potentially harm our business, results of operations and cash flows in future periods. Furthermore, we may face other unanticipated costs from our acquisitions, such as disputes involving earn-out and incentive compensation amounts.

We may make additional acquisitions of complementary companies, products or technologies in the future. In addition, we periodically evaluate the performance of all our products and services and may sell or discontinue current products and services. Failure to achieve the anticipated benefits of any acquisition or divestiture could harm our business, results of operations and cash flows. Furthermore, we may have to incur debt, write off investments, infrastructure costs or other assets, incur severance liabilities, write off impaired goodwill or other intangible assets or issue equity securities to pay for any future acquisitions.

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Rapid growth and a rapidly changing operating environment strain our limited resources.

We have limited operational, administrative and financial resources, which may be inadequate to sustain the growth we want to achieve. As the demands of our customers change and if our business continues to expand, we will need to increase our investment in our network infrastructure, facilities and other areas of operations. If we are unable to manage our growth and expansion effectively, the quality of our products and services could deteriorate and our business may suffer. Our future success will depend on, among other things, our ability to:

• adapt our products and services and maintain and improve the quality of our products and services;

• continue training, motivating and retaining our existing employees and attract and integrate new employees; and

• develop and improve our operational, financial, accounting and other internal systems and controls.

Several of the products and services we offer are quite disparate and have very different uses and functionalities, and it is difficult to discern significant synergies between and among them, which limits the amount of integration, cost savings and cross-selling we may be able to achieve among our business segments.

We are a global company focused on enterprise software through our CDC Software business unit, on online games through our CDC Games business unit and on internet and media services through our China.com business unit. Several of our products and services are quite disparate and have very different uses and functionalities. As such, it is difficult to discern significant synergies between and among some of our business segments. For example, our Software segment focuses on delivering enterprise software applications and related services around the world for enterprise resource planning, supply chain management, customer relationship management, order management systems, human resource management and business intelligence. Our online Games segment primarily focuses on operating online games for the China market. Because our segments are quite distinct, there may be limits to the amount of integration, cost savings and cross-selling we may be able to achieve among our business segments.

While as of December 31, 2007, we had cash and cash equivalents of $142.2 million and total available-for-sale securities of $107.0 million, much of this cash balance is held at our China.com subsidiary, and we have limited ability to use these funds for our benefit or our other subsidiaries outside of the China.com chain of subsidiaries.

As of December 31, 2007, we had cash and cash equivalents of $142.2 million and total available-for-sale securities of $107.0 million. Of such amounts, $92.9 million of the cash and cash equivalents and $63.1 million of the total investments held for trading and available for sale were held at China.com. China.com is a 77% owned subsidiary of ours listed on the Growth Enterprise Market of the Hong Kong Stock Exchange. Although we have the ability to appoint a majority of the board of directors of China.com, the board of directors of China.com owes fiduciary duties to all of the shareholders of China.com to act in the best interests of and use the assets of China.com, including the cash and cash equivalents balance and debt securities, for the benefit of such shareholders. As a result, aside from the board of directors of China.com declaring a dividend to its shareholders for which we would receive a pro rata portion as a 77% shareholder of China.com or a related party inter-company loan or similar transaction from China.com which would likely require the approval of the minority shareholders of China.com, we have limited ability to transfer or move the cash, cash equivalents, held-for-trading investments and available-for-sale investments balance to us at the parent entity level, or to use the amounts of cash, cash equivalents and held-for-trading investments and available-for-sale investments balance for the benefit of entities other than China.com and its subsidiaries. Any inability to access funds at China.com may have a material adverse effect on our financial condition.

We have significant fixed operating expenses, which may be difficult to adjust in response to unanticipated fluctuations in revenues, and therefore could have a material adverse effect on our operations.

A significant part of our operating expenses, particularly personnel, rent, depreciation and amortization, are fixed in advance of any particular quarter. As a result, an unanticipated decrease in the

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number or average size of, or an unanticipated delay in the scheduling for, our engagements may cause significant variations in operating results in any particular quarter and could have a material adverse effect on operations for that quarter. In the near-term, we believe our costs and operating expenses may increase in certain areas as we fund new initiatives and continue to pay for costs related to compliance with the Sarbanes-Oxley Act of 2002, mergers and acquisitions and other corporate initiatives we may undertake. Although we intend to strive to keep our costs and operating expenses in the near-term to a level that is in line with our expected revenue, we may not be able to increase our revenue sufficiently to keep pace with any growth in expenditures.

Because we rely on local management for many of our localized CDC Software, CDC Games and China.com businesses, our business may be adversely affected if we cannot effectively manage local officers or prevent them from acting in a manner contrary to our interests or failing to act at our direction.

In connection with our strategy to develop our enterprise software products and services through our CDC Software business unit, online games through our CDC Games business unit and internet and media services through our China.com subsidiary, we have interests in companies in local markets where we may have limited experience with operating assets and businesses in such jurisdictions, including enterprise software companies in the United States, Canada and Europe, global services companies in Australia, Korea and the U.S. and online games companies in the U.S., Japan and the PRC. As a result, we rely on our local management and have limited oversight over these persons. If we cannot effectively manage our local officers and management, or prevent them from acting in a manner contrary to our interests or failing to act at our direction, these problems could have a material adverse effect on our business, financial condition, results of operations and share price.

We have identified material weaknesses in our internal control over financial reporting as of December 31, 2006 and 2007. If we are unable to remediate the material weaknesses in our internal control over financial reporting, our ability to report timely and accurate financial information could be materially and adversely affected.

In connection with the audit of our consolidated financial statements, we and our independent registered public accounting firm have concluded that material weaknesses existed in our internal control over financial reporting at December 31, 2007. A material weakness is defined as a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements would not be prevented or detected on a timely basis. The material weaknesses that existed at December 31, 2007 were noted in the financial statement close and reporting processes, income taxes and treasury management. The primary cause of the material weaknesses was lack of sufficient personnel in each of these areas with appropriate expertise to ensure proper accounting and treatment in accordance with generally accepted accounting principles.

We cannot be certain that our material weaknesses will be fully remediated by December 31, 2008 because we have not yet fully completed the implementation or testing of our planned remedial actions and measures. Furthermore, we cannot assure you if or when we will be able to remedy these control deficiencies, that our independent registered public accounting firm will agree with our assessment that such deficiencies have been fully remediated, or that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. If the control deficiencies we have identified recur, or if we identify additional deficiencies or fail to implement new or improved controls successfully in a timely manner, we may be unable to issue timely and accurate financial reports and investors could lose confidence in the reliability of our consolidated financial statements, and such conclusion could negatively impact the trading price of our class A common shares.

If we need to raise additional capital in the future, it may not be available to us on favorable terms, if at all.

We may require additional capital in the future to pursue potential acquisitions or grow our business organically. We intend to meet our capital requirements through a variety of sources, including accessing the capital markets. If we are unable to obtain capital on favorable terms, or if we are unable to obtain capital at all, it could have a material and adverse effect on our business, results of operations and financial condition.

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Risks Relating to Our International Operations

A large part of our business is international and, as a result, there are a number of factors beyond our control associated with international operations that could materially and adversely affect our business, results of operations and financial condition.

Approximately 57% and 49% of our total revenues in 2006 and 2007, respectively, were derived from customers outside of North America. We anticipate that revenues from customers outside the United States will continue to account for a significant portion of our total revenues in the future, particularly as we intend to expand into targeted emerging markets, such as the PRC. Our operations outside the United States are subject to additional risks, including:

• changes in or interpretations of U.S. or foreign law that may materially and adversely affect our ability to sell our products, perform services or repatriate profits to the United States;

• the imposition of tariffs;

• hyperinflation or economic or political instability in foreign countries;

• imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries;

• conducting business in places where business practices and customs are unfamiliar and unknown or prohibited by applicable law;

• the imposition of restrictive trade policies, including changes in export restrictions;

• worldwide political conditions;

• the imposition of inconsistent laws or regulations;

• the imposition or increase of investment requirements and other restrictions by foreign governments;

• difficulty in staffing and managing our operations;

• different seasonal and other trends in business activities;

• longer collection cycles for accounts receivable;

• uncertainties relating to foreign laws and legal proceedings;

• having to comply with a variety of U.S. laws, including the Foreign Corrupt Practices Act, anti-boycott and embargo statutes and regulations, some of which are designed to safeguard U.S. origin technology from the unauthorized export to foreign parties and others which are designed to prevent U.S. persons from transacting business with companies and individuals identified by the federal government as prohibited countries or parties, violations of which can result in substantial civil and criminal fines as well as temporary or permanent loss in export privileges;

• having to comply with U.S. export control regulations and policies that restrict our ability to communicate with non-U.S. employees and supply foreign affiliates and customers with products and services;

• restrictions imposed on the export of U.S. technology or goods manufactured in the United States to some jurisdictions requires that may require special U.S. export authorization; and

• adverse determinations or findings by applicable export control authorities restricting our ability to export goods and services.

The 2008 Summer Olympics May Impact Our Ability to Provide our Online Games in China.

In preparation for, or in relation to, the upcoming 2008 Summer Olympics to be held in Beijing, regulations may be implemented in China that may affect our ability to provide our online games and other

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products and services to customers in China. For example, we or our customers may, at times, experience difficulty in accessing the internet. This may make certain of our operations more difficult and time consuming, and could result in our customers not having access to our games. Additionally, the hours of operation for internet cafes, a significant point of access for customers to our online games, may be limited or restricted. We cannot be sure of that there will not be disruptions to internet connectivity, distribution systems, transportation, communications or other infrastructure systems in China as a result of the 2008 Summer Olympics. Additionally, the length and substance of any regulations imposed may vary from province to province and the presence of a large number of foreign visitors in China may also disrupt the conduct of business in China. These factors could have a material adverse effect on our business, financial position and results of operations.

A change in currency exchange rates could increase our costs relative to our revenues.

Our revenues, expenses and liabilities are denominated in a number of currencies, including Australian dollars, British pounds, Canadian dollars, Euros, Chinese Renminbi, South Korean won, Swedish Kronas and U.S. dollars. However, our financial results are reported in U.S. dollars. In the future, we may also conduct business in additional foreign countries and generate revenues, expenses and liabilities in other foreign currencies. As a result, we are subject to the effects of exchange rate fluctuations with respect to any of these currencies and the related interest rate fluctuations. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future.

Global events beyond our control may disrupt our operations and harm our business, results of operations and financial condition.

Our business may be materially and adversely affected by a war, terrorist attack, third-party acts, natural disaster or other catastrophe. Such a catastrophic event could have a direct negative impact on us, our customers, the financial markets or the overall economy. It is impossible to fully anticipate and protect against all potential catastrophes. A security breach, criminal act, military action, power or communication failure, flood, hurricane, severe storm or the like could lead to service interruptions, data losses for customers, disruptions to our operations, or damage to our facilities, and could reduce acceptance and reliance on our products. Any of these could have a material and adverse effect on our business, results of operations and financial condition. In addition, we may incur costs in repairing any damage or other liabilities beyond our applicable insurance coverage.

Risks Relating to Our Software Group

Our strategy of developing and acquiring products for specific industry segments, or targeted vertical industries, may not be successful, which could materially and adversely affect our business, results of operations and financial condition.

Our strategy focuses on the development of industry-specific enterprise software applications. This strategy may not be successful due to numerous risks and uncertainties, including the following:

• companies in our targeted vertical industries may not select our products;

• many of our targeted vertical industries are subject to their own economic cycles, regulatory considerations and other factors beyond our control. For example, the homebuilding and real estate vertical industry is sensitive to interest rate movements and general economic conditions, and the healthcare vertical industry is subject to significant governmental regulations;

• some of our products have only been recently introduced, so they have neither a significant installed base of users nor significant recognition in their targeted vertical industry;

• development of industry-specific products is time-consuming and requires significant expertise;

• we may experience difficulty in recruiting sales, business and technical personnel who have experience in a particular targeted vertical industry;

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• due to resource constraints, we have a limited number of developers who can focus on product development for our targeted vertical industries; and

• if we decide to devote our limited resources to a targeted vertical industry, such as by dedicating a sales representative to a particular market, then that resource may not be available to focus on sales to our other targeted vertical industries.

If our strategy of developing products for specific vertical industries is not successful, our business, results of operations and financial condition could be materially and adversely affected.

Our failure to successfully develop, market or sell new products or adopt new technology platforms could have a material and adverse effect on our ability to generate revenues and sustain our profitability.

Our enterprise software applications compete in a market characterized by rapid technological advances in hardware and software development, evolving standards in computer hardware and software technology and frequent new product introductions and enhancements that may render existing products and services obsolete. While we continually seek to expand and refresh our product offerings to include newer features, products, technologies and standards, and enter into agreements allowing the integration of third-party technology into our products, we cannot assure you that we will be able to compete effectively or respond to rapid technological changes in our industry. In addition, the introduction of new products or updated versions of existing products has inherent risks, including, but not limited to, risks concerning:

• product quality, including the possibility of software defects, which could result in claims against us or the inability to sell our software products;

• the fit of the new products and features with a customer’s needs;

• the need to educate our sales, marketing and consulting personnel to work with the new products and features, which may strain our resources and lengthen sales cycles;

• market acceptance of initial product releases;

• marketing effectiveness; and

• the accuracy of research or assumptions about the nature and extent of customer demand.

In addition, we may need to adopt newer technology platforms for our enterprise software products as older technologies become obsolete. We cannot assure you that we will be successful in making the transition to new technology platforms for our products in the future. We may be unable to adapt to the new technology, may encounter errors resulting from a significant rewrite of the software code for our products or may be unable to complete the transition in a timely manner. In addition, as we transition to newer technology platforms for our products, our customers may encounter difficulties in the upgrade process, delay decisions about upgrading our products or review their alternatives with another supplier or competitor. Any of these risks could materially and adversely affect our business, results of operations and financial condition.

Because we commit substantial resources to developing new software products and services, if the markets for these new products or services do not develop as anticipated, or demand for our products and services in these markets does not materialize or materializes later than we expect, we will have expended substantial resources and capital without realizing sufficient offsetting or resulting revenues, and our business and operating results could be materially and adversely affected. In 2006, our research and development expense was $20.0 million, or approximately 6.5% of our total consolidated net revenues and in 2007, our research and development expense was $23.8 million, or approximately 5.9% of our total net revenues. In addition, as we or our competitors introduce new or enhanced products, the demand for our older products and older versions of such products is likely to decline. If we are unable to provide continued improvements in the functionality of our older products or move customers with our older products to our newer products, maintenance and license revenues from older products may decline, which could have a material and adverse effect on our business, results of operations and financial condition.

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We dedicate a significant amount of resources to research and development activities and we may not realize significant revenues from these efforts for several years.

Developing, enhancing and localizing software is expensive, and the investment in product development may involve a long payback cycle. Our future plans include significant additional investments in software research and development and related product opportunities. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we do not expect to receive significant revenues from these investments for several years, if at all.

Revenues from our Software segment fluctuate significantly from quarter to quarter, which may cause volatility in the trading price of our class A common shares.

Many factors have caused, and may continue to cause, revenues from our Software segment to fluctuate significantly, including:

• the practice of recognizing a substantial portion of our software license revenues in the last month of a quarter, and often in the last weeks or days of a quarter, which may result in increased volatility in quarterly revenues if customers decide to defer or cancel orders or implementations, particularly large orders or implementations, from one quarter to the next;

• the gain or loss of any significant customer;

• the number, timing and significance of new product announcements and releases by us or our competitors;

• our ability to acquire or develop products, independently or through strategic relationships with third parties, or introduce and market new and enhanced versions of our products on a timely basis, which may result in a customer delaying the execution of a contract or, for contracts that include a new software release as an element of the contract, the deferral of revenue recognition until such release;

• shipment rescheduling or delays;

• reductions in the historical rate at which opportunities in our pipeline convert into license agreements;

• patterns of capital spending and changes in budgeting cycles by our customers. For example, in 2001 and continuing through most of 2003, capital spending for enterprise software applications was negatively impacted by challenging economic conditions in the United States, Europe and Asia;

• market acceptance of new and enhanced versions of our products;

• changes in the pricing and the mix of our products and services;

• seasonal variations in our sales cycle;

• the level of product and price competition;

• exchange rate fluctuations; and

• changes in personnel and related costs.

In addition, we expect that a substantial portion of our enterprise software application revenues will continue to be derived from renewals of maintenance contracts from customers of our software applications. These maintenance contracts typically expire on an annual basis, and if they are not renewed, the timing of cash collections from related revenues will vary from quarter to quarter, which could adversely affect our business and results of operations.

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Some customers are reluctant to make large purchases before they have had the opportunity to evaluate the performance of our software applications in their business and opt to purchase our products in stages or subject to certain conditions. Additional purchases, if any, may follow only if the software performs as expected. To the extent the number of customers who opt to purchase in stages or subject to conditions remains significant or increases, our revenues could be materially and adversely affected.

We have been increasingly moving software development capabilities for our enterprise software applications to India and China which subjects us to risks that may result in certain staffing and management difficulties, which, if not effectively addressed, could delay development of upgrades and new products that, in turn, could reduce revenues and net income and increase research and development costs.

We have established a CRM-focused software development center in Bangalore, India and an ERP and SCM-focused software development center in Shanghai, China and Nanjing. Such off-shoring subjects us to various risks, including the following:

• inability to hire sufficient qualified programmers and developers in these markets;

• risks associated with turnover of programmers and developers, particularly where we have devoted significant time and resources to train such persons to be familiar with our enterprise software applications;

• challenges related to the need to remotely manage developers and programmers in India and China, particularly when the persons most familiar with the needs of the customer and the desired new functionality and features are not located in India and China;

• language and other communications barriers, particularly with software development in China; and

• time zone differences, which make communicating with persons in India and China more difficult.

Our future revenues depend in part on our installed customer base continuing to license additional products, renew customer support agreements and purchase additional services.

Recently, our installed customer base has generated increasing proportions of our license and support and service revenues. In addition, the success of our strategic plan depends on our ability to cross-sell products to our installed base of customers. Our ability to cross-sell new products may depend in part on the degree to which new products have been integrated with our existing applications, which may vary with the timing of new product acquisitions or releases. In future periods, customers may not necessarily license additional products or contract for additional support or other services. Customer support agreements are generally renewable annually at a customer’s option, and there are generally no mandatory payment obligations or obligations to license additional software. Customer support revenues are primarily influenced by the number and size of new support contracts sold in connection with software licenses and the renewal rate (both pricing and participation) of existing support contracts. If our customers decide to cancel their support agreements or fail to license additional products or contract for additional services, or if they reduce the scope of their support agreements, revenues could decrease and our operating results could be adversely affected.

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The market for enterprise software applications and services is highly competitive, and any failure by us to compete effectively in such a market could result in price reductions, reduced margins or loss of market share, which may have an adverse effect on our revenues and profitability.

The business information systems industry in general, and the enterprise software industry in particular, are highly competitive and subject to rapid technological change. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical and marketing resources, greater name recognition, larger technical staffs and a larger installed customer base than we do. A number of companies offer products that are similar to our products and target the same markets as we do. In addition, many of these competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, and devote greater resources to the development, promotion and sale of their products than we can. Furthermore, because there are relatively low barriers to entry in the software industry, we expect additional competition from other established and emerging companies. Such competitors may develop products and services that compete with our products and services or may acquire companies, businesses and product lines that compete with us. It is also possible that competitors may create alliances and rapidly acquire significant market share. Accordingly, our current or potential competitors may develop or acquire products or services comparable or superior to those that we develop, combine or merge to form significant competitors or adapt more quickly than we can to new technologies, evolving industry trends and changing customer requirements. Competition could result in price reductions, reduced margins or loss of market share, any of which could materially and adversely affect our strategy in this market. If we are unable to compete effectively, our business, results of operations and financial condition could be materially and adversely affected.

Our ability to sell our products is highly dependent on the quality of our service and support offerings, and our failure to offer high quality service could have a material adverse effect on our ability to market and sell our products.

Our customers depend upon our customer service and support staff to resolve issues relating to our products. High-quality support services are critical for the successful marketing and sale of our products. If we fail to provide high-quality support on an ongoing basis, our customers may react negatively and we may be materially and adversely affected in our ability to sell additional products to these customers. This could also damage our reputation and prospects with potential customers. Our failure to maintain high-quality support services could have a material and adverse effect on our business, results of operations and financial condition.

Risks Relating to Our Global Services Group and the Customer Services Provided by Our Software Group

Because most of our global services contracts can be cancelled with limited notice and without significant penalty, we could suffer a significant loss of business service revenues if our clients were to unexpectedly terminate their contracts.

The standard terms for many of our global service contracts do not require any payments or only include an up-front payment of a relatively low percentage of the total fee of the contract with the balance of the payments subject to our achieving specific milestones and deliverables. We generally do not require collateral for accounts receivable and generally, final payments are not due until completion of successful user acceptance testing. However, most of our business services contracts can be cancelled by the client with limited advance notice and without significant penalty. Termination by any client of a contract for our services could result in a loss of expected revenues, additional expenses for redeployment of staff and resources that were allocated to the terminated engagement, and underutilized employees and resources. Any unexpected cancellations or significant reductions in the scope of any of our large global services projects could have a material and adverse effect on the business of our global services companies, particularly those companies that depend upon a relatively small number of key clients for a substantial portion of their revenues. Should any of those key clients unexpectedly terminate their contracts for our services, we may suffer a significant loss of revenues for such companies which, in turn, could have a material and adverse effect on our business, results of operations and financial condition.

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If our Global Services Group fails to compete effectively, our business, results of operations and financial condition could be materially and adversely affected.

Our Global Services Group, which consists primarily of many smaller, regionally-focused subsidiaries that operate primarily in Australia and parts of the United States, faces intense competition. Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and greater financial, technical and marketing resources than we do. We also face competition from many of the large Asia Pacific based outsourcing firms. Any of our present or future competitors may provide services that provide significant performance, price, creative or other advantages over those offered by our Global Services Group. We may not be able to compete successfully against our current or future competitors, particularly as markets continue to consolidate, change or mature.

If we fail to accurately estimate the resources and time required for any engagements we enter into on a fixed-price basis, we could experience cost overruns and be subjected to penalties.

Several of our Global Services Group’s engagements consist of individual, non-recurring, short-term projects billed on a fixed-price basis, as distinguished from billing on a time and materials basis. In addition, while most of our professional services engagements associated with the sale and implementation of our enterprise software applications are billed on a time and materials basis, some of our engagements are also contracted on a fixed-price basis. These fixed-price engagements require us at times to commit unanticipated additional resources to complete these engagements, which may result, and has in the past resulted, in losses on certain engagements. Clients may also change the scope of the projects on which we are engaged. Our failure to accurately estimate the resources and time required for a particular engagement or to effectively manage client expectations and changes regarding the timing and scope of the services to be delivered could expose us to risks associated with cost overruns and penalties, any of which could have a material and adverse effect on our business, results of operations and financial condition.

Because some of our Global Services contracts do not have disclaimers of, or limitations on, liability for special, consequential and incidental damages, we may be exposed to potential litigation and liabilities.

A large portion of our service agreements with customers of our Global Services Group do not have disclaimers or limitations on liability for special, consequential and incidental damages, and/or do not have caps on liabilities or have relatively high caps on the amounts our customers can recover for damages. In addition, some of our subsidiaries do not carry professional indemnity or other insurance against liability for any claims or breaches under our customer contracts. If a dispute were to arise with respect to one of these agreements, we would likely be held liable for the obligations of these subsidiaries that do not carry insurance.

Claims relating to our Global Services contracts have arisen and may arise in the future. Any claim under customer contracts could subject us to litigation and give rise to substantial liability for damages, including special, consequential or incidental damages that could materially and adversely affect our business, results of operations and financial condition.

Each of our Global Services Group businesses faces intense competition. If we fail to compete effectively, our failure could have a material adverse effect on our business, financial condition and results of operations.

Each of our Global Services Group businesses, many of which are smaller in size and operate in localized regional markets (such as Australia, Korea, and various regions in the United States) faces intense competition. A significant portion of the revenues from some of our Global Services companies is obtained through the resale of software developed by third party software and hardware vendors who use our businesses as channel partners on a non-exclusive basis. Also, we rely on the referrals of these third parties to introduce us to new business opportunities. Should any of those third party software and hardware vendors decide to sell their software and hardware or provide services directly into our market, or use other service providers, this could result in a loss of expected revenues. In addition, many of our existing competitors, as well as a number of potential new competitors, have longer operating histories in each of our

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target global services markets, greater name recognition, larger customer bases and greater financial, technical and marketing resources when compared to us. For example, as our business evolves to place greater emphasis on outsourced software development and support services, we will face competition from many of the large Asia Pacific based outsourcing firms, such as Infosys Technologies Ltd and Wipro Ltd. Any of our present or future competitors may provide products and services that provide significant performance, price, creative or other advantages over those offered by us. We can provide no assurance that we will be able to compete successfully against our current or future competitors, particularly as markets continue to consolidate, change or mature.

Risks Related to Our Online Games Business

Our limited operating history and the unproven long-term potential of our online games business model make evaluating our business and prospects difficult.

We commenced the commercial distribution and operation of our most popular game, Yulgang, in July 2005. We commercially introduced our second major online game, Special Force, in June 2007. In December 2007 we launched our first game in Japan, Minna de Battle and in February 2008, we launched Lunia, our first MMORPG commercially available in North America. Our limited operating history makes evaluating our business very difficult. It is also difficult to evaluate our prospective business because we may lack sufficient experience to adequately address risks frequently encountered by early-stage companies that use new and unproven business models and enter into rapidly evolving markets like the online games market. Our operating results will depend on numerous factors, that, in certain cases, we have limited or no ability to control. These factors include but are not limited to:

• the popularity, pricing and timing of new online games offered by us and our competitors;

• our ability to timely upgrade our games to extend their commercial lifespans;

• the growth of Internet users and penetration in China and other markets where we have or may expand our operations;

• our ability to retain existing customers and attract new customers;

• our ability to license new games that achieve commercial success;

• our ability to maintain rights under our existing games licenses;

• our ability to successfully expand our operations within and outside China;

• our ability to successfully address rapidly changing consumer tastes and preferences in the online games market;

• the popularity of other forms of entertainment, particularly among our target demographic group of 18- to 25- year-olds;

• technological changes and challenges;

• our ability to maintain secure, reliable and effective operation of our servers and software;

• our ability to adequately and efficiently operate, upgrade and develop our transaction processing and payment systems;

• our ability to continue expanding our distribution network for physical and virtual point cards used to pay for in-game merchandise or playing time;

• our ability to attract and retain qualified personnel; and

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• general economic conditions in the markets where we operate, particularly those that affect discretionary spending.

Due to these factors, as well as others, we may be unable to maintain or grow our business, which may harm our financial results and our stock price.

Our operating results may fluctuate significantly because we currently depend on three online games for substantially all of our online games revenues and have launched, and anticipate launching, several new online games in the future.

We currently derive substantially all of our online games revenues from three online games: Yulgang, Special Force and Shaiya. The commercial lifespan of online games is highly uncertain due to factors such as game quality, business model and competition. If the popularity of Yulgang, Special Force or Shaiya diminish materially, our revenues and profitability may decline. Furthermore, we commercially launched new games in 2007, such as Minna de Battle, in December 2007, and we intend to launch several new games in the future. If revenues from Minna de Battle or other games fail to offset any revenue declines from Yulgang, Special Force or Shaiya, our revenues will decline, which may harm our stock price. The costs associated with launching each new online game are substantial. The typical cost to commercially launch a new online game in the PRC, the United States or Japan varies greatly and can cost several million dollars, exclusive of prepaid licensing fees and royalties, with the substantial majority of these costs being incurred prior to meaningful revenue generation from the online game. Because we incur costs for licensing a new game prior to recognizing any related revenues, we may experience increased expenses and lower margins without the benefit of revenues from that game during this period. The combination of our current reliance on a few online games, the significant costs associated with commercializing each new online game and our expected launch of several new online games in the future may cause our results of operations to fluctuate significantly. Poor operating results for any one game or a delay in the planned launch of a new game could materially affect us, making the investment risks related to any one online game larger than those associated with competitors that have a more broadly established online game portfolio.

If we are unable to consistently license or acquire new online games that have a high likelihood of commercial success, our business will be harmed.

Because we do not have an internal development group, our business strategy requires us to license or acquire new online games that have a high likelihood of commercial success. We typically acquire rights to games either through licensing agreements or by making financial investments in developers in exchange for game publishing and other rights. When we first acquire rights to a game, the game may not have been developed, or if developed, may not have been proven successful in China or another target market. Accordingly, we typically make a significant financial commitment to a game without any guarantee it will be commercially successful. In addition, we have and may continue to enter into licenses with, and make investments in, developers with limited or no history of developing successful games. We may be unable to fully recover upfront and minimum royalty licensing or investment costs if a game is not commercially successful.

For example, during 2007 we entered into several license agreements pursuant to which we were granted rights to distribute online games. Subsequently, however, it became apparent that we would not be able to successfully launch several of these games, and as such, we have taken losses on the license fees we paid for these games. Furthermore, despite our losses, the developers of these games may insist that our obligations under the license agreements continue. Therefore, we may become subject to litigation with the developers of some or all of these online games in the event that we are unable to negotiate an amicable termination of these license agreements.

Furthermore, our ability to successfully license online games that are attractive to users depends in part on our ability to establish relationships with online game developers and to identify games that will be commercially successful and developers capable of producing popular content. It may be difficult to determine whether an online game will appeal to the users in a targeted market, even if it has been successful in other markets. For instance, many games from developers in other markets were not

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specifically designed for China’s online games market, further complicating the task of identifying games that will appeal to our users in China. Moreover, due to increased competition among online game operators in China and other markets, upfront license fees, royalties and investment costs for licensed games have increased, which we expect will continue, and some developers are demanding guaranteed minimum royalty payments.

If we are not able to consistently license, acquire or develop additional attractive online games with lasting appeal to users, our financial condition and results of operations would be significantly harmed.

If we are unable to maintain stable relationships with the licensors of our online games, our licenses may be terminated or we may experience difficulties with the operation of our existing licensed games, the extension of existing licenses, obtaining licenses for new games and our ability to deliver games to our sublicensees.

We must maintain stable and productive working relationships with our licensors to help ensure that we are able to obtain necessary consents for our subsidiaries to operate games we have licensed, and to help ensure cooperation to operate our games effectively, deliver our games to our sublicensees and access to game upgrades and new online games licenses. For certain of our games, the licensors’ consent is required to permit our subsidiaries to publish the games. Furthermore, many times, an internet content provider license is required to operate an Internet portal under PRC laws and regulations. In such cases the licensors’ consent is necessary to release and operate the game. In addition, we depend on our licensors to provide necessary technical support for the operation of our licensed games as well as expansion packs and upgrades that help to sustain user interest in our online games. For certain of our games, we have granted sublicenses to games distributors. We depend on our licensors to deliver the games to us so that we may fulfill our obligations under our sublicense agreements. Further, in-game marketing activities and gift promotions often require our licensors’ consent. Moreover, some of our licenses may be terminated upon the occurrence of certain events, such as failure to commence beta testing or commercially launch the game in a timely manner, failure to make royalty payments, failure to meet certain operating or financial benchmarks, or in the event of a change in control of the licensee. If any of these termination rights are triggered, we may lose rights to a game even if we have expended considerable time and financial resources in developing, marketing and operating that game. If a licensed game is successful during its initial term of operation, we may be unable to obtain an extension of that term on reasonable terms, or at all. If a game license is terminated or we are unable to extend the term of a successful game, the licensor could offer the game itself or enter into a license with one of our competitors. Because most of our licenses only cover one game, we must maintain a stable and productive working relationship with our licensors and continue to offer them competitive terms in order to obtain rights to future games they develop. If we are unable to maintain these relationships, our financial condition and results of operations will be harmed.

For example, on October 17, 2007, Mgame, the licensor of Yulgang, unilaterally announced that they terminated their agreements with CDC Games, alleging breach of contract for non-payment. In October 2007 we filed two lawsuits against Mgame. The first lawsuit alleged breach of contract and that Mgame was not providing adequate technical support for Yulgang, and that Mgame was not supporting CDC Games in its efforts to combat pirate servers. We subsequently filed a second lawsuit alleging that Mgame breached contractual obligations owed to us by failing to provide certain financial and operating data and other information which Mgame is required to provide to us as a shareholder of Mgame. Although we subsequently settled our dispute with Mgame, we cannot assure you that we will not experience disputes with our game developers in the future, which could have a material adverse effect on our financial condition and results of operations.

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If we are unable to successfully implement our growth strategies or if we are unable to continue our operations in Japan or the United States, our competitiveness may be harmed and our business, financial condition and results of operations may be materially and adversely affected.

We are currently pursuing or plan to pursue a number of growth strategies, including offering new genres of games and further expanding into international markets. Some of these strategies relate to new products for which there are no established markets in China or are in areas where we lack experience and expertise. Moreover, the development cycle for online games is long, generally ranging from two to four years. The creative process inherent in online games development also makes the length of the development cycle difficult to predict, especially in connection with online games involving new technologies. As a result, we may experience delays in online game introductions from our game developer partners. If the release of an online game is delayed, we may miss an important marketing window, our competitors may be first to introduce a game that competes with our game, we may not achieve anticipated revenues for that game, or we may be required to spend more to accelerate completion of the game, each of which would increase our costs and lower our margins. We may be unable to deliver new products or services in markets where we have no prior experience. Establishing operations in these markets will require meaningful investment and we may be unsuccessful in our efforts. We face several obstacles in our efforts to expand into new markets. Some of these markets, including Japan and the United States where we have recently launched online games, have immature online game markets, or consumers in such markets may prefer playing games on game consoles. This means that online games may not be widely accepted and that the cost to launch games in these markets is higher. If we are unable to successfully implement our growth strategies or if we are unable to continue our operations in Japan or the United States, our competitiveness may be harmed and our business, financial condition and results of operations may be materially and adversely affected.

If consumer tastes and preferences move away from online games or the games that we offer, particularly MMORPGs, our revenues and profitability will likely decline.

Our ability to successfully plan for product licensing, distribution and promotional activities depends significantly on our ability to anticipate and adapt to changes in consumer tastes and preferences in the rapidly evolving online games market. MMORPGs are currently one of the most popular genres of online games in China and we expect to continue to rely on MMORPGs, particularly Yulgang, for a significant portion of our revenues in the near future. The popularity of MMORPGs in China may decline, and their current popularity in China may be replaced by new and different types of online or other games. We may be unable to anticipate or adapt to changes in consumer preferences or obtain rights to or market the genres or styles of games that appeal to evolving consumer preferences. A decline in the popularity of online games in general or the games that we offer, particularly MMORPGs, would likely adversely affect our revenues and profitability.

Moreover, we believe casual games are becoming increasingly popular in China. Casual games tend to have shorter commercial lifespans than MMORPGs, thereby increasing the importance of maintaining a consistent pipeline of new games and lowering our ability to leverage successful games over the longer term. We have little experience offering casual games and we cannot assure you that the casual games in our pipeline will be commercially successful.

If we are unable to successfully launch and operate our new online game genres or adapt to new revenue models, our future results of operations will be adversely affected and we may not generate sufficient revenues to consistently introduce new online games.

Our online games currently scheduled for launch in 2008 include fantasy role-playing, action, martial arts and others. We have invested significant financial resources in obtaining rights to these games and plan to invest a significant amount of financial and personnel resources in launching and operating these and other new games. These game genres have limited or no operating history in China and we have no experience offering certain of these game genres. Accordingly, if these games fail to achieve commercial success, our revenues and profitability would be harmed and we may not generate sufficient revenues to consistently introduce new online games, which is critical to our games business.

We were a pioneer of the free-to-play, pay for virtual merchandise, revenue model and substantially all of our online games continue to utilize this model. This type of revenue model requires us to expend significant resources to track consumer tastes and preferences, especially in-game spending trends in order

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to attract users to play and encourage them to purchase in-game merchandise. If new revenue models develop and attain commercial success in the online games industry in China or in future overseas markets, our current revenue model may be less successful and we may be unable to launch new games or retool our current games to adapt to these new models in a cost-effective manner or at all. This could harm our business and financial results.

Moreover, we anticipate that newly introduced games may result in a portion of our existing customers reducing their spending on our current games or switching to these new games altogether. These effects may be magnified as we attempt to unify our log-in and billing system, which is intended to allow users to use a single account to play and pay for all of our games, and lowers the barriers to shifting among different games on our platform. If this reduction in play or switching of players from our existing games exceeds our expectations, we may have to adjust our marketing, pricing and other business plans. Any revenues generated by new online games may be offset, at least in part, by loss of revenues from our current online games, which may harm our financial condition and results of operations.

We compete with other forms of entertainment, including offline games, television, movies, sports, and the Internet.

There are alternative choices of entertainment in the markets in which we operate such as offline games, television, movies, sports and the Internet, which may be perceived by our target users to offer greater variety, affordability, interactivity and enjoyment. These other forms of entertainment compete for the discretionary income of our target customers. Our target customers may prefer entertainment activities that are conducted at a group or communal setting and our online games, while offering a virtual community, may be unsuccessful in competing against other forms of entertainment that allow for greater human interaction. If we are unable to sustain sufficient interest in our products in comparison to other forms of entertainment, including new forms of entertainment, our business model may no longer be viable.

Undetected programming defects and unsatisfactory customer service could harm our reputation or decrease demand for our online games, which would harm our business.

The online games we operate may contain errors or flaws. This risk may be significantly heightened if we launch a significantly higher number of games in 2008 and 2009 than we have to date. Undetected programming errors, game defects and unsatisfactory customer service can disrupt our operations, adversely affect the game experience of our users, harm our reputation, divert our resources and delay market acceptance of our online games, any of which would harm our business. If our online games contain programming errors or other flaws, our users may stop playing them, may not recommend them to other potential users, and may switch to a competitor’s games.

Unexpected network interruptions, security breaches or computer virus attacks could significantly harm our business, reputation and ability to attract and retain users.

If we fail to maintain satisfactory performance, reliability, security and availability of our network infrastructure, our business, reputation and ability to attract and retain users could be significantly harmed. Major risks involving our network infrastructure include:

• break-downs or system failures resulting in a sustained shutdown of our servers, including failures caused by power shutdowns or efforts to gain unauthorized access to our systems, causing loss or corruption of data or malfunctions of software or hardware;

• disruptions or failures in China’s network infrastructure, which would prevent our users from logging on to our website or operating our games;

• damage from fire, flood, earthquake, power loss and telecommunications failures; and

• computer viruses, hacking and similar events.

Any network interruption or inadequacy that causes interruptions in the availability of, or deterioration in the quality of, our online games services could reduce user satisfaction and our number of

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users. In addition, any security breach caused by hacking, which involve efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment could disrupt our services, harm our reputation and cause users to move to our competitors. Inadvertent transmission of computer viruses could expose us to a material risk of loss or litigation and possible liability as well as damage to our reputation. Moreover, we may incur significant costs to protect our systems and equipment against the threat of, and to repair any damage caused by, computer viruses and hacking. Moreover, if hacking or a computer virus affects our systems and is highly publicized, our reputation and brand names could be materially damaged, which could cause us to lose customers and revenues.

Furthermore, increases in user activity could strain our computer systems’ capacity, leading to slower response times or system failures. This could result in a reduced number of users and could have an adverse effect on our business, financial condition, results of operations and reputation. We may need to incur additional costs to upgrade our computer systems in order to accommodate increased demand. As of December 31, 2007, our servers were co-located at 25 different Internet data center sites in mainland China, and do not have back-up systems located in different cities from our co-location sites.

We primarily depend upon few printing companies to produce our physical prepaid game point cards. If these companies mishandle our cards or the related passcodes or if there are production defects or delays, our reputation and business would be harmed.

Because of the relatively limited availability of online payment systems in China, we depend upon physical prepaid point cards for a significant portion of our revenues. For 2007, physical prepaid point cards accounted for approximately 30% of the total value of prepaid point cards delivered to users. We rely on a limited number of third-party printing companies to produce our physical prepaid point cards. These cards are generally produced in batches of hundreds of thousands with each card having an individual passcode that enables the purchaser to deposit the points on the card into their online user account. If our printers mishandle our cards or the related passcodes, or if there are production defects or delays, our reputation and business would be harmed.

We could be liable for breaches of security in connection with operating our games.

For 2007, virtual point cards accounted for approximately 55% of the total value of prepaid point cards delivered to users. Currently a substantial portion of our virtual point card sales are conducted through the internet. Secure transmission of confidential information over public networks is essential to maintain consumer confidence. This information includes customer credit or bank card numbers, personal information and billing addresses. Our current security measures may be inadequate to protect such information. Security breaches could expose us to litigation and potential liability for failing to secure confidential user information and could harm our reputation and ability to attract users.

We rely on third parties to provide us with distribution and server hosting services and any disruption or deterioration of these services could adversely affect our business, financial condition and results of operations.

Our users are located throughout China, and because of the limited forms of payment available in China, we rely largely on local distributors to deliver our physical prepaid game point cards to users. For the year ended December 31, 2007, our top five and top 10 distributors accounted for 50% and 80%, respectively, of our total prepaid game point card sales. We do not prohibit our regional distributors from distributing other online game operators’ prepaid cards and we do not have long-term agreements with any of our distributors. Although we endeavor to seek reputable and reliable distributors, we cannot monitor all of our distributors and their distribution activities. Moreover, these distributors may mishandle our cards or related pass codes, or encounter difficulties in delivery that are beyond their or our control. The occurrence of any of these events may harm our reputation and business.

Moreover, we principally rely on China Telecom and China Netcom to provide us with data communications capacity primarily through telecommunications access and Internet data centers to host our servers. We do not have access to alternative services in the event of disruptions, failures or other problems

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with the fixed telecommunications networks of China Telecom and China Netcom, or if China Telecom or China Netcom otherwise fail to provide such services. Any unscheduled service interruption or performance issues could disrupt our operations, damage our reputation and result in a decrease in our revenues. Furthermore, we have no control over the costs of the services provided by China Telecom and China Netcom. If the prices that we pay for telecommunications and Internet services rise significantly, our business, financial condition and results of operations could be adversely affected. In addition, if Internet access fees or other charges to Internet users increase, our user traffic may decrease, which in turn may harm our revenues.

Illegal game servers could materially and adversely affect the business, reputation, financial condition and results of operations of our online games segment.

We increasingly face the risks of illegal game servers at our CDC Games business unit. Some Internet cafés have misappropriated our game server installation software. Several competitors have reported instances of Internet cafés installing illegal copies of competitors’ games on the cafés’ servers and letting their customers play such games on illegal servers without paying for game playing time. Although we have made efforts to shut down illegal game servers across China, we have not been completely successful in our efforts. Also, the intellectual property enforcement regime in China is not as robust as that of the United States, and we continue to face considerable challenges to enforcing our intellectual property rights. Enforcement actions generally require cooperation from local authorities, which are sometimes unwilling to use their limited resources to enforce the intellectual property rights of national corporations against individuals or companies in their districts. In addition, litigation proceedings are often necessary to enforce intellectual property rights, which can be very expensive. Despite our efforts to shut down illegal game servers, we believe that a significant number of illegal game servers may continue to operate unauthorized copies of our online games. The continued operation of our online games by illegal game servers, or the operation of any new games that we may introduce by illegal game servers, may materially and adversely affect our business, reputation, financial condition and adversely affect our results of operations. We cannot assure you that we will be able to identify and eliminate new illegal game servers and unauthorized character enhancements in a timely manner, or at all.

If our licensors fail to protect, enforce or maintain their intellectual property rights, our results of operations may be materially and adversely affected.

We expect to derive substantially all of our online games revenues and profits from Yulgang, Special Force, Shaiya and other licensed online games in 2008. The licensors of these games may be subject to intellectual property rights claims with respect to the online games licensed to us. In addition, the license by which these licensors obtained their rights may be terminated or expire. If intellectual property rights claims brought against our licensors are successful and our licensors are precluded from continuing to offer a game we license, or if one of our licensors loses its license to a game, we may be unable to continue offering that game, causing us to lose our investment in, and potential revenues from, that game. We may also be liable for damages to the third-party owner of the game. In certain licensing agreements, we are also responsible for indemnifying our licensors for costs or liabilities resulting from claims of infringement of trademark, copyright or intellectual property. If we lose rights to one or more games, our business financial condition and our results of operations could be harmed.

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Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.

We regard our copyrights, trademarks, trade secrets, domain names and other intellectual property as important to our business. Unauthorized use of intellectual property, whether owned by us or licensed to us, may reduce our revenues, devalue our brands and property, and harm our reputation. We rely on intellectual property laws and contractual arrangements with our key employees and certain of our licensors, partners, manufacturers, distributors and others to protect our intellectual property rights. Policing unauthorized use of intellectual property is difficult and expensive. Despite our precautions, it may be possible for third parties to obtain and use the intellectual property used in our business without authorization. The validity, enforceability and scope of protection of intellectual property in Internet-related industries in China and certain other countries are uncertain and still evolving and may not protect intellectual property rights to the same extent as do the laws and enforcement procedures in the United States. Moreover, we may not prevail in any litigation that we undertake to enforce our intellectual property rights, and such litigation could result in substantial costs and diversion of our management resources.

We may be subject to intellectual property infringement claims, which may force us to incur substantial legal expenses and, if determined adversely against us, may materially and adversely affect our business and results of operations.

Our products and services could be found to infringe on the patents, copyrights or other intellectual property rights of others. We may incur substantial expenses in investigating and defending against third-party infringement claims, regardless of their merit. Litigation or other dispute resolution proceedings may be necessary to retain our ability to offer our current and future games, which could result in substantial costs and diversion of our financial and management resources. Furthermore, if we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or develop alternative games, characters or features and be forced to pay fines and damages, any of which could harm our business and results of operations.

We experience significant seasonality and our quarterly financial results may not be representative of annual financial performance.

The PRC online games market is characterized by increased user activity during seasonal periods primarily related to student examination schedules and the Lunar New Year holidays in China. We normally experience our highest online games sales volumes in March and September, when many of our users increase their playing after commencement of the school term. Correspondingly, our online games sales tend to be lower during holiday periods such as Lunar New Year, which falls in January or February, as well as immediately preceding and during school examination periods, which typically fall in June. As a result of this seasonality, our quarterly financial results may substantially fluctuate and our interim financial performance may not be indicative due to the seasonality of our revenues. We believe the seasonal variability in our financial results will continue in the future.

Negative publicity in China regarding online games could lead to additional government regulations that may have a material and adverse impact on our business, financial condition and results of operations.

The media in China has reported incidents of violent crimes allegedly inspired by online games, as well as incidents of theft of online game virtual items among users. In addition, incidents of excessive online game playing and allegations that online games distract students and interfere with their education have also been reported in the media. This negative publicity has contributed to several regulatory initiatives, such as:

• In June 2005, the Ministry of Culture and the Ministry of Information Industry jointly issued an opinion which requires online game operators to develop systems and software for identity certification, to implement anti-addiction modifications to game rules and to restrict players under eighteen years of age from playing certain games.

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• In August 2005, the General Administration of Press and Publications, or GAPP, proposed an online game anti-addiction system that would have reduced and eliminated experience points that a user can accumulate after three and five hours of consecutive playing, respectively.

• In March 2006, GAPP amended its proposal to require players to register with their real names and identity card numbers and to apply the anti-addiction system only to players under eighteen years of age.

• In April 2007 GAPP adopted the Online Game Anti-addiction System Development Standard which we were required to comply with by July 2007.

Anti-addiction laws and regulations in China could have a material and adverse impact on our business, financial condition and results of operations.

On April 5, 2007, eight PRC governmental agencies, including the Ministry of Education, Ministry of Information Industry, the General Administration of Press and Publication and the Ministry of Public Security jointly promulgated the Notice on the Implementation of Online Game Anti-Addiction System to Protect the Physical and Psychological Health of Minors. Under this anti-addiction notice, all online game operators, including us, are required to develop a system according to the Online Game Anti-addiction System Development Standard, which was released as an attachment to the notice, and the corresponding Identity Authentication Scheme of the anti-addiction system developed for our online games is aimed to reduce “fatigue time” and “unhealthy time” such that, when a user under the age of 18 has been playing an online game for more than three consecutive hours, he or she will automatically be sent periodic warnings within the game environment prompting him or her to leave the game and rest. Such warnings will become more frequent as the user accumulates more playing time. In addition, this system will cause the rate at which the game user can obtain experience points and other virtual items such as special equipment to decrease to half the normal levels during the “fatigue time” period and to zero during the “unhealthy time” period. In addition, anti-addiction laws and regulations may apply or may develop in certain overseas markets in which we conduct our business and could have a material and adverse impact on our business, financial condition and results of operations in such markets.

Also, in March 2006, the Chinese government announced an authentication system which requires all players to enter their identification card numbers before being allowed to play online games. This authentication system as well as the new anti-addiction regulations could have a material adverse effect on our business, financial conditional and results of operations.

Acquisitions and investments may have an adverse effect on our ability to manage our business.

Our growth strategy involves the acquisition of, and investments in, new technologies, businesses, products and services, or the creation of strategic alliances in areas which we do not currently operate. We have limited experience in evaluating investments in gaming companies and integrating acquired companies or assets into our business. Accordingly, we believe that investment, acquisition and integration will require significant attention from our management and could require that our management develop expertise in new areas and manage new business relationships. The diversion of our management’s attention and any difficulties encountered in the integration process could have an adverse effect on our ability to manage our business.

Acquisitions and investments will also expose us to potential risks, including risks associated with:

• the assimilation of new operations, technologies and personnel;

• unforeseen or hidden liabilities;

• the financial loss of our investment or the failure to receive any benefit from our investment;

• the diversion of resources from our existing businesses, sites and technologies;

• the inability to generate sufficient revenues to offset the costs and expenses of acquisitions; and

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• the potential loss of, or harm to, our relationships with employees, customers, licensors and other suppliers as a result of integration of new businesses.

Our ability to grow through acquisitions or investments will depend on the availability of suitable acquisition and investment candidates at an acceptable cost, our ability to compete effectively to attract these candidates, and the availability of financing to complete larger acquisitions or investments. The benefits of an acquisition or investment may also take considerable time to develop and we cannot assure you that any particular acquisition or investment will produce the intended benefits, if any.

We may be unable to compete successfully against new entrants and established industry competitors.

We face intense competition in the online games market in China. We believe there are currently over 150 online game operators in China operating over 400 games and given that the growth prospects of the online game market in China are very high, we expect many more companies to enter the market. Our competitors vary in size and include large companies such as Shanda Interactive Entertainment Limited, Netease.com, Inc., The9 Limited, Perfect World Co., Ltd., Giant Group and Tencent, many of which have significantly greater financial, marketing and game development resources and name recognition than we have. As a result, we may be unable to devote adequate resources to developing, licensing or acquiring new games, undertaking extensive marketing campaigns, adopting aggressive pricing policies, paying high compensation to game developers or compensating independent game developers to the same degree as some of our competitors. Any of our competitors may offer online games with better game performance, more attractive pricing, more developed storylines or other improvements over the games offered or to be offered by us. In addition, the increased competition we anticipate in the online game industry may also reduce the number of our users or growth rate of our user base, reduce the average revenues generated by our users, or cause us to reduce our fees. All of these competitive factors could adversely affect our business and results of operations.

The limited use of personal computers in China and the relatively high cost of Internet access with respect to per capita income may limit the development of the Internet in China and impede our growth.

Although the use of personal computers in China has increased in recent years, the penetration rate for personal computers in China is much lower than that in the United States. In addition, despite a decrease in the cost of Internet access in China due to a decrease in the cost of personal computers and the introduction and expansion of broadband access, the cost of Internet access remains relatively high in comparison to the average per capita income in China. The limited use of personal computers in China and the relatively high cost of Internet access may limit the potential number of users and therefore the growth of our business. Furthermore, any increase in the cost of Internet access or personal computers or a decline or slowdown of the China economy, which could affect our users or potential users disposable income, could reduce the number of users or potential users that play or may play our online games.

The PRC government has announced its intention, and has begun, to intensify its regulation of Internet cafés, which are an important venue for our users to play online games. Intensified government regulation of Internet cafés could restrict our ability to maintain or increase our revenues and expand our customer base.

In April 2001, the PRC government began tightening its regulation and supervision of Internet cafés. In particular, a large number of unlicensed Internet cafés have been closed. In addition, the PRC government has imposed higher capital and facility requirements for the establishment of Internet cafés. Furthermore, the PRC government’s policy, which encourages the development of a limited number of national and regional Internet café chains and discourages the establishment of independent Internet cafés, may slow down the growth of Internet cafés. Recently, the State Administration of Industry and Commerce, one of the government agencies in charge of Internet café licensing, issued a notice suspending the issuance of new Internet café licenses. It is unclear when this suspension will be lifted, if at all. So long as Internet cafés are the primary venue for our users to play online games, any reduction in the number, or any slowdown in the growth, of Internet cafés in China could limit our ability to maintain or increase our revenues and expand our customer base, thereby reducing our profitability and growth prospects.

Currently there are no laws or regulations in the PRC specifically governing virtual asset property rights and therefore, it is not clear what liabilities, if any, online game operators may have for virtual assets.

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In the course of playing online games, some virtual assets, such as special equipment, player experience grades and other features of our users’ game characters, are acquired and accumulated. These virtual assets can be important to online game players and in some cases are exchanged between players for monetary value. In practice, virtual assets can be lost for various reasons, often through unauthorized use of the game account of one user by other users and occasionally through data loss caused by a delay of network service or by a network crash. Currently there are no PRC laws and regulations specifically governing virtual asset property rights. As a result, it is unclear who is the legal owner of virtual assets and whether and how the ownership of virtual assets is protected by law. In case of a loss of virtual assets, we may be sued by online game players and may be held liable for damages, which may negatively affect our business, financial condition and results of operations. Due to the lack of laws or regulations in the PRC specifically governing virtual asset property rights we also could face an increase in customer complaints related to loss of virtual assets which could cause a substantial increase in workload for us, loss of customers and our reputation could be tarnished.

We may be unable to respond to future changes in the revenue model for the online games industry in China and in our overseas markets, which could materially and adversely affect our business, financial condition and results of operations.

We pioneered the free-to-play revenue model for online games in China. Our existing games, and many other future games that we intend to release, operate under this revenue model. Under the free-to-play revenue model, users can play our massively multiplayer online games, or MMOGs, for free but have the option to purchase in-game virtual items and value-added services to enhance their overall game playing experience. If any new revenue models develop in the online games industry in China or in our overseas markets, we may be unable to launch new games utilizing such new models in a timely manner or at all. We may also be required to expend significant resources to launch such games. In addition, we may unable to adapt our current games to such new models. Any of these factors could materially and adversely affect our business, financial condition and results of operations.

Acts of cheating by users of online games could lessen the popularity of our online games, adversely affect our reputation and our results of operations.

Cheating in online games may occur through a variety of methods, by which cheaters may be able to modify the rules of our online games during game play in a manner that allows them to gain an unfair advantage over our other online game users, which often has the effect of causing players to stop using the game and shortening the game’s lifecycle. Although we have taken a number of steps to deter our users from engaging in cheating when playing our online games, we cannot assure you that we or the third parties from whom we license some of our online games will be successful or timely in taking corrective steps necessary to prevent users from modifying the terms of our online games.

Risks Relating to our China.com Segment

The portal markets in China are highly competitive. If we fail to compete effectively, our failure could have a material adverse effect on our business, financial condition and results of operations.

In our portal business, our competition for user traffic, ease of use and functionality include Chinese and/or English language based Web search and retrieval companies, including AltaVista Co., Apple Daily, ChinaByte, FindWhat.com, Lycos, Inc., MSN, Netease.com, Inc., Shanghai Online, Sina Corporation, Sohu.com, Inc., Tom Online Inc. and Yahoo!, Inc., Oak Pacific Interactive, 21CN.com and qianlong.com.

Many of our competitors have more experience and longer operating histories in our target markets than us, as well as greater name recognition, larger customer bases and greater financial, technical and marketing resources. We may not be able to compete successfully in these markets. Our failure to remain competitive may cause us to lose our market share in the portals business, and our business, financial condition and results of operations may suffer.

Our China.com and other portal businesses depend substantially on third party content providers and may be adversely affected if we are unable to maintain existing arrangements with these content providers.

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We rely on third parties to create traffic and provide content for our portal network to make it more attractive to advertisers and consumers. Our content providers include Xinhua, a major shareholder of CDC, as well as commercial content providers and our registered community members. If Xinhua or these third parties fail to provide us with high quality content, our portal network could lose viewers, subscribers and advertisers and our revenue from these sources would decrease. Our existing relationships with Xinhua and other commercial content providers are not exclusive and may not result in sustained business partnerships or successful service offerings or sustained traffic on our portal network or future revenues.

Risk Relating to Our Online Games and China.com Segments as a Result of Conducting Operations in the People’s Republic of China

China’s economic, political and social conditions, as well as government policies, could affect our business.

While the economy in the PRC has experienced significant growth in the past twenty years, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

The economy in the PRC has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures that emphasize the utilization of market forces for economic reform, reduce the state ownership of productive assets and help establish sound corporate governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Our financial results have been, and are expected to continue to be, affected by the growth of the economy and the Internet industry in China. A slowdown of economic growth in China would reduce the growth of the Internet industry and related products and services, which in turn could adversely affect our business, operating results and financial condition.

The PRC economy differs from the economies of most developed countries in many respects, including:

• higher level of government involvement;

• early stage of development of a market-oriented economy;

• rapid growth rate;

• higher level of control on foreign exchange; and

• less efficient allocation of resources.

The PRC government has also implemented certain measures to control the pace of economic growth. These measures may cause decreased economic activity in China, including a slowing or decline in consumer spending, which in turn could adversely affect our financial condition and results of operations.

Regulation and censorship of information distribution over the Internet in China may adversely affect our business, and we may be liable for information displayed on, retrieved from, or linked to our website.

The online game and Internet content distribution industries in China are highly regulated by the PRC government. Various regulatory authorities of the central PRC government, such as the State Council, the Ministry of Information Industry, the State Administration of Industry and Commerce, the State Press and Publication Administration, and the Ministry of Public Security, are empowered to issue and implement regulations governing various aspects of each of these industries.

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China has enacted laws and regulations governing Internet access and the distribution of news, information or other content, as well as products and services, through the Internet. The PRC government has previously stopped the distribution of information through the Internet that it deems in violation of PRC laws and regulations. Under regulations promulgated by the State Council, the Ministry of Information Industry, the State Press and Publication Administration and the Ministry of Culture, Internet content providers and Internet publishers are prohibited from posting or displaying over the Internet, content that, among other things:

• opposes the fundamental principles in the PRC Constitution;

• compromises state security, divulges state secrets, subverts state power or damages national unity;

• harms the dignity or interests of the state;

• incites ethnic hatred or racial discrimination or damages inter-ethnic unity;

• sabotages China’s religious policy or propagates heretical teachings or feudal superstition;

• disseminates rumors, disturbs social order or disrupts social stability;

• propagates obscenity, pornography, gambling, violence, murder or fear or incites the commission of crimes;

• undermines public morality or the cultural traditions of the PRC;

• insults or slanders a third party or infringes upon the lawful right of a third party; and

• includes other content prohibited by laws or administrative regulations.

The mobile network operators in the PRC also have their own policies regarding the distribution of inappropriate content by wireless value-added service providers and have recently sanctioned certain providers for distributing inappropriate content, including the imposition of fines and service suspensions.

If any Internet content we offer or will offer through our affiliated PRC entities were deemed by the PRC government or the mobile network operators to violate any of such content restrictions, we would not be able to continue such offerings and could be subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. Additionally, we may face liability for defamation, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of information originating from our online games network or portal network.

We may also be subject to potential liability for any unlawful actions of our clients or affiliates or for content we distribute that is deemed inappropriate. It may be difficult to determine the type of content that may result in liability for us, and if we were found to be liable, we may be prevented from operating our online game and internet and media services in China. Such content could include material posted by our registered community members on our message boards, online communities, voting systems, e-mail or chat rooms. By providing technology for hypertext links to third-party websites, we may be held liable for copyright or trademark violations by those third-party sites. Third parties could assert claims against us for losses incurred in reliance on erroneous information distributed by us. Users of our web-based e-mail or SMS, MMS, WAP or IVR products could seek damages for:

• unsolicited e-mail or messages;

• lost or misplaced messages;

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• illegal or fraudulent use of e-mail or SMS messages; or

• interruptions or delays in service.

We do not carry liability insurance to cover potential claims of these types. In the event such claims are asserted against us, we may incur significant costs in investigating and contesting these claims. Any judgment, fine, damage award or liability imposed on us could significantly increase our costs. Moreover, our reputation may suffer as a result of these claims, which could reduce traffic on our portal network or reduce our revenues.

Because many laws, regulations and legal requirements with regard to the Internet in the PRC are relatively new and untested, their interpretation and enforcement of what is deemed to be socially destabilizing by Chinese authorities may involve significant uncertainty. In addition, the legal system in the PRC is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. As a result, it is difficult to determine the type of content that may result in liability. We cannot predict the effect of further developments in the Chinese legal system, particularly with regard to the Internet and the dissemination of news content, including the creation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local rules and regulations by national laws.

Violations or perceived violations of laws in China arising from information displayed, retrieved from or linked to our portals could result in significant penalties, including a temporary or permanent cessation of our business in China. The Chinese government agencies have announced restrictions on the transmission of state secrets through the Internet. State secrets have been broadly interpreted by Chinese governmental authorities in the past. We may be liable under these pronouncements for content and materials posted or transmitted by users on our message boards, virtual communities, chat rooms or e-mails. If the Chinese government were to take any action to limit or eliminate the distribution of information through our portal network or to limit or regulate any current or future applications available to users on our portal network, this action could have a material adverse effect on our business, financial condition and results of operations.

Government control of currency conversion may limit our ability to utilize our revenues effectively.

Substantially all of the revenues and operating expenses of our CDC Games and China.com businesses, are denominated in Renminbi. The Renminbi is currently convertible to foreign exchange with respect to “current account” transactions, but not with respect to “capital account” transactions. Current account transactions include ordinary course import/export transactions, payments for services rendered and payments of license fees, royalties, interest on loans and dividends. Capital account transactions include cross-border investments and repayments of principal of loans. Currently, our PRC subsidiaries may purchase foreign exchange for settlement of “current account transactions,” including payment of dividends to us and payment of license fees to content licensors, without the approval of the State Administration for Foreign Exchange, or SAFE. Our PRC subsidiaries may also retain foreign exchange in their current accounts, subject to a ceiling approved by SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, the relevant PRC governmental authorities may limit or eliminate the ability for our PRC subsidiaries to purchase and retain foreign currencies in the future. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from or registration with SAFE. This could affect our PRC subsidiaries’ ability to obtain debt or equity financing from outside the PRC, including by means of loans or capital contributions from us.

Fluctuations in exchange rates could materially and adversely affect the value of our common shares and result in foreign currency exchange losses.

Because our earnings and cash and cash equivalent assets earned or held in the PRC are denominated in Renminbi, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. In July 2005, the PRC government discontinued pegging the Renminbi to the U.S. dollar. However, the Renminbi exchange rate versus the U.S. dollar is restricted to a rise or fall of no more than 0.3% per day and the People’s Bank of China regularly intervenes in the foreign

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exchange market to prevent significant short-term fluctuations in the exchange rate. Nevertheless, the Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in the Renminbi exchange rate and lessen intervention in the foreign exchange market. Fluctuations in the exchange rate will also affect the relative value of any dividend we may issue that will be exchanged into U.S. dollars and earnings from and the value of any future U.S. dollar-denominated investments we make.

Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by Chinese exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

Recent PRC regulations relating to offshore investment activities by PRC residents may increase the administrative burden we face and create regulatory uncertainties that could restrict our overseas and cross-border investment activity, and a failure by our shareholders who are PRC residents to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute profits and could expose us and our PRC resident shareholders to liability under PRC law.

In October 2005, SAFE promulgated regulations that require PRC residents and PRC corporate entities to register with and obtain approvals from relevant PRC government authorities in connection with their direct or indirect offshore investment activities. These regulations apply to our shareholders who are PRC residents in connection with our prior and any future offshore acquisitions.

The SAFE regulation required registration by March 31, 2006 of direct or indirect investments previously made by PRC residents in offshore companies prior to the implementation of the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies on November 1, 2005. If a PRC shareholder with a direct or indirect stake in an offshore parent company fails to make the required SAFE registration, the PRC subsidiaries of such offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

These regulations are still relatively new and there is uncertainty concerning the reconciliation of the new regulation with other approval requirements, it is unclear how the regulation, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. Some of our shareholders may not comply with our request to make or obtain any applicable registrations or approvals required by the regulation or other related legislation. The failure or inability of our PRC resident shareholders to obtain any required approvals or make any required registrations may subject us to fines and legal sanctions, prevent us from being able to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely affected.

We rely on contractual arrangements, including a voting proxy, with our affiliated PRC entities for the control and operation of our online games and Internet content distribution businesses. These arrangements may be difficult to enforce under the PRC legal system. If any of our affiliated PRC entities fails to perform its obligations under these contractual arrangements, we may have to try to legally enforce such arrangements, and our business, financial condition and results of operations may be materially and adversely affected if these arrangements cannot be enforced.

Foreign ownership in the Internet content distribution and online game businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates Internet access, the distribution of online information, the conduct of online commerce and the provision of online game services through strict business licensing requirements and other government regulations. These laws and regulations also include limitations on foreign ownership in PRC companies that provide Internet content distribution and online game services. Specifically, foreign investors are not allowed to own more than a 50% equity interest in any Internet content provision business.

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Because we are a Cayman Islands company, we and our PRC subsidiaries and their branch companies in China are treated as foreign or foreign-invested enterprises under PRC laws and regulations. To comply with PRC laws and regulations, we conduct our operations in China through a series of contractual arrangements entered into among our PRC subsidiaries. These licenses held by our affiliated PRC entities are essential to the operation of our business.

Generally, employees of the respective business units who are Chinese nationals own the shares of the respective domestically registered companies in China which hold the relevant required domestic licenses for operation. These Chinese nationals, in turn, have entered into trust deed arrangements with respect to the domestically registered companies in China and affiliates of the respective business units under which the Chinese nationals serve as trustees of the trusts, and the business units have formed offshore holding vehicles to be 100% beneficiaries of the trusts. For a further description of the corporate structure in China, see Item 4.C., “Information on the Company – Organizational Structure – Corporate Structure in China for our CDC Games and China.com Business Units.”

CDC Games and China.com have no ownership interest in our affiliated PRC entities. These contractual arrangements, including the voting proxies granted to us, may not be as effective in providing us with control over these companies as direct ownership. If we were the controlling shareholders of these companies with direct ownership, we would be able to exercise our rights as shareholders to effect changes in the board of directors, which in turn could effect change, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, as a legal matter, if any of our affiliated PRC entities fails to perform its obligations under these contractual arrangements, we may have to (i) incur substantial costs and resources to enforce such arrangements, including the voting proxy, and (ii) rely on legal remedies under PRC law, which we cannot be sure would be effective. In the event that CDC Games and China.com are unable to enforce these contractual arrangements, if these contractual arrangements are held to be unenforceable under PRC or Hong Kong laws or regulations or if we suffer significant time delays or other obstacles in the process of enforcing these contractual arrangements, our business, financial condition and results of operations could be materially and adversely affected.

If our past or current business operation structure is found not to comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting down of our servers.

The relevant PRC regulatory authorities have broad discretion in determining whether a particular contractual structure is in violation of law. If our past or current ownership structures, contractual arrangements and businesses, or those of our PRC subsidiaries and our affiliated PRC entities are found to be in violation of PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

• revoking the business and operating licenses of our PRC subsidiaries or affiliated PRC entities, which licenses are essential to our business operations;

• levying fines;

• confiscating our income or the income of our PRC subsidiaries or affiliated PRC entities;

• shutting down our servers and/or blocking our website;

• discontinuing or restricting our operations or the operations of our PRC subsidiaries or affiliated PRC entities;

• imposing conditions or requirements with which we, our PRC subsidiaries or our affiliated PRC entities may not be able to comply;

• requiring us, our PRC subsidiaries or our affiliated PRC entities to restructure the relevant ownership structure, operations or contractual arrangements;

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• restricting or prohibiting our use of the proceeds from any offering we may make to finance our business and operations in China; and

• taking other regulatory or enforcement actions that could be harmful to our business.

Moreover, we could face material and adverse tax consequences if the PRC tax authorities determine that our undocumented or documented arrangements with our affiliated PRC entities were not priced at arm’s length for purposes of determining tax liability. If the PRC tax authorities determine that these arrangements were not entered into on an arm’s length basis, they may perform a transfer pricing adjustment. A transfer pricing adjustment could result in a reduction, for PRC tax purposes, of deductions recorded by our affiliated PRC entities, which could adversely affect us by increasing the tax liabilities of our affiliated PRC entities without reducing the tax liabilities of our PRC subsidiaries. This increased tax liability could further result in late payment fees and other penalties to our affiliated PRC entities for under-paid taxes. Any payments we make under these arrangements or adjustments in payments under these arrangements that we may decide to make in the future will be subject to the same risk.

Any of these actions could materially and adversely affect our business, financial condition and results of operations.

If the Chinese government considers our existing licenses to be insufficient in meeting compliance requirements with applicable regulations, or if we fail to comply with changes to these requirements or restrictions, our online games and Internet businesses could be materially adversely affected.

The Chinese government regulates access to the Internet by imposing strict licensing requirements on Internet service providers, or ISPs. Generally, the provision of different types of infrastructure telecommunication services and value-added telecommunication services is subject to different licensing regimes in China.

While we believe that our current operation complies with all existing laws, rules and regulations in China, there are substantial uncertainties regarding the interpretation of current Internet laws and regulations. It is possible the Chinese government may take a view contrary to ours because there are no well established precedents or clear judicial interpretations to support our interpretations and views of the laws, rules and regulations. Issues, risks and uncertainties relating to government regulation of China’s Internet sector include:

• regulations applying to Internet-related services and telecom-related activities. While many aspects of these regulations remain unclear, they purport to limit and require licensing of various aspects of the provision of Internet information services. If these regulations are interpreted to preclude our current ownership structure or business model, our portal business could be severely impaired; and

• the activities of ICPs are subject to regulation by various government authorities in China depending on the specific activities conducted by the ICP as stated by the Ministry of Information and Industry. Various government authorities have enacted several laws and regulations that govern these activities. The areas of regulation include:

• online advertising;

• online news reporting;

• online publishing;

• online securities trading;

• online gaming;

• online broadcasting;

• bulletin board service; and

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• the provision of industry-specific information (e.g., pharmaceutical products) over the Internet, etc.

Other aspects of our online operations may be subject to regulation in the future.

In addition to the regulations promulgated by the Chinese national government, some local governments, such as the Beijing local government, have also promulgated local rules applicable to Internet companies operating within their respective jurisdictions. These local rules may also create additional barriers in relation to the operation of our business.

Our ability to use and enjoy assets held by our affiliated PRC entities that are important to the operation of our business may be reduced or lost, particularly if any of these entities goes bankrupt or becomes subject to a dissolution or liquidation proceedings.

As part of our contractual arrangements with our affiliated PRC entities, they are required to hold certain of the assets that are important to the operation of our business.

Our PRC subsidiaries and affiliated PRC entities are required under PRC laws and regulations to provide for certain statutory reserves, such as a general reserve, an enterprise expansion fund and a staff welfare and bonus fund. Our PRC subsidiaries and affiliated PRC entities are required to allocate at least 10% of their after tax profits as reported in their PRC statutory financial statements to the general reserve and have the right to discontinue allocations to the general reserve once the reserve balance has reached 50% of their registered capital. These statutory reserves are not available for distribution to the shareholders of these companies, except in a liquidation, and may not be transferred in the form of loans, advances, or cash dividends.

Further, if any of these entities incurs substantial debt, the instruments governing such debt may restrict their ability to pay dividends or make other distributions to us; and if any of these entities goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of our affiliated PRC entities undergoes a voluntary or involuntary liquidation proceeding, the shareholders or unrelated third-party creditors may claim rights to some or all of these assets. Any of the foregoing, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

The discontinuation of any of the preferential tax treatments currently available to us in the PRC could materially and adversely affect our business, financial condition and results of operations.

Our subsidiaries incorporated in China are governed by the PRC Enterprise Income Tax Law Concerning Foreign-Invested Enterprises and Foreign Enterprises.

Our subsidiary, Beijing He He Technology Co., Ltd. has enjoyed preferential tax treatment as a “new technology enterprise” pursuant to which its net income was exempted from enterprise income tax from 2003 to 2005, and will be subject to a 7.5% enterprise income tax rate from 2006 to 2008 and a 15% enterprise income tax rate thereafter so long as it maintains its status as a new technology enterprise. In addition, our subsidiary and our affiliated PRC entity have applied for the same preferential tax treatment as new technology enterprises pursuant to which their net income will be exempt from enterprise income tax from 2006 to 2008, and will be subject to a 7.5% enterprise income tax rate from 2009 to 2011 and a 15% enterprise income tax rate thereafter, if they are approved as new technology enterprises and so long as they maintain their new technology enterprise status.

The financial and non-financial criteria that our subsidiary must meet in order to obtain or maintain preferential tax treatment as new technology enterprises are promulgated by the PRC Ministry of Science and Technology, and are as follows:

• the enterprise must engage in the research, development, production and the provision of technical services for, one or more high technology products. Pure commercial distribution of such technology products is not sufficient;

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• the enterprise must be a legal entity;

• scientific and technical personnel with college and university education must account for more than 30% of the enterprise’s total employees. Scientific and technical personnel engaged in the research and development of high and new technology products must account for more than 10% of the enterprise’s total employees;

• more than 5% of the gross revenue of the enterprise shall have been allotted as research and development expenses of high and new technology products;

• more than 60% of the enterprise’s gross annual revenues shall have been generated from the provision of technical services for, and sales of, high and new technology products, and the investment of any newly established enterprises in high and new technology-related areas must account for more than 60% of the enterprise’s total investment amount; and

• the persons in charge of the enterprise should be familiar with and focus on the research, development, production and sale of the products in their enterprise.

While we expect our subsidiaries and affiliated PRC entities to be able to enjoy their respective preferential tax rates or tax exemptions, this preferred tax treatment is subject to review by higher authorities. We cannot assure you that the PRC tax authorities will not, in the future, deny or elect to discontinue any or all of these preferential tax treatments. In the event the preferential tax treatment for any of our subsidiaries or affiliated PRC entities is discontinued, the entity will become subject to a 33% standard enterprise income tax rate. The discontinuation of any of these preferential tax treatments could materially and adversely affect our business, financial condition and results of operations.

The PRC legal system embodies uncertainties, which could limit the legal protections available to you and us.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investment in mainland China. Our PRC operating subsidiaries include several wholly foreign owned enterprises and are subject to laws and regulations applicable to foreign investment in China as well as laws and regulations applicable to foreign-invested enterprises. In particular, they are subject to the laws and regulations governing foreign companies’ ownership and operation of Internet content distribution and advertising businesses. These laws and regulations frequently change, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to us and our investors. In addition, we cannot predict the effect of future developments in the PRC legal system, particularly with regard to the Internet, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.

We have limited insurance coverage in China. Any business disruption, litigation or natural disaster might result in substantial costs and the diversion of our resources.

The insurance industry in China is still at an early stage of development and PRC insurance companies offer limited business insurance products. As a result, we do not maintain insurance policies covering losses relating to our systems and we do not have business liability, interruption or litigation insurance for our operations in China. To improve the performance and to prevent disruption of our services, we may have to make substantial investments to deploy additional servers. Any business disruption, litigation or natural disaster might result in our incurring substantial costs and the diversion of our resources.

Concerns about the security of electronic commerce transactions and confidentiality of information on the Internet may reduce use of our network and impede our growth.

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A significant barrier to electronic commerce and communications over the Internet in the PRC has been a public concern over security and privacy, especially the transmission of confidential information. If these concerns are not adequately addressed, they may inhibit the growth of the Internet and other online services generally, especially as a means of conducting commercial transactions. If a well-publicized Internet breach of security were to occur, general Internet usage could decline, which could reduce traffic to our destination sites and impede our growth.

Risks Relating to Our Intellectual Property, Personnel, Technology and Network

We may be unable to adequately protect or enforce our intellectual property rights and may be involved in future litigation over our use of technology rights.

We have acquired a significant amount of intellectual property and we are increasingly developing our own intellectual property. We regard the protection of our trademarks, service marks, copyrights, trade secrets, domain names, and other intellectual property rights as crucial to our success. We rely on a combination of copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information and technology. Copyrights or trademarks held by us, however, may be challenged or determined to be invalid. In addition to the protections generally available to unregistered trademarks under the laws of many jurisdictions, we also seek to protect our trademarks through registration, primarily in the United States and Canada, although we do seek such protection elsewhere in selected key markets. However, adequate protection for our intellectual property may not be available in any, or every country, in which our intellectual property and technology is used. Some countries, such as the PRC, may not protect our proprietary rights to the same extent as in the United States and Canada. In particular, software piracy in the PRC has been an issue of significant concern for many software publishers. Policing the unauthorized use of our licensed technology is difficult as are the steps necessary to prevent the misappropriation or infringement of our licensed technology.

Litigation, which may also ultimately prove to be insufficient, may be necessary to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our proprietary rights. Any of these claims, with or without merit, could result in costly litigation, divert our management’s time, attention and resources, delay our product shipments or require us to enter into royalty or license agreements.

As part of our confidentiality procedures, we have policies of entering into non-disclosure and confidentiality agreements with our employees, consultants, corporate alliance members, customers, prospective customers and strategic partners. We also enter into license agreements with respect to our technology, documentation and other proprietary information. These licenses are non-exclusive and generally perpetual. We provide for source code escrow arrangements under some of our license agreements. Despite the efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our products or technology that we consider proprietary and third parties may attempt to develop similar technology independently.

Most of our products do not contain the functionality to allow us to accurately track the numbers of users of our products at a particular customer site. Because some of our license agreements are for named-user licenses in which only a certain limited number of named individuals are permitted to use the software for which the license is granted, if our customers do not accurately report the number of users using our products or we cannot accurately track the number of users of our products at a customer site, we face the potential of lost revenues if the customer has a greater number of users than for which they have purchased licenses. License agreement provisions, such as those requesting or requiring customers to perform annual self audits of the number of users at a customer site, provide only limited protection and are retrospective.

We also currently sub-license and distribute the intellectual property and technology of third parties. As we continue to develop intellectual property and introduce new products and services that require new technology, we anticipate that we may need to obtain licenses for additional third-party technology. These existing and additional technology licenses may cease to be available to us on commercially reasonable terms, or at all. In addition, it is possible that, in the course of using new technology, we or our agents acting on our behalf may inadvertently breach the technology rights of third parties and face liability for our breach. Our inability to obtain these technology licenses or avoid breaching third-party technology rights

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could require us to obtain substitute technologies of lower quality or performance standards or at greater cost which could delay or compromise the introduction of new products and services, and could materially and adversely affect our business, results of operations and financial condition.

Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.

We regard our copyrights, trademarks, trade secrets, domain names and other intellectual property as important to our business. Unauthorized use of such intellectual property, whether owned by us or licensed to us, may adversely affect our business and reputation. We rely on intellectual property laws and contractual arrangements with our key employees and certain of our clients, collaborators and distributors and others to protect our intellectual property rights. Policing unauthorized use of intellectual property is difficult and expensive. Despite our precautions, it may be possible for third parties to obtain and use the intellectual property used in our business without authorization. The validity, enforceability and scope of protection of intellectual property in Internet-related industries in China are uncertain and still evolving. In particular, the laws and enforcement procedures of the PRC and certain other countries are uncertain or do not protect intellectual property rights to the same extent as do the laws and enforcement procedures in the United States. Moreover, we may have to resort to litigation to enforce our intellectual property rights. Any future litigation could result in substantial costs and diversion of our resources, and could significantly disrupt our business, as well as have a material adverse effect on our financial condition and results of operations.

We may be subject to infringement claims, which could be time-consuming and costly to defend, divert management’s attention and resources or cause product shipment delays.

We may be subject to an increasing number of infringement claims as the number of products and competitors in our various industry segments grows and the functionality of products in different industry segments overlaps. Any such claims, with or without merit, could be time-consuming and costly to defend, divert management’s attention and resources, cause product shipment delays or require us or our subsidiaries to enter into royalty or licensing agreements. Any such royalty or licensing agreements, if required, may not be available on terms acceptable to us, if at all, and may require the payment of substantial amounts of money. Furthermore, if we are found to have violated the intellectual property rights of others, or any party which licenses intellectual property to us is found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights. In the event of a successful product infringement claim against us or our failure or inability to license the infringed or similar technology, our business, results of operations and financial condition could be materially and adversely affected.

If our licensors cannot prevail on future intellectual property rights claims brought against them by third parties, our results of operations may be materially and adversely affected.

With respect to our online games business, we expect to derive most of our online games revenues and profits from Yulgang, Special Force and Shaiya and online games that we may license and launch in the future. Certain technology that is licensed from third parties may also be present in our software applications and licensed and developed online games. Our licensors may be subject to intellectual property rights claims with respect to the online game or games licensed to us. If any of our licensors cannot prevail on the intellectual property rights claims brought against them, we would lose our license from such licensor and may not be able to obtain the license from the legitimate owner of the game on terms acceptable to us, or at all, and our results of operations could be materially and adversely affected.

We could be subject to product liability claims, which could be time-consuming and costly to defend, divert management’s attention and could have a material and adverse effect on our reputation, business, results of operations and financial condition.

Our complex software products may contain errors that may not be detected until after the delivery of the software. Furthermore, errors may also be present in our online games and software that controls or is related to our various mobile applications and services offerings, Any such errors could result in delayed market acceptance or claims against us by customers, which could lead to increased insurance costs or the payment of damages by us. Any such claims, with or without merit, could be time-consuming and costly to

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defend and divert management’s attention and resources. Contractual provisions we may include in our agreements with third parties to mitigate this risk may not be enforceable in all jurisdictions, and liability insurance may not be available, or coverage for specific claims may be denied. A successful product liability claim brought against us could materially and adversely affect our reputation, business, results of operations and financial condition.

If we lose the services of key employees, it may be costly and time-consuming for us to locate other personnel with the required skills and experience.

Our success depends on the continued efforts of our board members, our senior management and our technical, research and development, services and support, marketing and sales personnel. These persons may terminate their association or employment with us at any time. We have experienced changes in our senior management for a variety of reasons, including restructuring, medical reasons, retirement, and resignations to pursue other career opportunities. Loss of the services of key members of senior management or experienced personnel can be disruptive and causes uncertainty. In particular, we depend upon the services of Mr. Peter Yip, our chief executive officer. Mr. Yip took a leave of absence for medical reasons between February 2005 and April 2006. During that time, two other people who served as our chief executive officer and president resigned. While Mr. Yip believes that he has recovered enough to serve as our chief executive officer, we cannot assure his continued service.

The process of hiring employees with the combination of skills and attributes required to implement our business strategy can be extremely competitive and time-consuming. We compete for a limited number of qualified individuals with more established companies with greater resources that may offer more attractive compensation or employment conditions. As a result, we may be unable to retain or integrate existing personnel or identify and hire additional qualified personnel.

We have determined that material weaknesses in our internal controls over financial reporting existed during 2005 and 2006 as a result of, among other things, our inability to attract and retain sufficient resources with the appropriate level of expertise in the accounting and finance departments of our organization to ensure appropriate application of GAAP, particularly in the areas of accounting for income taxes, foreign currency translation adjustments related to goodwill and intangible assets and the accounting for certain of our non-routine transactions. These material weaknesses resulted in the restatement of our financial statements for the years ended December 31, 2005, 2004 and 2003.

On July 2, 2007, we filed an amendment to our Annual Report on Form 20-F for the year ended December 31, 2005, to address comments received from the U.S. Securities and Exchange Commission and to provide separate consolidated balance sheets for 17game Group, a company we acquired, as of December 31, 2004 and 2005, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year ended December 31, 2005 and for the five month period from August 1 to December 31, 2004 and the accompanying audit report of Deloitte Touche Tohmatsu CPA Ltd. Additionally, on June 30, 2008, we amended our Annual Report on Form 20-F for the year ended December 31, 2006 to restate certain amounts presented in the business segment footnote to our consolidated financial statements for the year ended December 31, 2006.

An inability to attract or retain additional qualified senior managers or personnel in a timely manner, or the health, family or other personal problems of key personnel could have a material and adverse effect on our business, results of operations and financial condition.

In the past, we have partially relied on options to compensate our employees. In the event employees do not consider their options as valuable compensation, we may need to provide additional compensation at additional expense.

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We have granted, and anticipate we will continue to grant, options to purchase our Class A common shares to some of our employees. In the event our employees do not consider their options to be valuable compensation, we may need to provide additional compensation in the form of additional salary, bonuses or equity, in an effort to retain those existing employees. Our inability to retain the employees in our key revenue producing businesses could have a material and adverse effect on our business, results of operations and financial condition.

The computer networks at our CDC Software, CDC Games and China.com business units are vulnerable to hacking, viruses, spamming and other disruptions by third parties, which may cause those businesses to lose key clients, expose us to liability for our clients’ losses, or prevent us from securing future business.

Unauthorized or inappropriate use of Internet services or errors or omissions in processing instructions or data available in computer system or databases at our CDC Software, CDC Games and China.com business units could jeopardize the security of confidential information stored in these computer systems, which may cause our CDC Software,CDC Games and China.com business units lose key clients, expose us to liability for our clients’ losses and prevent us from securing future business, any of which could have a material adverse effect on our business, financial condition, results of operations and share price.

Unauthorized or inappropriate use of the Internet includes attempting to gain unauthorized access to information or systems (commonly known as cracking or hacking) and repeated transmission of unsolicited e-mail messages (commonly known as e-mail bombing or spamming). The current policies, procedures and configurations for managing the systems at our CDC Software, CDC Games and China.com business units, including their computer servers, may not be adequate to protect these facilities and the integrity of user and customer information. Although CDC Software, CDC Games and China.com implement security measures to protect their facilities and the integrity of their user and customer information, such measures could be ineffective or circumvented.

Alleviating problems caused by computer viruses or other inappropriate uses or security breaches may require interruptions, delays or cessation in the services our CDC Software, CDC Games and China.com business units, in addition to the outages that occur in these systems from time to time for various reasons, including power interruptions, errors in instructions, equipment inadequacy, capacity and other technical problems. We do not carry errors and omissions or other insurance covering losses or liabilities caused by computer viruses, security breaches or spamming attacks. Compromises or breaches in the security or integrity of these facilities or customer or user information, or inappropriate use of these Internet services, could subject us, CDC Games and China.com to litigation and could adversely affect our customer base, business, share price, results of operation and financial condition.

We rely on software and hardware systems at our CDC Games and China.com business units that are susceptible to failure, and in the event of service operations or other related problems, the operating efficiency and results of operations of these businesses may be adversely affected.

Any system failure or inadequacy that interrupts the services of our CDC Games and China.com business units or increases the response time of these services could reduce user satisfaction, future traffic and our attractiveness to advertisers and consumers. We also depend on Internet service providers and other Web site operators in the PRC and elsewhere that have experienced significant system failures and electrical outages in the past. Our users have experienced difficulties due to system failures that were unrelated to our systems and services. There can be no assurance that our technologies, services and products will not experience interruptions or other related problems, which could affect our operating efficiency and results of operations of these business units.

Many of our servers and routers, including back up servers, are currently hosted by third-party service providers throughout China. We do not maintain insurance policies covering losses relating to our systems and we do not have business interruption insurance. To improve the performance and to prevent disruption of our services, we may have to make substantial investments to deploy additional servers.

We also have limited system redundancy, and do not have a disaster recovery plan in the event of damage from fire, natural disasters, power loss, telecommunications failures, break-ins and similar events.

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We may experience a complete system shut-down if any of these events were to occur. To improve performance and to prevent disruption of our services, we may have to make substantial investments to deploy additional servers or one or more copies of our Web sites to mirror our online resources. Because we carry property insurance with low coverage limits, our coverage may not be adequate to compensate us for our losses. If we do not increase our capacity and our redundancy, these constraints could have a material adverse effect on our business, results of operations and financial condition.

The successful operation of our online game and internet portal businesses depends upon the performance and reliability of the Internet infrastructure and fixed telecommunications networks in China.

Our online game and internet portal businesses depend on the performance and reliability of the Internet infrastructure in China. Almost all access to the Internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of China’s Ministry of Information Industry. In addition, the national networks in China are connected to the Internet through international gateways controlled by the PRC government. These international gateways are generally the only channels through which a domestic user can connect to the Internet. We cannot assure you that a more sophisticated Internet infrastructure will be developed in China. We may not have access to alternative networks in the event of disruptions, failures or other problems with China’s Internet infrastructure. In addition, the Internet infrastructure in China may not support the demands associated with continued growth in Internet usage.

Risks Relating to Our Class A Common Shares

Our share price could be adversely affected if our major strategic shareholders materially change their holdings in our shares, particularly if the share holdings are not disposed of in an orderly manner.

As of April 30, 2008, Asia Pacific Online Limited, or APOL, beneficially owned 22,384,648 of our common shares, or approximately 20.9% of our total outstanding share capital, based on 106,992,519 shares outstanding as of March 31, 2008, and Xinhua, through a wholly-owned subsidiary, owned 7,362,734 of our common shares, or approximately 6.9% of our total outstanding share capital. APOL is owned by the spouse of Mr. Peter Yip, our current chief executive officer and Vice Chairman of the Board of Directors, and by a trust established for the benefit of Mr. Yip’s children. There is no guarantee that APOL or Xinhua will continue to hold our shares going forward for any length of time. If APOL or Xinhua disposes, or if our investors expect Xinhua or APOL to dispose of, a substantial portion of their respective holdings in CDC at any time, it could adversely affect our share price. For more information regarding the shareholdings of APOL, Xinhua and other entities, see Item 7.A., “Major Shareholders and Related Party Transactions – Major Shareholders.”

A small group of our existing shareholders control a significant percentage of our common shares, and their interests may differ from those of our other shareholders.

As of April 30, 2008, APOL owned approximately 20.9% of our common shares, based on 106,992,519 shares outstanding as of March 31, 2008, Xinhua, through a wholly-owned subsidiary, owned approximately 6.9% of our common shares and Jayhawk Capital owned approximately 8.4% of our common shares. Accordingly, these shareholders, particularly if they act together, will have significant influence in determining the outcome of any corporate transaction or other matter submitted to shareholders for approval, including:

• mergers, consolidations and other business combinations which under the law of the Cayman Islands requires the approval of at least 75% of the shares voting at the meeting;

• election or non-election of directors which under the law of the Cayman Islands requires the approval of a simple majority of the shares voting at the meeting;

• removal of directors which under the law of the Cayman Islands requires the approval of at least 66 ²/3% of the shares voting at the meeting; and

• amendments to our memorandum and articles of association which under the laws of the Cayman Islands requires the approval of at least 66 ²/3% of the shares voting at the meeting.

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As a result, these shareholders, if they act together, may be able to effectively prevent a merger, consolidation or other business combination, elect or not elect directors, prevent removal of a director and prevent amendments to our memorandum and articles of association.

For more information regarding the shareholdings of APOL, Xinhua and Jayhawk, see Item 7.A., “Major Shareholders and Related Party Transactions – Major Shareholders.”

Our share price has been, and may continue to be, extremely volatile, which may not be attractive to investors.

The trading price of our common shares has been, and is likely to continue to be, extremely volatile. During the period from July 12, 1999, the date we completed our initial public offering, or IPO, to December 31, 2002, the closing price of our shares ranged from $1.86 to $73.44, adjusted for our two stock splits. From January 1, 2003 to December 31, 2007, the closing price of our shares ranged from a low of $2.40 per share on April 15, 2005 to a high of $14.46 per share on July 14, 2003. There is no assurance that our share price will not fall below its historic or yearly low.

The trading price of our Class A common shares is subject to significant volatility in response to, among other factors:

• investor perceptions of our business, the market performance of our peer companies in the enterprise software business services, online games, Greater China portal and advertising and marketing activities businesses, in general;

• our significant acquisitions, partnerships, joint ventures or capital commitments;

• trends and developments in all the markets in which we compete;

• variations in our operating results;

• our new product or service offerings;

• changes in our financial estimates by financial or industry analysts;

• technological innovations;

• litigation;

• changes in pricing made by us, our competitors or providers of alternative services;

• the depth and liquidity of the market for our shares; and

• general economic and other factors.

In addition, the trading price of our common shares has experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to our operating performance. Broad market, political and industry factors may also decrease the price of our common shares, regardless of our operating performance. Securities class-action litigation and regulatory investigations often have been instituted against companies following steep declines in the market price of their securities.

We issued $168 million of senior exchangeable convertible notes due 2011 which we may not be able to repay in cash, could result in dilution to our current stockholders, dilution of our earnings per share, and which contain negative covenants which may have an adverse effect on our business and financial condition.

In November 2006, we issued an aggregate of $168 million of 3.75% senior exchangeable convertible notes due 2011 to a total of 12 institutional accredited investors in a private placement exempt from registration under the Securities Act. As of December 31, 2007, the face value of outstanding senior exchangeable convertible notes was $168 million.

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Upon the occurrence of certain events, we have the right to redeem the notes, and the investors may demand redemption of the notes by us in the event that no qualified initial public offering by either CDC Software or CDC Games has occurred on the third anniversary following the issuance of the notes. The notes may be redeemed at par value plus all accrued and unpaid interest; provided, however, that the interest rate shall increase to 12.5% per annum and apply retroactively from the issue date to the applicable redemption date. However, we cannot assure you that we will have enough cash on hand or the ability to access cash to pay the notes if presented for redemption, on a redemption date referred to above or at maturity.

In addition, in connection with our issuance of the notes, we became subject to various negative covenants. We agreed that we will not incur any debt, other than permitted debt, unless after giving effect to such debt: our leverage ratio is less than 6.0 to 1 as reflected in our consolidated financial statements for the immediately preceding four fiscal quarters; our aggregate debt does not exceed 50% of our total capitalization on a consolidated basis as reflected in our consolidated financial statements for the immediately preceding four fiscal quarters; or our consolidated cash flow exceeds two times the sum of consolidated interest expense and capital expenditures during the immediately preceding four fiscal quarters.

Furthermore, we also may not create, assume or incur any mortgage, pledge lien, or other security interest except for certain permitted liens, which include existing liens, intracompany liens, liens over assets of CDC Software to secure a credit facility to CDC Software in an amount not exceeding $30 million, liens securing assets acquired or constructed after the closing to secure the cost of such acquisition or construction, provided such liens do not exceed 80% of the fair market value of the asset, or any lien resulting from renewing extending or replacing a lien.

Pursuant to the negative covenants we are also prohibited from paying dividends to our common shareholders (other than dividends of our common shares) or repurchase any shares of our capital stock or any of our subsidiaries, provided, however, that we may purchase voting equity in any non-wholly owned subsidiary or make purchases pursuant to a stock repurchase program.

The note investors are also afforded anti-dilution protection, a right of first refusal if we, CDC Software or CDC Games intend to offer or sell any of its equity or equity equivalent securities prior to a qualified initial public offering, and have received registration rights with respect to the common shares deliverable upon an exchange of the notes. The negative covenants set forth above may have the effect of limiting our ability to operate our businesses and financial affairs in certain manners, which may have a material, adverse effect on our business, financial condition and results of operations.

We are a “foreign private issuer,” and have disclosure obligations that are different than those of other U.S. domestic reporting companies so you should not expect to receive the same information about us at the same time as a U.S. domestic reporting company may provide.

We are a foreign private issuer and, as a result, we are not subject to certain of the requirements imposed upon U.S. domestic issuers by the SEC. For example, we are not required to issue quarterly reports or proxy statements. We are allowed six months to file our annual report with the SEC instead of approximately three, and we are not required to disclose certain detailed information regarding executive compensation that is required from U.S. domestic issuers. Further, our directors and executive officers are not required to report equity holdings under Section 16 of the Securities Act. As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5.

Since many of the disclosure obligations required of us as a foreign private issuer are different than those required by other U.S. domestic reporting companies, our shareholders, potential shareholders and the investing public in general, should not expect to receive information about us in the same amount and at the same time as information is received from, or provided by, other U.S. domestic reporting companies.

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We are liable for violations of the rules and regulations of the SEC which do apply to us as a foreign private issuer. Violations of these rules could affect our business, results of operations and financial condition.

We may incur significant costs to avoid being considered an investment company under the Investment Company Act of 1940.

Generally, the Investment Company Act of 1940, or the 1940 Act, provides that a company is not an investment company and is not required to register under the 1940 Act as an investment company if:

• the company is primarily engaged, directly or through a wholly-owned subsidiary or subsidiaries, in a business or businesses other than that of investing, reinvesting, owning, holding or trading in securities; and

• 40% or less of the value of the company’s assets (exclusive of cash items and U.S. government securities) is represented by “investment securities” as defined by the 1940 Act.

We believe that we are engaged primarily and directly in the businesses of providing enterprise software and business services through our CDC Software business unit, on online games through our CDC Games business unit and on mobile applications and internet and media services through our China.com business unit. Also, based upon an analysis of our assets at December 31, 2007 and income for the year ended 2007, during 2007, we do not believe we will be considered an investment company. The determination of whether we will be an investment company will be based primarily upon the composition and value of our assets, which are subject to change, particularly when market conditions are volatile. As a result, we could inadvertently become an investment company.

If we were to become subject to the requirements of the 1940 Act, our operations and results would be negatively impacted, including among other possible effects, our inability to raise capital through the offer and sale of our securities in the United States. We could also be subject to administrative or legal proceedings and, among other things, contracts to which we are a party might be rendered unenforceable or subject to rescission. Additionally, we would be unable to continue operating as we currently do and might need to acquire or sell assets that we would not otherwise acquire or sell in order to avoid becoming and “investment company” as defined under the 1940 Act. We may incur significant costs and management time to avoid being considered an investment company under the Investment Company Act of 1940, as amended.

We can give no assurances in the future as to our investment company status under the Investment Company Act of 1940.

We believe, although we cannot assure you, that our Class A common shares should not be treated as stock of a passive foreign investment company, or PFIC, for the taxable year ending December 31, 2007. This belief is different than the determinations we have made in previous years, and we cannot assure you that we will not be treated as a PFIC in the future.

We do not believe that we should be treated as a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2007, based upon our analysis of our assets held at the end of each quarter of our taxable year ending December 31, 2007, and our income for our taxable year ended December 31, 2007. However, the PFIC determination is inherently factual and there is limited guidance regarding the application of the PFIC rules. Accordingly, we cannot assure you that the IRS will not successfully contend, or that a court would not otherwise conclude, that we are a PFIC. Accordingly, prospective investors are strongly urged to consult with their tax advisor as to the effects of the PFIC rules.

Further, the PFIC determination is made annually, and therefore may be subject to change in future years. Thus, we can provide no assurance that we will not be classified as a PFIC in 2008 and beyond. The determination of whether we would become a PFIC in a future tax year would be principally based upon:

• the composition of our assets, including goodwill, the amount of which will depend, in part, on our total net assets and the market value of our Treasury portfolio, which is subject to change; and

• the amount and nature of our income over the course of the year.

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We have limited control over these variables and therefore, cannot assure you of our PFIC status for future years.

Further, we may consider additional capital markets or corporate finance transactions in the future. Should we proceed with such offerings, we cannot, at this stage, specify with certainty the timing, amounts or the particular uses of the net proceeds. Depending on the usage of any such net proceeds, we could possibly become classified as a PFIC as a result of such transactions.

If we become a PFIC, U.S. holders, as such term is defined in Item 10.E., “Additional Information – Taxation – Tax Consequences of U.S. Holder,” could be subject to adverse U.S. federal income tax consequences. For further discussion regarding our PFIC status, see Item 10.E., “Additional Information – Taxation – Tax Consequences of U.S. Holders – Passive Foreign Investment Company Status.” U.S. holders are strongly urged to consult their own tax advisors regarding the application of the PFIC rules to their particular circumstances.

Substantial amounts of our common shares are eligible for future sale, which could adversely affect the market price of our shares.

Sales of substantial amounts of our Class A common shares in the public market could adversely affect the market price for our shares. As of March 31, 2008, we had 117,677,165 Class A common shares issued and outstanding, substantially all of which may be sold pursuant to an effective registration statement under the Securities Act or an applicable exemption from registration thereunder, including Rule 144, which permits resales of securities subject to limitations (including trading volume) depending on the holding period of such securities.

In August 2007, we prepared and filed a shelf registration statement on Form F-3 pursuant to which we could potentially register an indeterminate number of common shares and preferred shares, debt securities, or warrants to purchase any of such securities or units.

Several of the agreements we have entered into with respect to acquisitions we have made, require us pay cash and/or issue “earn-out” shares, which are shares of our common stock issued to sellers or other persons in those transactions, upon the occurrence of certain milestones or on certain dates. These earn-out obligations may, in some instances, extend for several years past the date of the original agreement. Any such issuance of shares will cause dilution in the interests of our stockholders. Furthermore, many of the amounts payable or issuable under the earn-out provisions are variable, and the number of shares and/or cash that may be payable under these provisions may be significantly more or less than we may expect or have anticipated.

In addition, as we continue to issue and register shares to fulfill our contractual and acquisition-related obligations, and as our employees and other grantees have been or are granted, and subsequently exercise, additional options to purchase our common shares, additional shares will be available-for-sale in the public market. We have also granted options to certain of our shareholders, directors and officers to purchase our shares, the vesting of which options may be accelerated upon an occurrence of a change-of-control event. As a result, additional shares may be available-for-sale in the public market. The availability or perceived availability of additional shares could have a dilutive and negative impact on the market price of our shares.

In the future, we may also issue additional shares, convertible notes or warrants to purchase our shares, in connection with acquisitions and our efforts to expand our business. Shareholders could face further dilution from any such future share issuances.

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Anti-takeover provisions in our charter documents may adversely affect the rights of holders of our common shares.

Our memorandum and articles of association include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions. We intend to review and evaluate these provisions periodically and may adopt additional anti-takeover measures in the future. These provisions could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us, in a tender offer or similar transaction.

For example, our board of directors is divided into three classes, each having a term of three years, with the term of one class expiring each year. These provisions have the effect of delaying the replacement of a majority of our directors and make changes to our board of directors more difficult than if such provisions were not in place. In addition, our board of directors has the authority, without further action by our shareholders, to issue up to 5,000,000 preferred shares in one or more series and to fix their designations, powers, preferences, privileges, relative participating, optional or special rights and the qualifications, limitations or restrictions thereon, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences. Any or all of the foregoing may be superior to the rights afforded to the holders of our Class A common shares. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control or make removal of management more difficult. If our board of directors issues preferred shares, the price of our Class A common shares may fall and the voting and other rights of the holders of our Class A common shares may be adversely affected.

Our shareholders may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, and by the Companies Law and common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from, as compared to the U.S., limited judicial precedent in the Cayman Islands and from English common law. Cayman Islands law in this area may conflict with jurisdictions in the United States. As a result, our public shareholders may face more difficulties in protecting their interests in actions against our management, directors or our controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States. For instance, the ability to bring a class action lawsuit may not be available to our shareholders as a vehicle for litigating securities matters against us in the Cayman Islands. Further, under Cayman Islands law, shareholder derivative actions may generally not be brought by a minority shareholder. In addition, the shareholders of Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States. As a result, our shareholders may have more difficulty in protecting their interests in actions against our management, directors or our shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States, and our ability to protect our interests if we are harmed in a manner that would otherwise enable us to sue in a United States court may be limited.

Additionally, the Cayman Islands have a less developed body of corporate and securities laws than the United States.

The Cayman Islands courts are also unlikely to:

• recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; or

• impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

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There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of foreign court of competent jurisdiction without retrial on the merits.

As a result of the above, our public shareholders may have more difficulty in protecting their interests than they would as public shareholders of a U.S. company.

You may have difficulty enforcing judgments obtained against us.

We are a Cayman Islands company and a substantial majority of our assets are located outside the United States. A substantial portion of our current operations is conducted outside the United States in countries such as Canada, China, Sweden, Australia, the United Kingdom and other countries and territories, and a majority of our directors and officers are nationals and/or residents of countries other than the United States. A substantial portion of any assets these people may hold is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon, and gain jurisdiction over, these persons. In addition, there is uncertainty as to whether the courts of Canada, China, Sweden, the United Kingdom and other jurisdictions would recognize or enforce judgments of U.S. courts obtained against us or these persons that may be based upon the civil liability provisions of the securities laws of the United States or any state thereof. Furthermore, the courts of these countries may refuse to hear cases brought in Canada, China, Sweden, the United Kingdom, or other jurisdictions against us or such persons predicated upon the securities laws of the United States or any of its states.

If you are not a registered shareholder and do not hold greater than 10,000 shares, you may not receive our proxy materials or other corporate communications.

We are a Cayman Islands company. As such, we are only required to distribute our proxy materials to our registered shareholders, and not to any shareholders who hold our shares beneficially, through a broker or in a brokerage account. We offer electronic delivery of proxy materials to our registered shareholders, and we mail proxy materials to each registered owner who has not opted to receive materials electronically. You are a registered shareholder if you have an account with our transfer agent, The Bank of New York, and if you hold a stock certificate evidencing your ownership of our common shares. You are a beneficial shareholder if a brokerage firm, bank trustee or other agent holds your common shares. However, your name would not appear anywhere on our records, but rather the name of the broker, bank or other nominee appears on our records as retained by our transfer agent, The Bank of New York. Although we only need to distribute our proxy materials to registered shareholders under Cayman Islands law, we also distribute, but are not required to distribute, proxy materials to beneficial shareholders who hold greater than 10,000 of our shares. In an effort to maintain cost effectiveness, we have, and intend to continue to, mail the proxy materials to those beneficial shareholders who hold greater than 10,000 of our shares. If you are not a registered shareholder and do not hold greater than 10,000 of our shares, you will not receive our proxy materials or other corporate communications. Therefore, if you are a beneficial shareholder and want to ensure that you do receive proxy materials, you are urged to become a registered owner.

We do not intend to pay dividends in the foreseeable future and the holders of our class A common shares may not receive any return on their investment from dividends.

We currently intend to retain any future earnings for funding growth. We do not anticipate paying any dividends in the foreseeable future. The holders of our class A common shares may not receive any return on their investment from dividends.

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ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Our headquarters and principal executive offices are located at 33/F Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong, and our telephone number is 852-2893-8200. Our contact telephone number in Beijing is 011-8610-5129-8700. Our primary address in the United States is Two Concourse Parkway, Suite 800, Atlanta, GA 230328 and our telephone number in Atlanta is (678) 259-8510. We have a website that you may access at http://www.cdccorporation.net. Information contained on our website does not constitute part of this Annual Report.

We were incorporated in June 1997 as China Information Infrastructure Limited, a company limited by shares under the Companies Law of the Cayman Islands and a wholly-owned subsidiary of China Internet Corporation Limited, or CIC, to operate CIC’s Internet portal and related businesses.

In June 1999, CIC distributed its entire interest in our predecessor company to CIC’s shareholders. Upon completion of that transaction, CIC ceased to have any ownership interest in our predecessor company. APOL and a wholly-owned subsidiary of Xinhua provided rights of first refusal to buy the other party’s shares in us in the event either party sought to dispose of its shareholdings. Additionally, APOL received rights to place shares of us owned by the Xinhua subsidiary to prospective buyers on behalf of the Xinhua subsidiary in exchange for a commission.

In July 1999, we completed our IPO of the equivalent of 19,320,000 class A common shares on NASDAQ at the equivalent of a public offering price of $5.00 per share on a stock split adjusted basis. All of the shares registered were sold and net proceeds from the IPO totaled $85.6 million.

In December 1999, our shareholders approved a two-for-one share split.

In January 2000, we completed a second public offering of the equivalent of 9,952,884 class A common shares on NASDAQ at the equivalent of a public offering price equal to $42.50 per share on a stock split adjusted basis. Of the 9,952,884 class A common shares sold, 2,325,000 shares were offered by certain of our shareholders. The selling shareholders received an aggregate of $94.1 million in net proceeds for their shares. All of the shares registered were sold and net proceeds to us from the offering totaled $303.9 million.

In March 2000, we listed our subsidiary, hongkong.com Corporation (which has since been renamed to China.com), on the Growth Enterprise Market, or GEM, of the Hong Kong Stock Exchange, by selling approximately 16% of this subsidiary to the public. We received net proceeds of approximately $168.5 million in connection with this listing and sale. We currently continue to own approximately 77% of China.com.

In April 2000, our shareholders approved a second two-for-one share split.

In addition, in April 2000, our shareholders approved the change of our company name to chinadotcom corporation. In April 2005, our shareholders approved a second change of our company name from chinadotcom corporation to CDC Corporation. Concurrently, in April 2005, the shareholders of hongkong.com Corporation approved a change of its name from hongkong.com Corporation to China.com.

Acquisitions and Divestitures

Our goal is to be a global company focused on enterprise software through our CDC Software business unit, online games through our CDC Games business unit, internet and media services through our China.com business unit. The evolution of our business model has been achieved in large part through strategic acquisitions and investments during the past three fiscal years. We have spent a significant amount of cash and have issued a significant number of our common shares in connection with the strategic acquisitions and investments mentioned below.

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The following is a summary of our strategic acquisitions and investments completed since September 2003 organized by business unit:

CDC Software

Software Group

Acquisition or Investment	Date	Description
Industri-Matematik International Corp.(1)	September 2003, November 2007	SCM for distribution intensive industries.
Pivotal Corporation	February 2004	Vertical CRM applications.
Ross Systems, Inc.	August 2004	Extended ERP and SCM applications.
Assets of JRG Software, Inc.	February 2006	On-demand supply chain solutions for planning and scheduling, delivered as Software as a Service (SaaS).
C360 Solutions, Inc.	April 2006	Add-on products, solutions and tools for the Microsoft Dynamics CRM platform.
MVI Holdings Limited	October 2006	Real-time performance management solutions for process manufacturers.
Vis.align, Inc.	December 2006	Enterprise solutions and IT services provider based in Pennsylvania.
Respond Group Limited	February 2007	Enterprise class complaints, feedback and customer service solutions.
Saratoga Systems Inc.	April 2007	Enterprise CRM and wireless CRM applications.
Catalyst International	September 2007	Integrated supply chain execution solutions and services.
Integrated Solutions Limited	March 2008	Enterprise solutions provider based in Hong Kong.

Global Services Group

Acquisition or Investment	Date	Description
Assets of Horizon Companies, Inc. (51%)	February 2006	Outsourced IT support and consulting services provider based in India, Canada and New Jersey.
DB Professionals, Inc.	June 2006	Outsourced IT support and consulting services provider based in Oregon.
OST International Corporation	June 2006	Outsourced IT support and consulting services provider based in Illinois.
Vectra Corporation (60%)	May 2007	Information security consulting services, managed services and enterprise security solutions provider based in Australia.
Assets of PlanTec Pty Ltd	June 2007	Information services provider based in Australia.
Catalyst International	September 2007	Integrated supply chain execution solutions and services.
Snapdragon Consulting Pty. Ltd.	October 2007	Information service provider based in Australia focused on Microsoft CRM.

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CDC Games

Online Games

Acquisition or Investment	Date	Description
Equity Pacific Limited (holds Beijing 17Game Network Technology Co., Ltd.) (2)	March 2006	17game is a leading massive multiplayer online role-playing games (MMORPG) provider in the China market.
Gorilla Banana Entertainment Corp.	January 2007	Independent online games development company in South Korea (minority equity investment and distribution rights).
Auran Holdings Pty Ltd	March 2007	Developer of online games in Australia (minority equity investment and revenue sharing rights).
Mgame Corporation	March 2007	Leading developer of online games in South Korea (minority equity investment and distribution rights).
Guangzhou Optic Communications Co., Ltd., or “Optic” (2)	July 2007	A leading online games company in the PRC.

(1) In September 2003 we acquired a majority interest in IMI by acquiring 51% of IMI’s holding company, Cayman First Tier. In November 2007, we entered into a letter agreement with Cayman First Tier, IMI’s holding company, and Symphony Technology Group, the holder of the remaining 49% interest in IMI, whereby the amounts outstanding under $25.0 million loan made by Cayman First Tier to Symphony were deemed to be repaid in full in exchange for the transfer to Cayman First Tier of Symphony’s right, title and interest in Symphony’s 49% ownership interest in Cayman First Tier.

(2) In March 2006, a subsidiary of China.com acquired the remaining 52% of Equity Pacific Limited, or Equity Pacific, which ultimately owns Beijing 17game Network Technology Co Limited, or 17game, amongst other subsidiaries. 17game was transferred to CDC Games in December 2006 in connection with our internal restructuring.

China.com

Mobile Services⁽¹⁾

Acquisition or Investment	Date	Description
Group Team Investments Limited (holds Beijing He He Technology Co. Ltd.)	May 2004	Operated Go2joy, a mobile value-added services and applications provider in China with partnerships with media companies in China.
Unitedcrest Investments Limited (holds Shenzhen KK Technology Ltd.)	June 2005	Mobile value-added services and applications provider in China which specializes in nation-wide WAP businesses.
Timeheart Science Technology Limited	November 2006	Provider of MVAS products through personal digital assistants (PDAs), wireless application protocol (WAP), multimedia services (MMS), interactive voice response (IVR) and media stream, in China.

(1) In February 2008 we announced that we would be discontinuing our mobile services operations and we have since discontinued such operations.

We continually seek to acquire companies that support and expand our current business models. Our acquisitions are typically financed through a combination of cash and our common shares.

In August 2007, we entered into four separate purchase agreements to sell the principal assets and subsidiaries that comprise our Ion Global business for $9.0 million. Under the terms of the agreements, we agreed to sell: (i) the assets related to the internet consulting services and website design and development of Ion Global (California) Inc.; (ii) substantially all of the assets of Ion Global Limited; (iii) all of the issued and outstanding shares of Ion Global Korea Ltd. held by Ion Global (BVI) Ltd.; and (iv) the “Ion Global” trademark.

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B. Business Overview

CDC Corporation, with facilities in the PRC, Southeast Asia, North America, Europe and Australia, is a global provider of enterprise software, online games and internet and media services. We report operating results in five business segments, “Software,” “Business Services,” “Online Games,” “Mobile Services and Applications” and “China.com”. During 2005, we reorganized these segments into two core business units, CDC Software and China.com., and during 2006, we added a third core business unit, CDC Games. The operations of Software and Business Services are included in the CDC Software business unit, the operations of online games are included in the CDC Games business unit and the operations of Mobile Services and Applications and China.com are included in the China.com business unit. In February 2008 we announced that we would be discontinuing our mobile services and applications operations and we have since discontinued such operations due to the regulatory environment connected with such operations.

CDC Software Business Unit

Our Business

CDC Software is a leading global provider of specialized enterprise software applications and complementary business services to customers in select industries, which we refer to as our targeted vertical industries. Companies in our targeted vertical industries generally have specific and complex business needs and often are subject to specific and extensive regulatory requirements. We believe that our enterprise software applications address our customers’ critical, industry-specific requirements more reliably and more cost-effectively than conventional enterprise software applications. We also offer a range of complementary business services, including information technology, or IT, and outsourcing services, that span the lifecycle of our customers’ technology investments.

We conduct our business through our Software Group and our Global Services Group. Through our Software Group, we offer enterprise software applications that are designed to deliver industry-specific functionality. We believe our products help our customers establish and maintain a competitive advantage by allowing them to reduce the cost of their operations, gain visibility needed for continuous business improvement and ensure their regulatory compliance. Our products can typically be rapidly deployed, configured and upgraded easily, and are intuitive to learn and use. We believe these factors lower our customers’ total cost of ownership and increase their return on investment.

CDC Software’s principal enterprise software applications include:

• Enterprise and departmental solutions for process manufacturers in the food and beverage, consumer products, pharmaceutical and biotechnology, chemicals, metals and natural products industries. These solutions include enterprise resource planning, or ERP, supply chain management, or SCM, manufacturing operations management, customer relationship management, or CRM, and enterprise performance management; and

• Vertical CRM applications for industries characterized by complex product offerings, business relationships and sales processes, such as the financial services, homebuilding and real estate, general manufacturing, energy, insurance and healthcare industries.

Through our Global Services Group, we offer IT and business services to help our customers optimize their business processes and maximize the value of their IT expenditures. Our IT and business service offerings include application development, IT infrastructure services, help desk services, business process improvement, implementation and outsourced hosting and application management services. Our customers make significant investments when they purchase enterprise software applications, whether from us or other software vendors, to run many critical business processes for years to come. Our broad range of IT and business services helps our customers protect and extend the value of those investments by offering them ways to improve and enhance their IT systems and business processes. We assist our customers in implementing software and in fine-tuning their IT infrastructure, including processes, systems and personnel management.

As of March 31, 2008, products and services had been purchased by over 6,000 companies worldwide. For the year ended December 31, 2007, the CDC Software Business Unit generated total revenues of $349.0 million and operating income of $21.5 million. Our Software Group and our Global Services Group accounted for 59% and 28%, respectively, of these 2007 revenues.

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Software Group

Overview

Our Software Group provides a diverse portfolio of sophisticated enterprise software applications for mid-sized enterprises and divisions of larger enterprises in our targeted vertical industries. Revenues from our Software Group were $238.3 million in 2007, which constituted 59% of our total revenues during that period.

Our integrated suite of enterprise software applications help our customers improve efficiencies and profitability through company-wide integration of business and technical information across multiple divisions and organizational boundaries, such as finance, general manufacturing, logistics, human resources, marketing, sales and customer service. While most of our products are available as licensed applications installed at our customers’ facilities, some of our products are available on a subscription basis over the Internet. Over time, we intend to make more of our products available in a SaaS format. We complement our products with a range of business services that promote a lower totals cost of ownership and faster return on investment. The following chart summarizes our current vertically focused products and services:

Industry Specialization	CRM	ERP	SCM	Manufacturing Operations	HR Payroll (China)	Business Analytics
Financial services	•				•	•
General manufacturing	•				•	•
Healthcare	•				•	•
Consumer products	•	•	•	•	•	•
Food and beverage	•	•	•	•	•	•
Pharmaceutical and biotechnology	•	•	•	•	•	•
Chemicals	•	•	•	•	•	•
Metals and natural products	•	•	•	•	•	•
Energy	•
Insurance	•

Our products and services are designed to meet the specific needs of our targeted vertical industries by helping to address the unique challenges facing those industries. Some of our industry-specific solutions may help our customers:

Selected Targeted Vertical Industry	CDC Software Industry-Specific Solutions
Financial services	•   Differentiate product offerings
	•   Increase sales effectiveness by managing indirect relationships with deal influencers
	•   Build customer loyalty by offering unique, personalized services
	•   Improve customer experience with coordinated interactions across all departments
	•   Measure and track expenses and profitability of individual agents and brokers
	•   Increase data accuracy and accessibility
	•   Streamline time-intensive processes to reduce costs
	•   Manage customer complaints to improve customer satisfaction and retention, and ensure regulatory compliance

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General manufacturing	•   Accelerate time to market for new products •   Increase sales effectiveness by managing indirect relationships with deal influencers, such as doctor •   Increase margins through improved price quoting and discounting •   Coordinate the management of extended sales teams including direct, wholesalers and distributors
Healthcare	•   Gain insight into individual client requirements and expectations
	•   Improve data quality and management visibility
	•   Improve the profit potential of each client
	•   Coordinate services more consistently and effectively across all departments
	•   Manage customer complaints to improve customer satisfaction and retention, and ensure regulatory compliance
Food, beverage and consumer products	•   Streamline operations and supply chain functions to reduce costs and improve profits •   Cost-effectively respond to increasing demands of big-box retailers and large distributors •   Manage complex sales and distribution networks
	•   Streamline regulatory compliance
	•   Ensure consistent safety and quality of product
	•   Ensure brand protection
	•   Manage recalls and mock recalls
	•   Increase product line profitability
	•   Optimize production and inventory planning
	•   Provide customer self-service
	•   Manage recipes
	•   Control inventory
	•   Facilitate complex product costing
Pharmaceutical and biotechnology	•   Streamline regulatory compliance •   Monitor, track, control, validate and audit critical resources and activities across the manufacturing and distribution processes
	•   Maintain control and ensure product safety and quality while taking advantage of the industry trend toward outsourced and offshore manufacturing
	•   Ensure brand protection
	•   Manage recalls and mock recalls
	•   Optimize production and inventory planning
	•   Provide customer self-service

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	•   Manage customer complaints to improve customer satisfaction and retention, and ensure regulatory compliance
Chemicals	•   Streamline operations and SCM functions to reduce costs and improve profits
	•   Optimize production and inventory planning
	•   Manage complex sales and distribution networks
	•   Facilitate automated monitors and reporting to efficiently demonstrate compliance
	•   Maintain control and ensure product safety and quality while taking advantage of the industry trend toward toll processing and outsourced and offshore manufacturing
	•   Optimize value of capital investments in production equipment and warehouse capacity
Metals and natural products (forest and agricultural products)	•   Streamline operations and SCM functions to reduce costs and improve profits •   Minimize operating costs and maintain control while taking advantage of the industry trend toward outsourced and offshore manufacturing •   Respond to an increasing need to outsource to meet cyclical demands
	•   Enhance customer service as a differentiator
	•   Improve productivity
	•   Optimize value of capital investments in production equipment and warehouse capacity
Energy	•   Quickly integrate new products and services into the sales force
	•   Quickly adapt complex processes to new regulatory mandates and energy conservation incentive programs while tracking the success of these programs to ensure compliance
	•   Integrate data from many different systems into a consolidated view enabling customer service to provide customers with insight into complex pricing and rebate programs
Insurance	•   Provide accountability throughout the entire lifecycle of a group through automated workflows between internal departments and broker channels
	•   Integration with core systems either through imports or real-time connectivity eliminating data duplication, reducing data entry and errors, as well as improving sales, underwriting, and membership processes

Enterprise Software Applications and Services

Our enterprise software applications and services include the following:

Enterprise Resource Planning (ERP). Our ERP products help provide the control and visibility needed throughout a customer’s operations to improve profitability and fulfill customer demand. For companies that produce and package products through recipe and formula-based processes, our ERP solutions help process manufacturers manage manufacturing operations with dynamic forecasting and scheduling, formula-based production and yield management, quality control, inventory management, complex product costing, and streamlined regulatory compliance.

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Supply Chain Management (SCM). Our SCM products help enable process manufacturers to plan and forecast proactively, optimize production schedules for low-cost and high-quality customer service, minimize inventory investments, and streamline distribution operations. We also offer SCM products for distribution intensive companies that support demand-driven fulfillment in multi-company, multi-site, multi-channel environments, such as for retailers (grocery stores, specialty goods and direct merchant retailers), wholesalers (pharmaceutical and over-the-counter drug distributors) and consumer goods manufacturers, which have high volumes of order transactions and fast-moving products.

Manufacturing Operations. Our manufacturing operations applications help companies optimize the efficiency and effectiveness of their factories. These applications are integrated with and complement our ERP and SCM products, and also fill the manufacturing operations void in ERP, SCM and manufacturing execution systems from our competitors. Our manufacturing operations applications combine finite factory scheduling with real-time performance management and business intelligence to enable continuous improvement, optimization of operational resources and change management for manufacturing operators, engineers, technicians and management personnel.

Customer Relationship Management (CRM). Our CRM products help our customers establish and maintain profitable long-term business relationships with their customers by integrating information from the entire enterprise and increasing efficiencies within the sales, marketing and service functions to create one unified business network connecting employees, partners and customers. Our products are highly configurable, enabling companies to cost-effectively adapt and integrate the application to fit their unique business processes.

Enterprise Feedback Management (EFM). Our EFM applications help organizations capture and process customer complaints and feedback and use this information to help deliver cost reductions, increased efficiencies, improved customer satisfaction and increased profitability. These applications help companies maintain customer satisfaction and advocacy, and drive business improvements and competitive advantage as well as providing the ability to help address regulatory compliance requirements.

Human Resource Payroll (HRP). Our HRP solutions, which are currently only offered in China, focus on automating processes to enable an organization to improve business results and increase workforce performance by leveraging technology and applications to manage and mobilize a unified, global workforce. Our HRP solutions streamline the human resource management process, increase work efficiency, and support strategic decision-making. Our customers are able to automate routine daily tasks such as payroll processing, attendance, and benefits tracking, giving them more time and information to implement strategies that align the workforce with their organization’s strategic goals.

Business Analytics (BA). Our BA applications help to empower organizations with convenient access to information, reporting and analysis capabilities, and budget and planning systems. These tools help to convert large volumes of data collected and stored by the business into meaningful and multi-dimensional reports and analyses for use in decision-making. These applications are sold as complementary applications to our ERP, SCM, CRM and manufacturing operations solutions.

The following table sets forth the core components of our various solutions:

ERP	SCM	Manufacturing Operations	CRM	EFM	HR Payroll (China)	BA
•   Financial Management •   Manufacturing Management •   Quality Management •   Regulatory Compliance •   Materials Management •   Inventory Control •   Maintenance Management •   Business Analytics •   Data Collection	•   Supplier Management •   Demand Planning •   Replenishment Planning •   Vendor Managed Inventory •   Sales and Operations Planning •   Production Scheduling •   Radio Frequency Identification (RFID) •   Planning •   Execution Analytics	•   Finite Factory Scheduling •   Real-Time Performance Management •   Reporting and Analytics	•   Sales •   Marketing •   Service •   Partner Management •   Analytics •   Mobile CRM •   Complaint and Feedback Management •   Add-on products to Microsoft Dynamics CRM	•   Customer Complaints •   Complaint Management and Escalation •   Analytics	•   Human Resources •   Payroll Administration •   Attendance Tracking •   Employee Self-Service	•   Reporting •   Analysis •   Budget •   Planning

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Customer Services

Our Software Group offers a variety of professional services to customers that use our enterprise software applications. These services cover the full range of business optimization requirements, including industry advisory services, business process improvement services, traditional implementation services, tuning/optimization services and outsourced hosting/application management services.

The following diagram illustrates the range of professional services we are able to offer to match up with the continuum of customer needs.

The Professional Services Continuum

Generally, these customer services are offered on a time and expense reimbursement basis, although there has been an increasing trend to perform such services for a fixed fee.

• Industry Advisory Services. Industry advisory services involve working with clients to understand their business issues and to identify and document achievable technical solutions to provide tangible business improvements, often by identifying and implementing industry best practices as part of the clients’ processes. Utilizing professionals with specific industry expertise, we offer independent analysis and advice to help customers plan, evaluate and select the processes necessary to form an effective business solution. This process often requires us to become involved in other aspects of our clients’ businesses, such as business planning, financial modeling and defining and documenting business requirements.

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• Business Process Improvement Services. Business process improvement services involve working with clients to design and document business processes that drive tangible business improvements. Our business consultants work with clients to produce an in-depth analysis of the client’s specific needs and prepare detailed plans that list the step-by-step procedures that will form a business process.

• Software Implementation Services. Software implementation services seek to achieve timely and successful implementation of business systems usually involving one or more of our software products. These services include evaluating and managing the client’s needs by supplying custom application systems, custom interfaces, data conversions and system conversions. Our consultants participate in a wide range of activities, including software design and development. In addition, we also provide implementation services focused on networking and database administration.

• Tuning and Optimization Services. Tuning and optimization services focus on improving the coordination and operation of our clients’ disparate business systems so that all of the processes are seamless, smooth and efficient, and the system provides all of the business information that clients require quickly and accurately. As part of these services, we typically assist clients in the integration of multiple software products across multiple existing systems. Because businesses have often deployed disparate enterprise systems over time to support sales, services, accounting, manufacturing, human resources and order processing, our tuning and optimization services seek to unify the multiple systems and unlock the information in these separate databases.

• Hosting and Application Management. Hosting and application management involves offering clients a variety of managed IT services, including outsourcing, facilities management and hosting strategic business processes. Hosting and application management offers a practical alternative for organizations wanting to concentrate on core business activities rather than devote limited resources to IT matters. Specific services we offer include hosting enterprise software applications for clients on our servers, providing outsourced desktop and data management services, providing help desk support to a client’s employees, leasing and supporting IT assets such as computers and printers, and acting as a strategic source for certain segments of a client’s IT infrastructure (such as second level support beyond the help desk). In addition, we provide outsourced application development services to our clients, including designing, developing, testing and deploying custom software applications.

Other Customer Services Provided by the Software Group

To enable our customers to get the most out of our enterprise software applications, we also offer client support and education services to our customers.

Customer Support. We seek to ensure that our customers quickly and easily find answers to questions or issues related to their enterprise software applications. We provide customer support through a variety of media, including web-based support, e-mail, telephone support, technical publications and product support guides. These media allow our customers to conveniently and effectively acquire the information they desire. Customer support works closely with our customers’ internal support teams to assist our customers in their use of our solutions. Generally, our customer support is provided under the maintenance provisions in our license agreements for an annual fee, which is based on a percentage of the software license fees. Customers are typically required to purchase customer support for at least one or two years when they enter into a license agreement. Standard maintenance agreements generally entitle a customer to certain product upgrades and product enhancements, as well as access to our staff. In addition to standard support, we continue to expand our offerings to include remote services and extended technical support.

Education Services. We seek to ensure that our customers effectively adopt and use their enterprise software applications by delivering education and training services that fit each customer’s business needs. Education services are offered to customers as standard or customized classes at our education facilities or at the customer’s location.

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Global Services Group

Our Global Services Group provides many of the same business optimization services offered by our Software Group to customers that do not use our enterprise software applications. The Global Services Group assists customers to achieve the highest value for their IT expenditures by providing our customers with more value-added services than offered by our Software Group. These services are generally offered on a regional basis in the United States and Australia. In order to provide more cost-effective services while maintaining a high quality of service, our Global Services Group utilizes both locally based professional services staff who can interact with a customer’s staff on-site, as well as “off-shore” professional services staff typically located in India or China.

Revenues from our Global Services Group were $110.8 million in 2007. As a percentage of total revenues, revenues from our Global Services Group constituted 28% of our total revenues in 2007.

Customers

Our enterprise software customers operate in process-intensive industries, such as the food and beverage, consumer products, pharmaceutical and biotechnology, chemicals, metals and natural products industries, and in other industries that are characterized by complex customer relationships, such as the financial services, homebuilding and real estate, general manufacturing and healthcare industries. We believe customers in these industries benefit from vendor solutions that address their industry and business specific needs, such as the ability to make modular purchase decisions, the availability of risk-mitigating implementation services and strong configuration support. As a result, our products often suit mid-sized enterprises and divisions of larger enterprises in our targeted vertical industries. As of December 31, 2007, over 6,000 customers worldwide had purchased our products.

Within the Global Services Group, we target both mid and large companies doing business in many areas including telecommunications, chemical, oil and gas, pharmaceutical, consumer product, utility, insurance, banking and finance, entertainment and IT sectors. Because many of our target customers for business services are also in our targeted industries for enterprise software, we seek to cross-sell both enterprise software applications and business services between the two customer bases in addition to leveraging our industry expertise and knowledge gained between the two lines of business.

During 2007, our top 10 customers accounted for 11% of our total revenues. No customer accounted for more than 10% of our total revenues in 2006 or 2007.

Sales

We sell our products and services through a variety of methods, including our direct sales force, our channel partners and distributors, and, for certain products, through our websites. Our direct sales force is organized by vertical industry and is primarily concentrated in the United States and Western Europe. As of December 31, 2007, we had approximately 260 employees engaged in direct sales.

In addition to our direct sales force, we sell our products through partners and distributors. These partners include value-added resellers, original equipment manufacturers, consulting and professional services companies, progressive product development organizations, and regional consulting and sales agents that meet certain criteria. Our partners and distributors pay us royalties on the sales of products and maintenance services. As of December 31, 2007, we had approximately 44 distributors, principally located outside the United States, that distribute our enterprise software products. In addition, we sell add-on products, solutions and tools for the Microsoft Dynamics CRM platform both directly through an online store and through more than 600 authorized reseller partners worldwide.

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China Strategy for Leveraging Development Capabilities

We believe that we maintain a low-overhead research and development infrastructure that delivers high-quality, low-cost software development capabilities through our operations in Shanghai and Nanjing. As of March 31, 2008, we maintained a total of 135 employees in these facilities.

While our product development and design decisions are primarily maintained in the United States, software development and quality assurance testing work has been increasingly moved offshore. We now have a significant amount of our global research and development organization in China, and currently intend to increase that amount over time. We believe that this strategy will help further reduce our overall cost structure, as labor costs for information technology professionals are approximately 18% of the typical costs of those paid in the U.S. and 79% of the typical costs paid in India. Furthermore, in China, turnover rates have been relatively low, and we have experienced only modest salary increases relative to other regions, such as India.

Currently, Shanghai is our key development center in China today; however, we have also established a significant presence in Nanjing. Nanjing offers lower operating cost than Shanghai, which helps us maintain a low average cost structure in China. Total operating costs in Nanjing are approximately 20% lower than those in Shanghai, and salaries in Nanjing are approximately 18% lower.

In addition, we also maintain a relationship with one of China’s leading universities, the Nanjing University. We believe this relationship helps our recruiting efforts by attracting top talent.

We also believe that one of our competitive advantages is our ability to migrate research and development efforts to our China operations. Since many of the companies we typically acquire have research and development expenditures greater than our corporate average, during our integration process, we typically leverage our offshore capabilities to lower that spend level, or accelerate development schedules.

China Strategy for Increasing Software Sales

We also believe we have a strong sales channel in China that may allow us to benefit from positive economic and technology trends in China.

Our total headcount in sales and marketing in China is currently approximately 110 persons, and our locations include Shanghai, Beijing, Nanjing, Guangzhou, and Hong Kong.

Global concern over China’s food and product safety is a major catalyst for interest in our products in China as our ERP products provide food and product traceability necessary to support brand protection initiatives. Other industry drivers include the need to support complex regulatory and reporting requirements for human resources and payroll, and the need to ensure that supply chain inefficiencies do not negatively affect the low cost of labor.

Furthermore, one example of an emerging market we are targeting in China is CRM in the Financial Services industry of Institutional Asset Management. Approximately 50% of the top 25 global asset management firms use CDC Software’s CRM packages. We hope to leverage that experience into the Asia/Pacific region, initially targeting Hong Kong and Singapore.

We have developed our HRM solutions to specifically address the unique regulatory and reporting requirements found in China, and our HRM products are already established in the manufacturing, business services and financial services industries in China. We intend to take advantage of this customer base to help cross-sell our other enterprise applications to these customers.

Franchise Partner Program and Other Initiatives

We have established a Franchise Partner Program, or FPP, and have allocated an aggregate of up to $20 million for investment in channel partners to establish strategic relationships that we hope will accelerate mutual business expansion. We select participating partners in high-growth geographies including Eastern Europe, the Middle East, Latin America, India and China. For participation in the FPP,

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we seek partners with long-standing, successful track records in ERP, SCM and CRM. Additionally, we consider the more than 600 authorized distribution partners of CRM add-on products, industry-specific CRM solutions and CRM development tools for Microsoft Dynamics CRM. Our investments, made through equity investments, lines of credit or a combination of these, are used to help these partners grow their businesses through expanded marketing and sales programs, accelerated product localization and improved local support and services.

To date, we have entered into agreements under the FPP with Business T&G Group, in Spain, CMT Latin America, in Latin America, Desarrollo de Recursos Estratégicos S.A de C.V, in Mexico, Ross Systems Chile Ltda, in Chile and DC Software do Brasil Sistemas S.A., in Brasil, we have also acquired Brilliant Training and Consulting in Australia, and a majority ownership interest in Integrated Solutions Limited a Hong Kong-based vendor of ERP systems designed for small and medium-sized discrete manufacturers in China.

In December 2007, we announced that we had commenced sales of our Pivotal CRM solutions in India through CDC CRM Solutions Private Ltd., a company in which we have taken a 19% ownership stake and that is intended to exclusively sell Pivotal CRM in India.

In addition, in October 2007, we executed a term sheet to enter into a joint venture with FlexSystem Limited to develop, market and sell basic accounting and payroll SaaS products. We intend that the products to be developed by the joint venture will initially be marketed and sold to customers in the People’s Republic of China. The term sheet provides that each party shall license certain intellectual property rights to the joint venture for use in product development. The completion of the joint venture with FlexSystem remains subject to standard conditions, including, but not limited to, finalizing definitive transaction agreements, completing due diligence to our satisfaction and obtaining the approval of our board of directors.

Marketing

In support of our sales force, partners and distributors, we conduct a variety of marketing programs, including telemarketing, direct mailings, online and print advertising, seminars, trade shows, public relations and on-going customer communication. We are engaged in a significant marketing effort using online channels including web-based seminars, online newsletters, and electronic direct mail. Additionally, we participate in industry, customer and analyst events, and hold local events to better meet the needs of prospects, partners, distributors and customers around the world. We also hold an annual global users conference as a forum to bring together users of our products to present upcoming products and releases, share success stories and best practices and obtain feedback from our customer base on the quality of our products and services, as well as ideas for improvements and future upgrades.

We also conduct communications programs to establish and maintain relationships with key trade press and industry analysts. We have customer marketing teams targeted at working directly with our customers to obtain feedback and to track ongoing customer success stories. We also hold joint web events with marketing partners and others, co-author business papers, and create and publish other materials that are of value to our customers and partners in making a decision to purchase one of our products.

Product Development

To meet the increasingly sophisticated needs of our customers in our targeted vertical industries and address potential new markets, we strive to invest in, and enhance the functionality of, our existing product offerings and related services and develop new product solutions. During 2007, we spent $23.8 million on research and development activities.

Our development process involves a system where we obtain product input from a variety of sources, including product and design forums, specialty industry groups, market trends, changes in industry and regulatory requirements and customer surveys. The input is conveyed through internal product boards, made up of technical, sales and marketing personnel, that provide advice to the product manager who then produces a product plan. Generally, under the product plans, specific major new releases are made every 12 to 18 months, with minor product releases on a six-month basis.

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Generally, the expert knowledge of the functionality of our products and the needs of our customers is located in Atlanta, Georgia for our enterprise and departmental solutions for process manufacturers, and in Vancouver, British Columbia, Canada, and Campbell, California for our vertical CRM products. Our software development capabilities, however, are located principally in China and India. In addition to our development centers in Shanghai and Nanjing, we have established a software development center in Bangalore, India to develop our vertical CRM products. Our Shanghai and Bangalore centers have achieved Microsoft Gold Certification. As of December 31, 2007, our software development centers in China and India employed approximately 135 and 167 development personnel and 0 and 19 consultant personnel, respectively. This shift has enabled us to expand the breadth of product development and accelerate delivery schedules while reducing overall development costs. By managing our own internal development centers, rather than outsourcing to third parties (as is frequently practiced in the software industry) we believe we have maintained better control over product quality and development schedules.

Development activity during 2006, 2007 and the first quarter of 2008 covered a range of evolving functionality enhancements to present releases of our products, including the following:

• Q1 2006. New products launched supported the growing need for mobility among our customers. A new CRM handheld solution provided mobile access to CRM data and functionality via BlackBerry Wireless Handheld devices. The extended ERP application was enabled with additional mobile support to streamline automated collection of manufacturing and inventory information using PocketPC devices. Additionally, the inventory and warehouse management applications were enabled with radio frequency identification, or RFID, support for customers in the food, pharmaceutical and consumer products industries.

• Q2 2006. New products launched furthered our commitment to providing leading applications for our targeted vertical industries. These new applications include CRM 5.9, which provided greater usability for end users to quickly navigate to the information they need, and increased flexibility for tailoring the solution to implement complex business practices. Additionally, CRM 5.9 included a BlackBerry Wireless Handheld mobile application, Call Scripting for automating customer interactions, and other significant customer-driven enhancements. Home-building 5.7 and Manufacturing 2.1 were also launched to address additional industry-specific requirements. An Enterprise Performance Management, or EPM, application relating to our inventory module was launched to provide our process manufacturing customers with visibility into key inventory performance indicators and business drivers. This added to the EPM sales and EPM manufacturing applications that had been previously launched. Additionally, version 5 of the OnePlan SaaS planning and scheduling applications was made available, which added and improved functionality to increase visibility, improve scheduling and add collaborative features.

• Q3 2006. New products launched included Warehouse Voice, a software package for voice recognition technology applied to warehouse operations, which provides advanced, hands-free voice-driven picking functionality suited for fast-paced, high-volume and harsh environments, such as cold storage. Also released was a new version of a SCM solution that included enhancements for global supply chain planning, simplifying configuration and reducing implementation time and improving synchronization between planning and execution.

• Q4 2006. International versions of the CRM products were released, including French and Japanese versions of Pivotal 5.9, and a French version of our latest applications for the financial services vertical industries. Also, version 10 of the IMI suite was released. This latest version includes performance and usability improvements in IMI Replenishment, and new applications for transportation and analytics that assist companies with distribution-intensive operations to create competitive advantages based on improved productivity, operational reliability and cross-enterprise visibility.

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• Q1 2007. We released version 6.2 of our ERP applications which added graphical Business Process Modeling workflow capabilities that improve collaboration and process consistency across internal departments, as well as supplies and customers.

• Q2 2007. We released version 5.10 of our marketing automation application, CDC Market-First, which provided enhanced integration with our CRM applications and introduced Market-First Analytics providing graphical dashboard analysis of marketing campaign performance. Also during Q2 2007 we launched CDC Factory, the first packaged manufacturing operations management solution that includes real-time performance management and finite factory scheduling. CDC Factory provides a real-time framework that helps manufacturers unlock hidden capacity on the factory floor by managing production scheduling in real time, pinpointing the causes of plant inefficiencies and providing immediate feedback on key operating metrics including rate, yield, utilization and per unit cost. CDC Factory is the result of internal research and development investments coupled with two targeted acquisitions of specialized process manufacturing solutions. The CDC Supply Chain product line was enhanced with the launch of IMI eCommerce, an eCommerce solution that combines the company’s advanced order and supply chain management solution with a new web application. IMI customers have access to product catalogs, as well as current contract prices and delivery information.

• Q3 2007. Ross Enterprise EPM Budgeting v5.9.4 was released, providing a web-based, automated budgeting solution that unifies and streamlines customers’ budgeting, planning, forecasting, analysis and reporting processes, aligning both operational and finance departmental objectives. This new EPM module allows customers to quickly and easily adjust budgets and forecasts as strategies, plans or operations change. The Business Process Modeling application (BPM) was released for customers on both v6.2 and v5.9 Ross Enterprise ERP releases. In addition, Ross Enterprise ERP v6.2 Service Pack 1 was announced for both UNIX & VMS technology platforms. This Service Pack includes a list of new connectors for the BPM workflow which enables customers to create additional process workflows within Ross ERP, around Sales Order, Receiving, and production order processing.

OnePlan v5.8, the finite scheduling application within CDC Factory was released. This release includes the introduction of Factory Demand which accepts high level and detailed forecasts and sales history, and allows for adjustment and disaggregation of demand into specific products, demand dates, and quantities, for more focused finite production scheduling. This release is based on B2MML integration standards, for improved import and export of information with external applications.

During the quarter, the CDC Factory product line was launched in Spain, including a first release of CDC Factory translation in Spanish, with related sales information and a Spanish web site also now available.

Pivotal CRM for Financial Services 5.9 French was released to address the French-speaking markets.

The first version of the CDC MarketFirst Deliverability Email Server was release. This addition to CDC MarketFirst resolves e-marketing deliverability issues by adding a high-performance email application server that increases message reception, revenue and campaign ROI.

C360 added four new products and enhanced most of the existing products in its Core Productivity Pack. c360’s Core Productivity Pack was released in conjunction with Microsoft CRM version 4.0. The new products were designed using customer and partner feedback with a focus on increasing CRM usability, user productivity, and user adoption.

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• Q4 2007. EPM 6.2.101, was delivered for Enterprise Performance Management (EPM) Sales. In addition to providing visibility regarding overall sales history, Ross ERP customers can now leverage key Pricing and Promotions information to provide profitability insight, based on the cost impact of promotional incentives awarded, and relative to the return on sales for their business. New Scoreboards, Dashboards, analysis Dimensions, and additional Metrics and Key Performance Indicators (KPI’s) are now available to address critical pricing and promotions requirements specific to the Food, Beverage, Consumer Products Pharmaceuticals and Biotechnology vertical industries.

The first managed software as a service (SaaS) enterprise solution for the Life Sciences (Pharmaceuticals and Biotechnology) vertical industries was launched. This comprehensive, industry-specific solution for life sciences companies may be deployed in a matter of days with, in most instances, no customizations required. This unique combination of industry fit and rapid deployment makes this solution suited to a broad array of emerging and mid-sized pharma and biopharma companies supporting GMP manufacturing, clinical supply operations, chargebacks for wholesaler distribution, and project / service-based organizations (CMO/CRO). These life sciences enterprises can choose an off-site hosted or an on-site managed deployment and they also have the option to choose a monthly subscription fee or traditional software license fee.

Pivotal 5.9 Platform upgrade was released providing compatibility support for key customer environment applications, including Windows Vista, Microsoft Internet Explorer 7, Microsoft Exchange 2007, Microsoft Office 2007 and Crystal Reports XI. Pivotal CRM for Homebuilding version 5.9 was released providing integration to the industry-standard home options system from Envision.

CDC MarketFirst 5.10 French was released to address the French-speaking markets.

CDC Respond was enhanced with the launch of Respond Runner, a new application in the latest release of its CDC Respond 3 XA suite of enterprise applications for customer complaint and feedback management. Respond Runner offers powerful new automation and scheduling features that streamline processing and analysis of business data that also help improve an organization’s overall operational efficiency.

• Q1 2008. Ross ERP v6.2 Service Pack 2 was released, as part of the existing Ross Enterprise product suite. This Service Pack 2 offers enhancements in the following areas: Integration with Ross SCP 6.3, Eleven new BPM (Business Process Management) connectors, ability to calculate and assign tax amounts on post-invoice discount promotions in AP or AR, based on a sales invoice, in order to meet the tax requirements in different countries, especially in Europe.

Ross EPM v 6.2.101, is an upgrade that provides the addition of pricing and promotional analytics. With this upgrade, Ross EPM customers can now analyze gift promotions, book-only promotions, substitution discounts and multi-level sales order discount calculations, in order to help improve their level of customer service. As part of providing expanded negotiated pricing and discounting terms and conditions of sales, Ross EPM Sales enhancements now provide new dashboards, metrics, and KPI’s, based on added analysis dimensions, as part of offering added insight into the impact of promotional costs on Sales and Profit Margin over time.

Ross Supply Chain Planning v6.3 was released, formerly known as the Supply Chain Management suite, and provides significant usability and performance enhancements to Demand Planning (DP), Inventory/Replenishment Planning & VMI, and the Advanced Planning & Scheduling (APS) modules, as well as added interoperability with Ross ERP – SCP Integration. Major improvements include APS Labor Planning incorporating graphic displays and dynamic alerts, what-if scenarios and 15 new KPI’s in APS Performance Management and a new DP Performance Management that now provides improved Forecast Exception and new Forecast Error measurement tools.

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CDC Factory Scheduling upgrade—This release provides significant new scheduling features, usability and performance enhancements to help improve production scheduling and real-time integration between shop floor execution and production schedules. The Enhanced Labor Scheduling feature now offers the ability to define, model and assign labor types to specific production tasks, to further enable the optimization of human capital within the factory.

Pivotal Capital IQ Adapter was released, which delivers a packaged solution that allows financial services institutions to leverage Standard & Poors Capital IQ data within the Pivotal System.

We released an ASR Conversion Tool to assist customers and partners in migrating their existing software to our new Pivotal 6.0 platform.

We released the French version of Pivotal CRM for financial services 5.9 which delivers several key customization, administration and end user enhancements to expand our offerings in the financial services industry.

Competition

Software Group

The enterprise software industry is very competitive and subject to rapid technological change. A number of companies offer products that are similar to our products and target the same vertical industries as us. In addition to competing with the internal IT departments of our customers, our major competitors in each of our targeted vertical industries include:

• For extended ERP and SCM in the food and beverages, consumer products, pharmaceutical and biotechnology, chemicals, metals and natural products industries: Epicor, Infor, Lawson, Manhattan Associates, Microsoft, Oracle, QAD, Sage, SAP and various other small vendors.

• For vertical CRM in the financial services, homebuilding and real estate, general manufacturing, and healthcare industries: Made2Manage, Microsoft, NetSuite, Oracle, Sage, Salesforce.com, SalesLogix, SAP and various other small vendors.

• For SCM in the distribution industries: i2, Infor, Logility, Manhattan Associates, Oracle and SAP.

• For HRP: Oracle, SAP, Taleo and various local providers in the Greater China market, including Cityray Technology, BenQ Group, Kingdee International Software Group, Shanghai Kayang Information System, Strategy Software Systems, UFIDA Software and Vanguard Software.

Global Services Group

The IT services industry is highly competitive and rapidly changing as customers’ needs are constantly evolving. We compete with firms that range from large global IT consulting firms such as Cambridge Technology Partners, Infosys, Syntel and Wipro, to IT services divisions of large diversified technology companies such as IBM Global Services. In addition, we also compete with the internal IT departments of our customers, as well as several niche services providers that specialize in a geographic market or vertical segments.

CDC Software’s Competitive Strengths

We believe our principal competitive strengths include the following:

We have developed sophisticated products for our targeted vertical industries. We believe that sophisticated buyers seek solutions that are closely tailored to their industry-specific requirements. We believe this demand creates significant advantages for us relative to our competitors that offer generalized enterprise software applications that require significant customization. Our enterprise software applications are industry-specific and allow businesses to immediately benefit because our solutions do not require extensive, costly customizations in order to meet an individual customer’s industry-specific business needs.

Our products can be implemented rapidly, configured and upgraded easily, and are intuitive to use, which helps lower our customers’ total cost of ownership and increase their return on investment. Because

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our enterprise software applications incorporate the unique functionality required by customers in our targeted vertical industries, they can be implemented without the significant customization that is typically required for conventional enterprise software applications. Our applications often require limited configuration, resulting in significant time and cost savings, particularly for mid-sized companies that do not have large IT staffs or budgets for software customization. Beyond initial implementation, our products provide benefits over the lifespan of our customers’ IT systems. An enterprise software application typically undergoes four to five major release upgrades during its eight to ten year lifecycle. Conventional enterprise software applications that have been highly customized typically require rebuilding and retesting with each upgrade. The effort and cost of these upgrades for the customer may rival those of the initial implementation. Because our enterprise software applications require less customization during initial implementation, the complexity of subsequent upgrades is greatly reduced, saving time and money for customers and enabling them to take advantage of software updates. Furthermore, because our applications are designed to meet industry-specific requirements, end-user training requires fewer staff and is less expensive and time-consuming. We believe our products are also more intuitive to use than conventional enterprise software applications, which helps to lower start-up training and deployment costs.

Our products are scalable to meet the needs of growing businesses. Many of our customers require products that support growing numbers of employees, customers and partners. Our enterprise software applications are designed to enable our customers to expand their use of our products as their businesses grow by adding servers without having to re-implement software or retrain personnel. This improves product performance, enables our products to support larger numbers of concurrent users at lower cost, thereby protecting our customers’ original investment in our products, and provides us with ongoing revenue streams as our customers grow.

Our sales and marketing personnel have significant industry expertise in our targeted vertical industries. In the current market environment, we believe buyers are not only seeking tailored solutions, but also long-term business partners who understand and are familiar with the unique and evolving challenges of their industries. In order to address this need and to more effectively develop, enhance and sell our industry-specific solutions, we have sought to attract and retain personnel with substantial experience in the industries we target. Our industry experts understand our customers’ specific business concerns, resulting in a more effective sales force than those of our competitors who sell their products through a generalist sales force. Additionally, due to our focus on offering industry-specific solutions, we believe that our marketing programs are significantly more cost-effective than those of our generalist competitors.

We have a global, diverse and growing base of highly satisfied customers. Our enterprise software applications have been purchased by over 6,000 companies worldwide as of December 31, 2007, and our customer base is growing. During 2007, approximately 51.0% of our total revenues were generated in North America, approximately 24.9% in Europe, the Middle East and Africa, and approximately 24.1% in the Asia Pacific region, whereas during 2006, approximately 56.4% of CDC Software total revenues were generated in North America, approximately 27.4% in Europe, the Middle East and Africa and approximately 16.2% in the Asia/Pacific region. Our global and diverse customer base helps ensure that we are not dependent on any single customer, industry or geographic region. We expect to continue leveraging our existing customer relationships to support our marketing and sales programs through customer case studies, media interviews, speaking engagements and sales references to generate additional leads and sales.

Our business services address a wide spectrum of IT and business needs, create additional cross-selling opportunities and enable us to become a strategic consultant to our software customers and other companies, which helps to build lasting relationships. Our business services offerings extend beyond software implementation, support and maintenance services typically offered by software companies. In addition to these basic services, we also offer industry advisory services, business process improvement services and outsourcing services, such as help desk support, desktop management, enterprise software application management, asset management and custom software development. We also proactively sell additional IT and business consulting services to them. Through these services, we develop advisory

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relationships with our customers, increasing the value we provide and strengthening our competitive position with each account. We also gain early insight into additional software requirements of our customers and create opportunities to cross-sell additional enterprise software applications.

Our Growth Strategy

Our goal is to be an integrated global enterprise solutions company offering a complete range of software products to meet the needs of large and mid-sized enterprises in our targeted vertical industries. We also seek to provide high quality, affordable, value-added services that complement our product offerings and enable our customers to enhance their IT use. The key elements of our growth strategy are to grow our business organically and through selective acquisitions. Specifically, we intend to:

Continue to expand and enhance our industry-specific products and expertise to strengthen our competitive advantages. We intend to continue to focus on offering high-quality solutions to our new and existing customers to address their specialized business, industry and regulatory requirements at an affordable cost. To accomplish this, we intend to:

• develop broader and deeper product functionality to address our customers’ expanding requirements;

• attract and retain employees with business and product expertise in our targeted vertical industries;

• develop additional geographically-specific functionality to address the increasingly local requirements of our customers and enable their expansion on a global basis; and

• provide additional delivery models, such as Software as a Service, or SaaS, to address the preferences of our customers, so that applications suitable for delivery in this manner can be accessed over the Internet on a subscription basis.

Capitalize on cross-selling opportunities into CDC Software’s installed customer base. As of December 31, 2007, CDC Software’s enterprise software applications and services had been purchased by over 6,000 companies worldwide. However, because the licensing and implementation of software solutions involves a significant capital investment, many customers may not purchase all of the modules or applications we offer to optimize their business at one time. Therefore, CDC Software’s large, global customer base provides us with a significant opportunity to sell our new software products, upgrades for existing applications and complementary business services. CDC Software’s sales force has specific sales and marketing personnel dedicated to penetrating our installed customer base. In addition, our business services customers include many companies that are not currently customers of our enterprise software applications, which presents opportunities to sell our enterprise software applications to business services customers in our targeted vertical industries. During 2007 and the first quarter of 2008, software sales to our growing base of customers increased as a percentage of our overall software license sales.

Enhance our customer relationships. With the broad range of services offered by our Global Services Group, we seek to enhance our customer relationships. We offer capabilities to address the broader strategic issues our customers face as their industries evolve, such as identifying leading industry practices and designing such processes into their systems. We also offer additional technical capabilities to enhance our customers’ existing systems or even operate their IT systems on an outsourced basis. We believe this expanded relationship with customers across the spectrum of their IT needs will increasingly become the trend and expectation of purchasers of strategic IT systems.

Selectively pursue acquisitions. We may continue to selectively pursue acquisitions to expand our product and service offerings, extend our geographic reach and grow our customer base. Since 2003, we have consummated over 20 acquisitions many of which have provided additional vertical expertise and solutions in our vertical industry portfolio. For example, in February 2007 we acquired Respond Group Limited, which added complaint and feedback management capabilities to our vertical CRM applications, and in October 2006 we acquired MVI Holdings Limited, which added real-time performance management capabilities to our portfolio of solutions for process manufacturing.

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Target emerging markets for enterprise software applications. We believe that lower cost geographies, such as China and India, represent strong growth markets for enterprise software applications as many companies continue to relocate their operations to those regions due to lower overhead and labor costs. We intend to target opportunities in these emerging markets, as well as opportunities in Latin America and Eastern Europe. In particular, we believe we are well positioned to take advantage of the experience and infrastructure of CDC Corporation’s family of companies in China. We believe our enterprise software applications will have competitive advantages in our targeted vertical industries in these emerging markets.

Expand our in-house software development, services and support centers located in China and India. We perform increasing amounts of our software development, services, and support functions at our in-house development centers located in China and India. While our product development and design decisions are made locally, the actual development work has been increasingly moved offshore. In addition to our development centers in Shanghai and Nanjing, China, we have established a software development center in Bangalore, India to develop our vertical CRM products. Our Shanghai and Bangalore centers have achieved Microsoft Gold Certification. This shift has enabled us to expand the breadth of product development and accelerate delivery schedules while reducing overall development costs. By establishing our own offshore development centers, we believe that we maintain better control over product quality and development schedules than our competitors that have outsourced their development work to third parties. Additionally, locating some of our service and support activities offshore allows us to provide those functions more cost effectively while maintaining quality levels.

Expand into new vertical industries. We have been successful by focusing on our targeted vertical industries, and we intend to expand into new vertical industries where we believe we can establish a competitive advantage. We may pursue such expansion either through strategic acquisitions or through internal product development. We expect to target new vertical industries that have characteristics similar to our existing vertical industries, such as those characterized by complex customer and partner relationships, intricate regulatory requirements and/or sophisticated processes and procedures.

CDC Games Business Unit

Overview

Our CDC Games business unit pioneered the “free-to-play, pay for virtual merchandise” business model for online games in China, and is a leading operator of online games in China. CDC Games’ online game, Yulgang, which was launched in July 2004, was the first free-to-play, pay for virtual merchandise online role playing game in China.

CDC Games has experienced significant revenue and earnings growth since it was formed in the third quarter of 2006. Online game revenues were $33.6 million for the year ended December 31, 2007, compared to $26.8 million for the year ended December 31, 2006, and operating loss from our online games segment was $14.6 million for the year ended December 31, 2007, compared to operating income of $9.5 million for the year ended December 31, 2006. During 2007, and prior to such time, 100% of our games revenues were derived from China.

As a percentage of total revenues, revenues from our online games segment constituted 8.3% of total revenues in 2007.

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CDC Games’ Products

CDC Games offers massive multiplayer online role playing games, or MMORPGs and massive multiplayer online games, or MMOGs, which are online games that allow thousands of users to interact with one another in a virtual world by assuming ongoing roles, or avatars, with different features. In addition to traditional MMORPGs, we also offer more casual games that appeal to a wider audience and enable us to introduce our products to non-gamers through our integrated operating platform. The interactive and group-oriented nature of these games along with the size of our user base helps us retain our current users and attract new users.

Our MMORPGs and MMOGs are action-adventure based, and draw upon fantasy, martial arts and combat themes. Typical features of our games include the following:

• Players assume the ongoing role, or alter-ego, of a particular game character, each with different strengths and weaknesses;

• Each game character may gain experience and, depending upon the game, may collect or purchase from us certain game features, such as weapons, armor, uniforms and magical power, which increases the status of the game character and, in the process, builds a strong game identity which makes the character unique in the virtual game world;

• Although each game character may be unique, groups of players may, and often must, form teams or alliances to fulfill certain game objectives. Players may communicate with each other through instant messaging or chat rooms during the game;

• Special events are held from time to time to stimulate group interest, such as “fortress raids” where players are encouraged to form groups and attack a particular fortress at a specified time; and

• In preparation for the commercial launch of a new game, we conduct closed beta testing of the game in an effort to eliminate technical problems. This closed beta testing is followed by open beta testing in which we allow registered users to play in open market conditions to ensure performance consistency and stability of the game platform and systems.

Current Games

Yulgang

Yulgang is a fantasy martial arts based MMORPG based upon a popular comic book series in Korea. The game creates a precise, rich and colorful cartoon-like virtual gaming world for online users using 2.5D graphics. In the game, players become martial artists and journey through a mythical realm learning martial arts, completing tasks and mastering skills. As they progress, players may choose factions to join and participate in massive battles for the honor of their factions. Players select a character class to play among bladesman, swordsman, archer, healer and spearman, and accumulate abilities and skills which can be carried over to the successively higher game levels. The game was awarded the “Top 10 Most Popular Games” award at the China Game Industry Annual Conference in both 2005 and 2006.

Yulgang can be accessed from any location with an Internet connection. Substantially all of the players in China access the game servers either from PCs at home or Internet cafe outlets equipped with multiple personal computers that have Internet access. Currently, a significant portion of CDC Games’ users access the game through Internet cafes throughout China.

In April 2008, we announced that we had commercially launched Yulgang 2.0, a significant content update for that game.

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Special Force

Special Force, which was developed by, and which we have licensed from, Dragonfly GF Co., Ltd., is a first person shooter online game that originated in Korea. The game allows players to create their own elite military units with customized weapons and equipment selected from those used by special forces from around the world. Special Force has advanced 3D graphics and advanced special effects, and allows users nationwide to play against each other in teams and compete in competitions.

Shaiya

Shaiya is a fantasy-themed “free-to-play, pay-for-merchandise” MMORPG developed by and licensed from the Korean entertainment company, SONOKONG. In addition to its advanced graphics, Shaiya also contains music and sound effects produced by a large orchestra and choir. Players can choose to join either the Union of Fury or the Alliance of Light to take part in an epic feud where they can battle monsters or other players, and join with other players to battle for control of the continent.

Other Current Active Games

In addition to Yulgang, Special Force and Shaiya, we currently offer the following games in the following territories:

Game	Territory	Description
EVE Online	PRC (including Hong Kong & Macau)	EVE Online is a 3D science fiction MMORPG set in outer space. Players can pilot customizable ships as they take part in trading, mining, research, and pirating activities. Unlike many other traditional MMORPGs, EVE Online does not have occupations or levels, which gives players more freedom to explore the vast universe. This game uses a time-based payment model. We have licensed EVE Online from CCP.
Shine Online	PRC (including Hong Kong & Macau)	Shine Online is a 3D fantasy-themed MMORPG based on Japanese comic-style graphics with a wide appeal that includes various age groups and female players. Shine Online uses the “free-to-play, pay-for-merchandise” pricing model. We have licensed Shine Online from Ons On Soft.
Mir III	PRC (including Hong Kong & Macau)	Mir III is a “free-to-play, pay-for-merchandise” 3D fantasy-themed MMORPG. Mir III features martial arts style combat and users can choose between three unique character classes (Warrior, Sorcerer, and Taoist) as they defend the continent from the attacks of the evil forces. We have licensed Mir III from Wemade Entertainment.
Minna de Battle	Japan	Minna de Battle is a “free-to-play, pay-for-merchandise” 3-D Multiplayer Online Action Game which features a range of martial arts skills (Taekwondo, Kung Fu, Boxing, Kobudo), and also contains simple gameplay with support for gamepad input devices. Game modes include Team Play, Battle Mode, and Rumble Mode. We have licensed Minna de Battle from Gretech Corporation.
Lunia	North America	Lunia is a 2D/3D MMORPG that emphasizes action arcade action and is based on the widely popular manga-style of Japanese comics. In April 2008, we announced that we had launched our Skull Island Expansion for Lunia that provides additional challenges and content for players. We have licensed Lunia from Allm Corporation.

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Games Licensing

In addition to our current active games, we license several additional games, which we may launch in the future, including, but not limited to:

Game	Territory	Description
Lord of the Rings Online	PRC (mainland only)	Lord of the Rings Online is a MMORPG set in the Lord of the Rings universe and is the first and only MMORPG based on the literary works of J.R.R. Tolkien. The Lord of the Rings Online allows players to explore the most famous fantasy world of all time, fight the evil minions of the Dark Lord Sauron, and advance their heros by adventuring through the vast reaches of Middle-earth. Gamers can adventure solo or choose from thousands of players online to forge their own fellowships. We intend that The Lord of the Rings Online will be a time-based game. We have licensed this game from Turbine, Inc., a developer based in the United States.
Street Gear	PRC (including Hong Kong & Macau)	Street Gear is a “free-to-play, pay-for-merchandise” 3-D roller blading Multiplayer Online Action Game. We have licensed Street Gear from NFlavour Corp.
DigimonRPG	PRC (mainland only) & North America	Based on a series of very popular Japanese animated television shows, DigimonRPG is massively multiplayer online game based on the Digimon world. We have licensed DigimonRPG from SK Telecom.
DigimonSavers	PRC (mainland only) & North America	Based on a series of very popular Japanese animated television shows, DigimonSavers is the next generation of the massively multiplayer online game based on the Digimon world. We have licensed DigimonSavers from SK Telecom.
Dragon Sky	PRC (including Hong Kong & Macau)	Dragon Sky is a Chinese martial arts-themed MMORPG set in medieval times. We have licensed Dragon Sky from SONOV.
Life Online	PRC (including Hong Kong & Macau)	Life Online is a MMORPG set in Medieval Europe with 3D cartoon-style graphics that features numerous fighting styles. We have licensed Life Online from SONOV.

We have also entered into license agreements for several games that we have subsequently deemed unlikely to succeed, and, therefore we may never launch. These games include Master of Fantasy, Chaosgem, Xeros Online, Dance Fever and Darkness and Light.

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Game Licensing

Mgame Corporation

In December 2003, we entered into our original game license agreement with Mgame Corporation for Yulgang. This agreement was subsequently supplemented in June 2004 to extend the term of our license for Yulgang to December 2007 and provide a 21% royalty on our revenue derived from Yulgang to Mgame. Furthermore, in March 2007, we entered into an additional supplementary agreement with Mgame pursuant to which we extended our exclusive license to Yulgang in China (excluding Hong Kong) through 2010.

On October 17, 2007, Mgame unilaterally announced that they terminated their agreements with CDC Games, alleging breach of contract for non-payment. In October 2007, we filed two lawsuits against Mgame. The first lawsuit alleged breach of contract and that Mgame was not providing adequate technical support for Yulgang, and that Mgame was not supporting CDC Games in its efforts to combat pirate servers. We subsequently filed a second lawsuit alleging that Mgame breached contractual obligations owed to us by failing to provide certain financial and operating data and other information which Mgame is required to provide to us as a shareholder of Mgame.

Following the announcement of our disputes with Mgame in October 2007 and until such time as we resolved these disputes in March 2008, revenues generated by Yulgang declined significantly.

In March 2008, we settled our disputes with Mgame by entering into an Amended and Restated Exclusive Game License Agreement and Settlement Agreement. Under these settlement agreements, CDC Games received exclusive distribution rights to Yulgang in China until March 2010 with an option to extend for an additional year. CDC Games also agreed to work together with Mgame to launch a Version 2.0 upgrade to Yulgang as soon as possible following the settlement. In addition, the settlement agreements provided that our license fee payable to Mgame would be increased to $4.5 million of which $4.0 million of would be paid by us in the form of shares of Mgame held by us. Additionally, we agreed to pay royalty payments equal to 25% of revenues in months where revenues are less than $2.0 million and 28% in months where revenues are greater than $2.0 million, and agreed to terminate the game license agreement with Mgame pursuant to which we received the exclusive right to distribute Wind Forest Fire Mountain, or WFFM, a combat MMORPG developed by Mgame.

In April 2008, we announced that we commercially launched Yulgang 2.0, a significant content update for that game. Revenues from Yulgang have continued to recover since the settlement of our disputes with Mgame, but have not reached the levels we experienced before our dispute arose.

Other Licensors and Developers

In addition to our license agreement with Mgame for Yulgang, to date, we have obtained our content through licensing arrangements with developers and other third parties. We have entered into license agreements with each of Dragonfly GF Co., Ltd. and SONOKONG for Special Force and Shaiya, respectively.

We also monitor the markets to identify and source new online games, particularly the markets in South Korea, Japan and the United States. The cost of licensing games from developers generally consists of an upfront licensing fee, which we generally pay in installments, and ongoing licensing fees, which are equal to a percentage of our revenues from the relevant licensed game. The ongoing royalties for games which have been licensed range from 17% to 29% of total sales before distributor discount. Each of these licenses provides us with the exclusive right to operate the game in Mainland China, and in some instances, certain other territories, including India. Generally, the MMORPG developers agree to timely provide, without any additional charge, with updates, enhancements and improvements developed for the games licensed to us. The majority of our game licenses require the licensors to provide technical support.

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Game Development

While we do not currently have an in-house game development capacity, we are considering either internally developing or acquiring a research and development program.

Game Developer Program and CDC Games Studio. In August 2006 we introduced a Game Developer Program which included an aggregate of US$20.0 million allocated for investment in selected strategic online game developer partners globally. Under the program we sought and intend to seek to make investments in developers through direct cash investments, equity investments, lines of credit or a combination of these. The investments are intended to be used to help these partners build China culturally aware titles, and may be complemented by market research and game research from us. In March 2007, we expanded our online games developer program by forming CDC Games Studio. CDC Games Studio seeks to attract talented games development companies around the world that may already have operations in China or are seeking to relocate or expand into China to take advantage of the market demand for new games, talent in China available for games development and tax incentives available to companies developing games for domestic distribution as well as for export. CDC Games Studio looks to fund the creation of new online games, as well as acquire rights to develop game titles in China, with the goal of publishing and distributing them on a global scale. As of March 31, 2008, CDC Games has entered into definitive agreements for three investments under this program:

• Gorilla Banana. In December 2006, we entered into a subscription agreement pursuant to which we made an investment of KRW1.5 billion (approximately $1.6 million), payable in two installments, in Gorilla Banana Entertainment Corp., an independent online games development company in Korea. This investment, which was subject to certain regulatory approvals, was closed, and consideration was exchanged, upon receipt of these required approvals in first quarter of 2007. In connection with this investment, we acquired a minority equity stake in Gorilla Banana and options to increase our minority stake in the company during the 18 month period following closing. Furthermore, we also acquired the exclusive right to distribute Gorilla Banana’s game, Red Blood, based on a popular comic book series in Korea, India and China, in exchange for the payment of a royalty on gross revenues we may receive for this game. In addition, we also entered into a shareholders’ agreement with the existing shareholders of Gorilla Banana pursuant to which the parties agreed to certain uses of funding, preemptive and maintenance rights, rights of first refusal, restrictions on share transfers and sales, board representation rights, information rights and other matters. We have since incurred a loss of $1.1 million as a result of our investment in Gorilla Banana.

• Auran. In March 2007, we entered into a subscription agreement pursuant to which we made an initial investment of approximately $1.7 million in Auran, a developer of online games in Australia, and entered into a facilitation agreement whereby we would receive a percentage of revenues on the sales of Fury, an MMORPG developed by Auran. In connection with this investment, we acquired a minority equity stake in Auran and options to increase our minority stake in the company during the 6 month period following closing. In July 2007 we exercised our first option to purchase additional shares of Auran by paying an additional $1.7 million. We have since incurred a loss of $3.3 million as a result of our investment in Auran.

• Mgame. In March 2007, we entered into a subscription agreement pursuant to which we made an investment of $5.0 million in Mgame Corporation, one of South Korea’s leading developers of online games, including our current game, Yulgang. In connection with this investment, we acquired a minority equity stake in Mgame, for which we paid Mgame $5.0 million at closing. We also obtained rights relating to our access to information on Mgame, observation rights on Mgame’s board of directors, pre-emptive and anti-dilution rights, as well as a right for us to consent prior to the issuance of new debt by Mgame over certain monetary thresholds. Additionally, in March 2007, we entered into an exclusive game license agreement with Mgame pursuant to which we received exclusive rights to distribute the simplified Chinese version of Mgame’s next MMORPG, WFFM, in the PRC (including Hong Kong and Macau) until 2010. Pursuant to the Settlement Agreement by and between us and Mgame under which we settled all disputes with Mgame, we transferred $4.0

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million of the shares of Mgame purchased in March 2007 as partial payment of the license fee set forth in the Amended and Restated Game License Agreement and Settlement Agreement. Furthermore, we terminated the license agreement for WFFM pursuant to the Settlement Agreement.

Pricing

To date, we have adopted a “free-to-play and pay for virtual merchandise” business model for most of our currently-offered online games (with the exception of EVE Online) and anticipate that many of the games in our pipeline will operate on a similar business model. Under this model, game players are not charged for time spent in the virtual game world, but rather for purchasing value-added virtual merchandise and services through the online game shop, such as weapons, armor, uniforms and magical power. While such a business model has been previously utilized in Korea, Yulgang represents the first instance of such a business model being adopted for a large scale MMORPG in China.

Setting prices for virtual items is generally formulated as part of the underlying economic model for the game during its development. However, we have the ability to adjust prices for virtual items as part of tuning the game, although care must be taken that we will not upset the underlying economic model. We generally look at pricing curves to set and adjust prices for virtual merchandise offered. Pricing curves are developed primarily based on internal game factors such as the popularity of an item and the nature of the enhancing characteristics the item provides, as well as external game factors such as game cost, user game playing and the pricing of competing games in the market. We attempt to adjust prices of virtual merchandise based on the feedback of users and offer various discounts on merchandise from time to time; however, once pricing of virtual merchandise is set, it can be difficult to make significant adjustments to the prices during the game’s commercial lifecycle. We have generally maintained stable pricing curves for our games.

Payment

While most of our games are free to play, in order to purchase virtual merchandise for the game, users must purchase pre-paid points which are sold in both physical card form or can be purchased electronically online and through mobile sales partners. Each pre-paid card, purchased in physical form or electronically, contains a unique access code and password that enables users to add value to their account for our online games. As users purchase virtual merchandise in the gaming world, charges are deducted against the value in their account.

Distribution

We distribute pre-paid cards through an offline distribution system of physical pre-paid cards. We generally sell pre-paid cards to a group of regional distributors from whom we generally collect payment on a prepaid basis. These distributors resell the cards to sub-distributors that, in turn, distribute the cards directly to Internet cafes and other retail points of sale, such as software stores and newspaper booths. Our sales policies and distributor incentive systems generally discourage our regional distributors from distributing pre-paid cards of other online game operators. In 2007, we offered sales discounts that averaged between approximately 13% and 15% to our distributors. The sales discount represents the difference between the price at which we sell game cards to distributors and the face value of the game cards. For our physical cards, we estimate that our network reaches over 200,000 retail points of sale throughout China, over 75% of which are Internet cafes, which are one of the primary venues for users to play online games in China.

We have both online and mobile sales partners to distribute points for our games. Our mobile sales partners include China Mobile, China Unicom and China Netcom. Points may also be purchased online through several popular Chinese websites, such as www.cupoo.cn, www.cncard.com and www.996.com.

Customer Service

Since our inception, we have focused on providing excellent customer service in order to retain our existing customers, as well as attract new customers.

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Game Masters. We have in-game game masters to constantly monitor our games to maintain an effective and fair gaming environment. Our game masters are responsible for organizing in-game events, troubleshooting and actively and continuously monitoring the online game environment. Game masters are always available to respond to players’ inquiries, initiate the bug reporting and removal process, as well as identify, record and deal with players’ inappropriate behavior such as cheating and fighting. We believe that utilizing game masters to monitor the gaming environment is an important element in maintaining customer loyalty and efficiently addressing technical problems as they arise.

Customer Service Center. Our centralized customer service center is located in Beijing, China, and is operated 24 hours a day, seven days a week. Customers may call or e-mail our customer service center any time and receive timely responses. As of December 31, 2007, we employed approximately 229 full time personnel in our call center as customer service specialists. In general, our customer service representatives are able to immediately handle approximately 65% of the inquiries from our customers, and provide solutions within 24 to 48 hours with respect to requests that cannot be resolved at the time of the initial customer call. All of our customer service representatives have participated in a formal training program before commencing work. We have implemented detailed performance measures to monitor our calls to ensure that our customers will receive quality service. We periodically review staffing needs and train our representatives to provide excellent customer service.

We also maintain reception areas in our offices in Beijing and Shanghai that are open to the public for customer service purposes.

Marketing

Our overall marketing strategy is to rapidly attract new customers and increase revenues from recurring customers.

We employ a variety of traditional and online marketing programs and promotional activities to build our brand and attract new customers, including advertising in many game magazines and online game sites that are updated regularly. In addition, we engage in on-site promotions, such as distributing free game related posters at selected Internet cafes, and in-game marketing from time to time, including player competitions in Internet cafes across the country and online adventures for prizes. We also conduct communications programs to establish and maintain relationships with key trade press and industry analysts.

Technology

We aim to build a reliable and secure technology infrastructure to fully support our operations. Our current technology infrastructure consists of the following:

• over 138 server groups and over 350 network devices located at 25 Internet data centers, in different sites regions throughout China. As of December 31, 2007, we owned a majority of the servers in the server network used for our game operations, and we leased the remainder from third-party telecommunications operators. All of the servers in the server network for our game operations are located on the premises of our hosting telecommunications operators.

• proprietary software and game monitor tools that are integrated with our websites and customer service center operations; and

• hardware platform primarily consisting of Lenovo, Hewlett-Packard/Compaq, Dell and IBM servers.

We have direct access to the Internet backbone. CDC Games also has contracts with reputable vendors such as Hewlett-Packard Company and Dell Inc. for warranty services for our hardware platform. As of December 2007 we employed 60 technical support staff to maintain our current technology infrastructure and develop new software features to further enhance the functionality of our membership management and payment system.

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CDC Games has a network operation team responsible for stability and security of our network. The team follows the workflow for problem detecting, recording, analyzing and solving. The primary responsibilities of the team members consist of monitoring system performance, troubleshooting, detecting system error, random sample testing on servers, maintaining equipment, and testing, evaluating and installing hardware and software. In addition, we frequently upgrade our game server software to ensure the stability of our operation and reduce hacking risks.

Competition

The online game market in China is increasingly competitive. A significant number of competitors have entered the online game business in China and we expect more companies to do the same in the future. Additionally, we expect a wider range of online games to be introduced to the China market. Competition from other online game operators, both based in China as well as overseas, is likely to increase in the future. As the online game industry in China is relatively new and constantly evolving, our current or future competitors may compete more successfully as the industry matures. In particular, any of these competitors may offer products and services that provide significant performance, price, creativity or other advantages over those offered by us. Some of our existing and potential competitors have significantly greater financial and marketing resources than we do.

With respect to our online games business, we compete principally with the following three groups of companies in China:

• Online Game Operators, such as Shanda Interactive Entertainment Ltd. (NASDAQ: SNDA) which operates The Legend of Mir II, The9 Ltd. (NASDAQ: NCTY) which operates the World of Warcraft and Shanghai Everstar Online Entertainment Co. Ltd. which operates O2JAM and Audition;

• Major Internet Portal Operators, such as NetEase.com, Inc. (NASDAQ: NTES) which operates Fantasy Westward Journey and Westward Journey Online II, Sohu.com Inc. (NASDAQ: SOHU) which operates Tian Long Ba Bu (TLBB) and Blade Online (BO) and Tencent Holdings Limited (SEHK: 700) which operates QQ Fantasy and QQ Tang; and

• Domestic Online Game Developers such as Kingsoft Corporation Limited (SEHK: 3888) which operates Chun Qiu (CQ) and Shui Hu (SH), Perfect World Co., Ltd. (ADR) (NASDAQ: PWRD) which operates Perfect World, Perfect World II and Zhu Xian, Giant Interactive Group Inc. (NYSE: GA) which operates ZhengTu and NetDragon Websoft Inc. (SEHK: 8288) which operates Eudemons Online.

In addition, we compete for users against various offline games, such as console games, arcade games and handheld games, as well as various other forms of traditional or other online entertainment.

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CDC Games’ Competitive Strengths

We believe CDC Games’ principal competitive strengths include the following:

Ability to localize games from leading and emerging international developer partners. We have partnered with leading global online game developers and successfully localized their products for the Chinese market. Through our network of relationships we have entered into licensing agreements to distribute, market and operate proven, high-quality titles at low cost, leveraging the significant investments our partners have made in game development. We believe that our localization capabilities, significant distribution network, established user base, and knowledge of the Chinese market make us well-positioned to obtain future licenses for leading online games in China and other rapidly growing Asian markets.

Substantial product pipeline and portfolio across game genres. We have secured a substantial product pipeline across online gaming genres which we believe will offer our community of users one of the most diverse game portfolios of online game operators in China. We believe that a diversified approach allows us to reduce the effect of “hit or miss” games, particularly as many of our titles have been tested and widely played in other countries. We believe that our diversification of leading titles positions us well to attract users in different genres, which we believe is important to address emerging consumer tastes and evolving PRC regulations.

Pioneer and leader in the “Free-to-Play” business model in China. As there is no charge to play games in our “Free-to-Play” business model, we believe that more prospective players are attracted to try our games. When combined with the high quality of the games we offer, we believe that players are often drawn to continue playing the game and to enhance their skill level and maximize their gaming experience by purchasing virtual items. As the pioneer of the free-to-play, pay-for-virtual-merchandise business model, we believe we have developed expertise not easily replicable by understanding both the art and science of the in-game item sales model, which includes understanding what items to sell, when to sell and who to sell to. In addition, through our leadership position in free-to-play games, intend to continue to attract game developers to license high-quality games to us for distribution and operation in China.

Extensive nationwide sales and marketing network. In order to play our online games, users must purchase prepaid points which are sold in physical form or can be purchased electronically online and through mobile sales partners. We have built a nationwide network in China to distribute our prepaid points and market our games through local media and Internet cafés. For our physical prepaid cards, we estimate that our network reaches over 200,000 retail points of sale throughout China, over 75% of which are Internet cafés, which are a key venue for online gamers in China. In addition, we have formed partnerships with China Mobile, China Unicom and China Netcom for mobile points card sales, and numerous Chinese websites, such as 1717gm.com, 51gw.com and 15173.com for online points card sales.

Advanced technology platform. We maintain an extensive national server network to host our online games. Due to the real-time interaction among thousands of users, the stable operation of an online game requires advanced data centers with numerous interconnected servers and continuous connectivity, representing significant capital investment and resources to grow and maintain. As of December 31, 2007, our nationwide server network in China consists of approximately 138 server groups with the capacity to accommodate approximately 800,000 concurrent online users. Due to China’s large geographical area and technological limitations, we have located servers for our online games in a number of regions throughout China. As a result, we believe that our users can play our games using servers located in their region and without exchanging data across the national network, thereby increasing the speed at which our games operate and enhancing the user experience. Additionally, we have developed and maintained proprietary security software which helps us combat unauthorized access to or use of our games by local hackers.

Scalable, high-margin business model. Our online games business is highly scalable with relatively low incremental operating costs. After incurring initial licensing and localization costs for our online games, we can deliver such products and services to a large online games audience quickly and at a low cost. Additional users can be accommodated and revenues generated without incurring significant costs other than those associated with implementing additional servers.

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CDC Games’ Goals and Strategies

Our goal is to become one of the world’s leading providers of online games. Our strategies for achieving this objective include the following:

Utilizing our strategic investment program to strengthen ties to emerging and leading online game developers which we believe will enhance our game pipeline. We have introduced CDC Games Studio, through which we intend to make investments in selected strategic online game developer partners. We plan to partner with developers that have successful track records in the development of top quality and commercially successful online games. Under the program we seek to make strategic investments in these developers through direct cash investments, equity investments, lines of credit or a combination of these methods. We intend that these investments will be used to help these partners develop titles localized for the Chinese consumer and other markets we plan to target, and will be complemented by market and game research we will provide.

Continue to significantly expand and diversify our user and revenue base by continually adding new content and features to our existing portfolio of games while also introducing different genres of online games. We believe that one of our greatest assets is the large number of registered users we have been able to attract to our games. By releasing new versions of our existing games, updating items available for sale and adding new chapters, we believe that we can keep existing users interested in playing our games and can further expand our user base, thereby improving revenues per user and consequently overall game revenues. For example, in April 2008, we launched the Yulgang version 2.0, which provided gamers with enhanced abilities and content. In addition to the diversification of offerings within our current games, we intend to introduce different genres of online games into the market such as casual as well as different types of MMOGs outside of the traditional fantasy-based role-playing genre in order to reach the broadest audience possible.

Pursue cross-selling opportunities and diversify our sources of revenue. We intend to pursue cross-selling opportunities to expand and diversify our sources of revenues, such as seeking to generate advertising revenue from our online games. We believe the combination of our online games platform, our large registered user base and the large number of concurrent users playing our games will provide an established marketing platform for advertisers. Advertising opportunities include sponsorships, banner advertising, sponsored community events, contests and other activities. While we have not sought to grow our advertising revenues to date, we believe that such diversified sources of revenues represent a significant opportunity for us in the future.

Continue to expand our distribution, sales and marketing capabilities to further support our game offerings. We intend to continue to build our sales, marketing and distribution network in China and other targeted high-growth markets to reach the broadest audience possible. We plan to expand our partnerships with physical-point card distributors providing access to distribution points at software stores, Internet cafés, newspaper booths and other local media outlets while also increasing our partnerships with online and mobile distribution providers to ensure as many users across as many distribution channels as possible have knowledge of and access to our games. We plan to use our own CDC Games local ground marketing teams to complement our distribution partnerships by coordinating on-site promotional activities with administrators of Internet cafés and other locations where gamers spend a significant amount of time and initiate marketing campaigns with local media outlets to introduce our products to potential users. We also intend to develop innovative new marketing campaigns across other forms of media such as television to further promote our online game offerings and attract new users to try our games.

Continue to expand through acquisitions of online game companies in China and overseas markets as such opportunities arise. We intend to pursue this strategy by making a combination of minority-stake investments, joint ventures, acquisitions and organic development. We intend to complement our current content acquisition strategy by evaluating potential strategic acquisitions that we believe will further diversify our product portfolio, secure in-house development expertise and/or accelerate our expansion into foreign markets. We evaluate our product portfolio on a regular basis and will look for opportunities to acquire companies with a portfolio of titles that will broaden our community of users and provide differentiated product offerings for our current user base. For example, we believe casual games such as card games, board games and tile games, have a lower level of complexity and require less time to play, providing less experienced online game players with a means to become familiar with both game playing and the online game culture without making substantial commitments of time and resources. In addition to

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genre expertise, we actively research strategic opportunities that will accelerate our international expansion efforts either through the acquisition of a localized product portfolio or an operating platform that will allow for the delivery and management of games in high-growth foreign markets.

Seek to expand our online game offerings into other international markets. In December 2007 we launched Minna de Battle, our first online game to be offered in Japan, and in February 2008, we launched Lunia, our first MMORPG commercially available in North America. We intend to continue our expansion in Japan and North America and expand into other online gaming markets exhibiting similar growth and user base characteristics to China. We hope to accomplish this through leveraging the current portfolio of titles and developer partnerships we have generated and by establishing operations in other territories by sub-licensing titles to proven online game operators in the key markets we have identified as expansion opportunities. We also intend to opportunistically partner with or acquire key developers and/or operators that provide a strong entrée into these targeted online games markets.

China.com Business Unit

Overview

During 2007, our China.com business unit was engaged in providing mobile services and applications and internet and medial products and services and was comprised of two segments, “Mobile Services and Applications” and “China.com”. In February 2008 we announced that, due to negative effects caused by the regulatory environment surrounding the MVAS industry in China, we decided to discontinue the operations of our Mobile Services and Applications business and currently, our China.com business unit is comprised of a single segment, “China.com”.

Total revenues for the China.com segment were $11.4 million for the year ended December 31, 2007, compared to $10.0 million for the year ended December 31, 2006. As a percentage of total revenues, revenues from our China.com segment constituted 2.8% of total revenues in 2007 and 3.3% of total revenues in 2006.

Products and Services

Mobile Services and Applications segment. During 2007, and in earlier periods, we offered a suite of mobile data applications, including dating, chatting, entertainment, information-related content and community services to mobile subscribers in China utilizing SMS, MMS, WAP and IVR services.

In June 2006 we were alerted to policy changes for all subscription services on China Mobile’s, or CMCC’s, Monternet platform, which affected the Company’s MVAS subscription services. These changes, which were implemented under the policy directives of China’s Ministry of Information Industry, aimed to address industry-wide objectives, including reducing customer complaints, increasing customer satisfaction and promoting the healthy development of the MVAS industry and CMCC’s Monternet.

As a result of these significant industry-wide directives, for the year ended December 31, 2007, our total mobile services and application revenue for the year ended December 31, 2007 was $8.3 million, compared to $31.9 million for the year ended December 2006, representing a decrease of approximately 73.8%. During 2007, SMS and MMS continued to be our primary revenue generating businesses at China.com, representing approximately 52.1% and 23.6% respectively, of the total mobile services and applications revenue. The remaining revenues were mainly comprised of our WAP and IVR services.

As the regulatory environment for the MVAS industry continued to be difficult we determined that there was no reasonable instance where our MVAS business would be profitable in the foreseeable future. As a result, in February 2008, we announced that we were discontinuing our MVAS business and we have since discontinued these operations.

China.com segment. Our China.com business is focused on online entertainment and Internet products and services that target users in China and Chinese communities worldwide via our portal network ( and ). This segment also includes our Singapore-based travel trade publisher and organizer serving the travel and tourism industry in the Asia Pacific region. The China.com business offers the following products and services:

Portal. The services and products of our portal include online advertisement, search, enterprise service and mail services.

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Travel and Trade Services. TTG publishes literature for the travel industry and organizes industry events. It is one of Southeast Asia’s most established information and access providers to the travel and tourism industry. TTG offers a wide range of travel and tourism media products, including publications, exhibitions, database management and Internet products. TTG also offers integrated marketing solutions and a platform for customers to showcase their products and services in the travel and tourism industry. TTG sells its products and provides services directly to its customers, such as travel associations and government agencies.

Internet Video. In November 2006, we announced that China.com launched a new service, v.china.com, which allows people to watch video clips from that site. We believe the v.china.com site is different from many other video sharing websites because its content comes from self-developed or co-developed video films or authorized pieces provided by contracted partners. We believe this approach helps address certain copyright issues which have long plagued the video sharing industry.

Furthermore, in August 2007, China.com signed a content agreement with Forbes. Under the agreement, Forbes.com will provide the China.com portal with a variety of content in English and in Chinese. In addition, during the third quarter of 2007, the China.com portal established a strategic partnership with www.globalsources.com (NASDAQ: GSOL), a leading business-to-business (B2B) media company and a primary facilitator of two-way trade with Greater China.

Recognizing the growth and potential of the online games sector in China, China.com also intends to expand its current games channel into an informational and interactive games platform and intends to forge strategic partnerships with leading domestic and international game developers to launch browser-based games, many of which are sports games, to help capture a fast growing market and to capture the advertising opportunities created by the 2008 Olympics. The portal is also expanding content on games-related news and information, offering the China.com games channel as an attractive choice for game advertisers. Additionally, in November 2007, China.com signed an advertising contract with Giant Interactive Group Inc. (NYSE: GA), one of the leading online games developers and operators in China.

Sales

Our China.com business unit is also focused on launching promotions both through our portals and the general media. Currently, we have approximately 58 sales and marketing personnel who are located throughout China, including in Beijing, Nanjing, Shandong, Guangdong and Hangzhou. Our primary sales and marketing initiatives focus on direct marketing through consumer portals like , which is not part of this Annual Report, and general media advertising in traditional media, including point-of-purchase promotions, newspaper and magazine advertisements, radio and TV advertisements.

Competition

Our China.com business unit also operates in an increasingly competitive environment and faces increasing competition for content, user traffic, ease of use and functionality. Such competitors include Chinese and/or English language based Web search and retrieval companies, including AltaVista Co., Apple Daily, ChinaByte, FindWhat.com, HotBot, HotWired Ventures, Lycos, Inc., Mingpao.com, MSN, Netease.com, Inc., Netvigator.com, Overture Services, Inc. (acquired by Yahoo!, Inc.), Shanghai Online, Sina Corporation, Sohu.com, Inc., Tom Online Inc. and Yahoo!, Inc. We also encounter increased competition from Internet service providers, Web site operators and providers of Web browser software, including Microsoft Corporation or Netscape Communications Corporation, that incorporate search and retrieval features in their products.

China.com’s Competitive Strengths

We believe that China.com benefits from strong brand recognition in China. As of June 2008, Alexa ranked our domain, www.china.com, in the range between 140 and 160th of all websites globally, and also ranked www.china.com as 14th among all simplified Chinese character websites, as measured by user traffic.

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In addition, we believe China.com benefits from the growth of online advertising and its established strategic partnerships with Internet industry leaders in China.

China.com’s Goals and Strategy

Our goal for our China.com business is to be a leading portal company in China., and we intend to continue to place emphasis on the development of our portal network. We believe that the portal network will play a critical role in driving synergies among our other related businesses, including our online games business and will serve as a strategic and core business platform.

In addition, we have begun to implement a repositioning strategy for the portal network to sharpen its vertical focus, and extend the depth of its product offerings in selected channels which includes Automobile channel and Webgames channel.

China.com and CDC Mobile Strategic Partnerships, Agreements and Investments

Google. In July 2006, China.com and Google formed a strategic partnership, which was expanded in July 2007 to improve search experiences for Internet users in China. Under the agreement, Google’s WebSearch service will be embedded in China.com’s search box, allowing users to switch between online content and web page search. In addition, China.com intends to utilize Google AdSense program to deliver relevant advertisements that generate revenue and enhance the user experience.

Soufun. In 2005, China.com formed a strategic relationship with Soufun, one of China’s leading real estate websites. We believe this partnership has enriched our content in those channels and improve user’s experiences. The China.com portal will continue to broaden its partnership with leading websites in various vertical sectors.

Our Intellectual Property

We have acquired a significant amount of intellectual property and we are increasingly developing our own intellectual property. We regard the protection of our trademarks, service marks, copyrights, trade secrets, domain names, and other intellectual property rights as crucial to our success. We rely on a combination of copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information and technology. Copyrights or trademarks held by us, however, may be challenged or determined to be invalid. In addition to the protection generally available to unregistered trademarks under the laws of many jurisdictions, we also protect our trademarks through registration primarily in the United States and Canada, although we do seek such protection elsewhere in selected key markets. However, protection may not be available in every country in which our intellectual property and technology is used. Some countries, such as China, may not protect our proprietary rights to the same extent as in the United States and Canada. In particular, software piracy has been an issue in China for many software publishers. Policing the unauthorized use of our licensed technology is difficult as are the steps necessary to prevent the misappropriation or infringement of our licensed technology. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our proprietary rights. Any of these claims, with or without merit, could result in costly litigation, divert our management’s time, attention and resources, delay our product shipments or require us to enter into royalty or license agreements.

As part of our confidentiality procedures, we have policies of entering into non-disclosure and confidentiality agreements with our employees, consultants, corporate alliance members, customers and prospective customers. We also enter into license agreements with respect to our technology, documentation and other proprietary information. These licenses are non-exclusive and generally perpetual. We provide for source code escrow arrangements under some of our license agreements. Despite the efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our products or technology that we consider proprietary and third parties may attempt to develop similar technology independently.

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Most of our products do not contain the functionality to allow us to accurately track the numbers of users of our products at a customer site. Because some of our license agreements are for named-user licenses in which only a certain limited number of named individuals are permitted to use the software for which the license is granted, if our customers do not accurately report the number of users using our products or we cannot accurately track the number of users of our products at a customer site, we face the potential of lost revenues if the customer has a greater number of users than for which they have purchased licenses. License agreement provisions, such as requesting customers to perform annual self audits of the number of users at a customer site, provide only limited protection and are retrospective.

We currently sub-license and distribute the intellectual property and technology of third parties. As we continue to develop intellectual property and introduce new products and services that require new technology, we anticipate that we may need to obtain licenses for additional third-party technology. These existing and additional technology licenses may cease to be available to us on commercially reasonable terms, or at all. In addition, it is possible that, in the course of using new technology, we or our agents acting on our behalf may inadvertently breach the technology rights of third parties and face liability for our breach. Our inability to obtain these technology licenses or avoid breaching third-party technology rights could require us to obtain substitute technologies of lower quality or performance standards or at greater cost which could delay or compromise the introduction of new products and services, and could materially and adversely affect our business, results of operations and financial condition.

Legal Proceedings

As of June 2008, other than as set forth below, there is no material litigation pending against us. From time to time, we and our subsidiaries are a party to other litigation and claims incident to the ordinary course of business. While the results of such litigation and claims cannot be predicted with certainty, we believe that the final outcome of such other matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Class Action Lawsuit. A class action lawsuit was filed in the United States District Court, Southern District of New York on behalf of purchasers of our securities between July 12, 1999 (the date of our IPO) and December 6, 2000, inclusive. The complaint charges we and the underwriters in our IPO with violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that the prospectus used in our IPO was materially false and misleading because it failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors, in exchange for which the underwriters allocated to those investors material portions of the restricted numbers of the Company’s shares issued in connection with the IPO; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate our shares to those customers, in exchange for which the customers agreed to purchase additional shares in the aftermarket at pre-determined prices.

In June 2003, the plaintiffs in the consolidated IPO class action lawsuits currently pending against us and over 300 other issuers who went public between 1998 and 2000, announced a proposed settlement with us and the other issuer defendants. The proposed settlement provided that the insurers of all settling issuers would guarantee that the plaintiffs recover $1.0 million from non-settling defendants, including the investment banks that acted as underwriters in those offerings. In the event that the plaintiffs do not recover $1.0 million, the insurers for the settling issuers will make up the difference. Under the proposed settlement, the maximum amount that could be charged to us insurance policy in the event that the plaintiffs recovered nothing from the investment banks would be approximately $3.9 million. We believe that we have sufficient insurance coverage to cover the maximum amount that we may be responsible for under the proposed settlement. The independent members of our Board of Directors approved the proposed settlement at a meeting held in June 2003. As of March 2005, outside counsel advised that the court has granted preliminary approval of the settlement, subject to certain conditions. In August 2005, the court preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes in the six test

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cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings (the action involving the Company is not one of those test cases). In June 2007, the court entered an order terminating the proposed settlement based on a stipulation among the parties to the settlement. Plaintiffs have filed amended master allegations and amended complaints and moved for class certification in the six test cases, which the defendants in those cases have opposed. In March 2008, the court largely denied the defendants’ motion to dismiss the amended complaints in the six test cases. It is uncertain whether there will be any revised or future settlement. If the litigation proceeds, we believe that we have meritorious defenses to plaintiffs’ claims and intends to defend the action vigorously.

ManTech International Corporation and ManTech Australia International Inc. In October 2005, ManTech International Corporation and ManTech Australia International Inc, filed a civil action against our subsidiaries CDC Australia Limited and CDC Australia (Praxa) Pty Ltd (collectively, “CDC Australia”), alleging that CDC Australia failed to pay AU$5.0 million that was retained as part of the consideration for the acquisition of Praxa Limited. In late 2005, CDC Australia filed and served a request for further and better particulars of the statement of claim and a request for the filing of security of costs. The plaintiffs have answered the requests for further and better particulars, and further directions as to the conduct of the action were given by the Court soon after plaintiff made payment of security for costs in January 2007. The parties are engaging in discovery and interrogatories under a new timetable, and other preliminary procedural steps through early 2008 have been set. At a hearing held in February 2008, plaintiffs filed and served answers to defendants’ interrogatories and a directions hearing was scheduled for March 2008. Plaintiffs have now requested additional discovery. We believe that the AU$5.0 million was rightfully retained by CDC Australia in accordance with the terms of the acquisition agreement, and the action is without merit. We intend to vigorously defend such action. Management considers the outcome of any judgment on the lawsuit with respect to us to be uncertain and the amount of any expenditure from the lawsuit is not estimable.

Lam, Po Chiu Mark. In December 2003, Mr. Mark Lam filed a civil action in the High Court of Hong Kong against our subsidiary Ion Global (BVI) Limited alleging breach of contract in relation to a put option agreement under a share purchase agreement in an amount of approximately $0.7 million. Pleadings closed in April 2004 when Mr. Lam filed his reply to the defense filed by Ion Global. The case was largely dormant until late 2005 when the plaintiff sought and was granted leave to amend his statement of claim and to join CDC Corporation, our parent company, as a party. CDC Corporation was joined in July 2006. In January 2007, Mr. Lam also joined a member of our board of directors, Mr. Peter Yip, to the proceedings. An amended statement of claim and an amended defense have been filed by the plaintiff and defendants, respectively. Management considers the outcome of any judgment in this matter to be uncertain and the amount of any expenditure from this matter is not estimable. We believe that this action is without merit and intend to vigorously defend such action.

Marjorie Fudali. In June 2003, Majorie Fudali (“Fudali”) filed a civil action in the United States District Court for the District of Columbia against Pivotal Corporation, alleging that she was owed commission in the amount of $0.4 million plus override commissions under a compensation plan allegedly agreed between her and a former senior executive of Pivotal, and wages under District of Columbia wage laws. In early 2004, Pivotal’s motion to dismiss the wage law claim was granted. In July 2004, Fudali amended her claim to add a promissory estoppel ground. In August 2004, Pivotal filed a motion for summary judgment, which was denied by the Court, ruling that factual disputes existed, which should be resolved at trial. Shortly before the jury trial which was scheduled to occur in January 2007, Fudali alleged that new facts came into light and amended her damages claim to $2.3 million. As a result, the jury trial was adjourned. The jury trial took place in October 2007, and a verdict against Pivotal was returned. The Court ordered Fudali to provide a calculation of the amount that Fudali believes she may be entitled to based on the verdict. Fudali has provided two alternative calculations, in the amounts of $1.9 million and $1.8 million. Pivotal has challenged those calculations and is awaiting a hearing and the Court’s decision on the amount.

Jason Leedy. In August 2002, Mr. Jason Leedy filed a civil action against Vis.align, LLC, which we acquired in December 2006. Mr. Leedy has alleged that his employment with Vis.align had been wrongfully terminated, and severance pay and other amounts were owing to him, and sought damages in the amount of $0.3 million. After a jury trial in which a verdict favorable to Mr. Leedy was returned, the Court entered judgment in the amount of $0.4 million, which included $0.1 million in attorney’s fees and costs. Vis.align

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has appealed to the Pennsylvania Superior Court. In September 2006, the Superior Court ordered that the judgment below based on the jury verdict be vacated, and that judgment be entered in favor of Vis.align notwithstanding the verdict. In November 2006, the Superior Court granted Mr. Leedy’s petition for rehearing en banc and withdrew its September 2006 decision. In March 2008, an evenly divided Superior Court issued two opinions, one in support of reversal of the trial court and one in affirmance of the trial court. As the Superior Court was evenly split, the trial court’s decision was affirmed by default, leaving the defendants liable for approximately $40.4 million. A petition requesting review by the Pennsylvania Supreme Court was filed in April 2008 and remains pending.

Asian Media Company Limited. Optic Communications Co., Ltd received an arbitration claim of approximately $0.5 million from Asian Media Company Limited claiming damages related to an alleged breach of contract under an undated 3-party agreement among Guangzhou Optic Communications Co., Ltd, Asian Media Company Limited and Changchun YaAo Resources Development Company Limited. We intend to vigorously defend such action. Management considers the outcome of this matter with respect to us to be uncertain and the amount of any expenditure from this matter is not estimable.

Chan. In March 2007, we filed suit against Steven Chan (“Chan”) and Bing Corporation (“Bing”), alleging that Chan and Bing illegally obtained option shares in CDC Corporation. In April 2008, Chan and Bing filed a cross-complaint against CDC Corporation and CDC Corporation Ltd. alleging breach of an oral contract and various tortious claims including interference with the exercise of purported options, and defamation. Chan and Bing currently allege damages: (i) in excess of $1.0 million arising from alleged inability to exercise stock options at more favorable dates, (ii) in excess of $0.2 million for various payments alleged to be due to Chan and/or Bing, and (iii) unspecified damages for libel.

Pure Biosciences. In June 2007, Pure Biosciences (“Pure”) filed a complaint in the Southern District of California asserting claims for breach of contract, breach of express warranty, breach of implied warranty of merchantability, breach of the implied warranty of fitness for a particular purpose, and rejection of goods and/or revocation of acceptance related to a Software License and Professional Services Agreement and related Statement of Work and Master Work Order Pure entered into with Ross in March. In August 2007, Ross filed a motion to dismiss the complaint. Pure did not respond to Ross’s motion, but instead filed an amended complaint in October 2007. In November 2007, Ross filed a second motion to dismiss, and in an order dated April 4, 2008, the Court granted Ross’s motion without prejudice. Pure filed its Second Amended Complaint In May 2008 asserting claims for breach of contract, breach of express warranty, and rejection of goods/revocation of acceptance and seeking attorney’s fees and damages of at least $0.2 million. Ross filed its third motion to dismiss in May 2008, arguing that Pure still failed to adequately allege that the software failed to conform to the terms of the parties’ License Agreement or the express warranty it contains and that Pure cannot state a claim based on alleged pre-contractual marketing statements because the License Agreement contains a merger clause. Pure filed its response in June 2008, and Ross’s reply is due June 23, 2008. The Company cannot predict when the final resolution of this litigation will occur, and it is not possible to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss with respect to this matter.

William McKenna (“McKenna”). In November 2007, McKenna filed a civil action in the District Court of Denver County, Colorado, against the Company’s subsidiary, CDC Software, Inc. alleging he was terminated from his position as a sales account executive in violation of public policy, based on his refusal to engage in allegedly improper sales practices. McKenna is seeking compensatory damages in an unspecified amount, damages for emotional distress and exemplary damages. In January 2008, the Company removed the case from the Colorado State Court to the U.S. District Court for the District of Colorado and thereafter filed an answer, defenses and asserted a counterclaim alleging a breach of McKenna’s Proprietary Information Agreement with the Company. In addition, the Company filed a motion to transfer venue of this case to the United States District Court for the Northern District of Georgia. In February 2008, McKenna filed an answer to the Company’s counterclaim, and the Company was notified that McKenna’s attorney requested permission to withdraw from the case. McKenna hired new counsel, who filed a response in opposition to the Company’s motion to transfer and moved to amend the Complaint to add a cause of action for alleged violations of the Colorado Wage Claim Act. The Company filed a reply in support of its motion to transfer in April 2008, and the parties are now waiting for the Court to rule on that motion. Later in April 2008, the Company filed a response in opposition to McKenna’s motion to

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amend, and McKenna filed a reply in early May 2008, and the United States Magistrate Judge issued a written opinion recommending that the District Court Judge grant McKenna’s motion to amend, and the Company filed Objections later in May 2008. The parties have recently propounded written discovery. The Company cannot predict when the final resolution of this litigation will occur, and it is not possible to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss with respect to this matter.

Triton IP LLC. In April 2008, Triton IP, LLC filed a claim in the United States District Court for the Eastern District of Texas against defendants NetSuite, Inc., CDC Corporation and CDC Software Inc. alleging that our MarketFirst software infringed a patent owned by Triton through assignment. The plaintiff is seeking a permanent injunction against defendants, damages, costs, expenses, interest, attorneys’ fees and other restitutional remedies. The Company intends to vigorously defend such action. Management of the Company considers the outcome of this matter with respect to the Company to be uncertain and the amount of any expenditure from this matter is not estimable.

Vertical Computer Systems, Inc./NOW Solutions LLC (“Vertical” or “NOW”). In February 2003, Vertical Computer Systems (on behalf of itself and on behalf of NOW Solutions) filed a civil action in the state court in New York, New York, against the Company’s subsidiary Ross Systems, Inc. and others alleging, among other things, breach of contract, claims under contractual indemnifications and fraud arising from the February 2001 sale of assets from Ross’s HR/Payroll division to NOW Solutions. The action sought $5.0 million in damages. In April 2003, Ross filed a motion to dismiss the complaint, which was granted in November 2003. The plaintiff appealed and its appeal was granted in October 2004. The matter was remanded to the trial court for adjudication. In May 2006, both Vertical and Ross filed a summary judgment motions against each other. In November 2006, the Court denied these summary motions, finding that factual issues existed to be resolved at trial. In March 2004, the Company’s subsidiary Ross filed a separate civil action against NOW in state court in New York, New York seeking payment of the final $0.8 million installment due under a promissory note executed by NOW in connection with the February 2001 HR/Payroll division asset sale. In November 2004, NOW asserted counterclaims against Ross raising the same contractual issues asserted in the Vertical v. Ross action, as well as additional contractual claims related to the 2001 asset sale, seeking a total of approximately $15.0 million in damages. In December 2004, Ross filed a motion to dismiss certain of the counterclaims, which he Court granted in February 2005, thereby reducing the total damages being sought in NOW’s counterclaims to approximately $5.0 million. In May 2006, Ross filed a motion for partial summary judgment that was granted in part. A jury trial of both the Vertical v. Ross and Ross v. NOW actions took place in March and April 2007 following which the Court directed certain verdicts in favor of NOW, and certain verdicts in favor of Ross. In September 2007, the Court entered a final judgment against Ross in the amount of $1.3 million in damages, $0.9 million in attorney’s fees and costs, and $0.9 million in pre-judgment interest, for a total judgment against Ross of $3.2 million. In November 2007, Ross filed a Notice of Appeal, thereby commencing its appeal from the Court’s trial rulings. In February 2007, NOW Solutions, Inc, the alleged successor-by-merger to NOW Solutions, LLC, filed an action in the state court in New York, New York, against Ross, although Ross has yet been served with the Complaint. In this action, NOW Solutions, Inc. asserts claims for breach of contract and attorney’s fees based upon facts similar to those in the above action, seeking $4.1 million in damages. The Company believes that this action filed in February 2007 is duplicative of the claims that have already been litigated through trial as referred to above, and is without merit, and the Company intends to vigorously defend the same. The Company accrued $0.3 million, $2.9 million and $3.2 million at December 31, 2005, 2006 and 2007, respectively.

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C. Organizational Structure

CDC Corporation was incorporated in June 1997. The following table sets forth our significant subsidiaries organized by business unit as of April 30, 2008. Please note that the following table does not include our intermediate holding companies.

•        Ross Systems, Inc.   •        Pivotal Corporation   •        Industri-Matematik International Corp   •        Saratoga Systems Inc.   •        Vectra Corporation (majority interest)   •        MVI Holdings Limited   •        Respond Group Limited   •        Vis.align, Inc.   •        DB Professionals, Inc.   •        OST International Corporation   •        c360 Solutions Incorporated   •        Platinum China Holdings Inc.
(holds OpusOne)   •        Assets acquired from JRG Software, Inc.   •        Praxa Limited   •        Software Galeria, Inc. (51%)
(holds Ascent and the assets of Horizon)   •        PK Information Systems Pty Ltd.   •        MEZZO Business Databases Pty Limited   •        Catalyst International •        Beijing 17Game Network Technology Co., Ltd.   •        Guangzhou Optic Communications Co., Ltd   •        CDC Games Interactive Limited •        TTG Asia Media Pte Limited*   •        chinadotcom Portals Limited*   •        hongkong.com Portals Limited*   •        CDC Mobile Media Corporation (90%)*   •     NewPalm (China) Information Technology Co. Ltd. (held by Palmweb Inc.) **   •     Beijing He He Technology Co. Ltd. (held by Group Team Investments) (operates Go2joy) **   •     Shenzhen KK Technology Ltd (held by United Crest Limited) **   •     TimeHeart Science Technology Limited **

( ) Denotes percentage ownership, if less than 100%

* Subsidiaries held under our 77% owned subsidiary, China.com, which is listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, or GEM.

** Subsidiaries Held Under CDC Mobile Media Corporation, a 90% Owned Subsidiary Of China.Com, which is listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, or GEM.

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Corporate Structure in China for our CDC Games and China.com Business Units

Overview

Internal Restructuring. In December 2006, we completed our plans for an internal restructuring of CDC Games pursuant to which CDC Games was moved from within China.com to become a direct business unit of CDC Corporation. The independent shareholders of China.com, present in person or by proxy at China.com’s shareholders meeting, approved the restructuring.

In connection with the restructuring, CDC Games entered into a stock purchase agreement whereby it acquired all issued and outstanding shares of its common stock for a purchase price of $110 million. Of such amount, $50 million was paid in cash at closing and $60 million was funded through CDC Games’ issuance of a note bearing interest at 5% per annum, due June 28, 2008. This note was paid in full on June 27, 2008.

Businesses. As of March 31, 2008, CDC Games operates in the online games business segment in China through 17game and Optic. As of March 31, 2008, China.com, a 77% owned subsidiary of CDC Corporation, operates our China.com business segments in China.

CDC Games and China.com make investments in each of these business units mainly through offshore holding vehicles registered in the British Virgin Islands or Cayman Islands.

Trust Deed Arrangements

To comply with legal and regulatory considerations in China, each of CDC Games and China.com conducts a significant portion of the operations of these business units through domestically registered companies in China, referred as ICPs, which are held under trust deed arrangements. Under these trust deed arrangements, the trustees are employees of CDC Games or China.com who are Chinese nationals and the 100% beneficiaries of the trusts are offshore holding vehicles registered in the British Virgin Islands or Hong Kong.

With respect to our Newpalm business, we have formed two ICPs, Beijing Newpalm Technology Co., Ltd., or Beijing Newpalm, and Beijing Wisecom Technology Co., Ltd., or Beijing Wisecom. Two of China.com’s employees, Mr. Wang and Ms. He, each own 50% of Beijing Newpalm and Mr. Wang and Mr. Fang each own 50% of Beijing Wisecom. Beijing Newpalm and Beijing Wisecom are held under trust deed arrangements under which Mr. Wang, Ms. He and Mr. Fang also serve as trustees of the trusts. China.com Corp. Limited is the holding vehicle of China.com incorporated in Hong Kong which is the 100% beneficiary of the trusts.

With respect to our Shenzhen business, the ICP is Shenzhen KK Technology Ltd., or Shenzhen KK. Two of China.com’s employees have ownership interests in Shenzhen KK with Mr. Wang and Ms. each owning 50% of Shenzhen KK. Shenzhen KK is held under trust deed arrangements under which Mr. Wang and Ms. He also serve as trustees of the trusts. Unitedcrest Investments Limited is the offshore holding vehicle of China.com registered in the British Virgin Islands which is the 100% beneficiary of the trusts.

With respect to our TimeHeart business, the ICP is Beijing TimeHeart Information Technology Limited, or Beijing Timeheart. Two of China.com’s employees have ownership interests in Beijing TimeHeart with Ms. Huang owning 50% of Beijing TimeHeart and Ms. Zhao owning 50% of Beijing TimeHeart. Beijing TimeHeart is held under trust deed arrangements under which Ms. Huang and Ms. Zhao also serve as trustees of the trusts, and TimeHeart Science Technology Limited is the offshore holding vehicle of China.com registered in the British Virgin Islands which is the 100% beneficiary of the trusts.

With respect to our China.com Portal business, the ICP is Beijing China.com Technology Services Co., Ltd., or Beijing China.com. Three of China.com’s employees have ownership interests in Beijing China.com with Mr. Wang and Mr. Fang each owning 40% of Beijing China.com and Ms. Wu owning 20% of Beijing China.com. Beijing China.com is held under trust deed arrangements under which Mr. Wang, Mr. Fang and Ms. Wu also serve as trustees of the trusts, and chinadotcom Portals Limited is the offshore holding vehicle of China.com registered in the British Virgin Islands which is the 100% beneficiary of the trusts.

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With respect to our Go2joy business, the ICP is Beijing He He Technology Co., Ltd., or Beijing He He. Two of China.com’s employees have ownership interests in Beijing He He with Ms. He and Ms. Wu each owning 50% of Beijing He He. Beijing He He is held under trust deed arrangements under which Ms. Wang and Ms. Wu also serve as trustees of the trusts, and Double Keen Limited is the offshore holding vehicle of China.com registered in the British Virgin Islands which is the 100% beneficiary of the trusts.

With respect to our 17game business, the ICP is Beijing Hulian Jingwei Technology Development Co., Ltd., or Beijing Inter Connected. Two of China.com’s employees have ownership interests in Beijing Inter Connected with Mr. Wang owning 70% of Inter Connected and Mr. Xu owning 30% of Inter Connected. Inter Connected is held under trust deed arrangements under which Mr. Wang and Mr. Fan also serve as trustees of the trusts, and Equity Pacific Limited is the offshore holding vehicle of China.com registered in the British Virgin Islands which is the 100% beneficiary of the trusts.

Licenses and Agreements

The ICPs each hold various types of licenses required by the regulatory authorities in China with respect to operating their respective businesses.

• Beijing Newpalm, Beijing Wisecom, Beijing He He and Shenzhen KK each hold a license to provide SMS, MMS, IVR, WAP and other mobile services and applications to public subscribers in the PRC.

• Beijing Newpalm, Beijing He He, Shenzhen KK and Beijing TimeHeart each hold a nationwide license to provide mobile value added services, or MVAS in the PRC.

• Beijing TimeHeart holds an Internet Content Provider license in the PRC.

During 2007, Beijing Newpalm continued to serve as the primary ICP within Newpalm. Previously, Beijing Newpalm had entered into agreements with China Mobile to provide services on China Mobile’s network and Beijing Wisecom had entered into agreements with China Unicom to provide services on China Unicom’s network. As the primary ICP within Newpalm, Beijing Newpalm continues to enter into various agreements with China Mobile to provide services on China Mobile’s network, and except for a few provinces, Beijing Newpalm has replaced Beijing Wisecom to renegotiate with China Unicom to provide services on China Unicom’s network.

Beijing He He has entered into agreements with China Mobile and China Unicom to provide MVAS services using either China Mobile’s or China Unicom’s network.

Shenzhen KK has entered into agreements with China Mobile to provide MVAS services using China Mobile’s network.

Beijing China.com holds an Internet Content Provider License and has been authorized to operate an Internet portal with the URL www.china.com. Beijing China.com also holds various licenses which are attached to the Internet Content Provider License, such as an Internet advertisement license and an Internet news reporting license.

Beijing Inter Connected holds one Internet content provider license and has been authorized to operate two Internet portals with the URL www.17game.com and the URL for all its online games. Beijing Inter Connected also holds various licenses which are attached to the Internet content provider license which are particularly applied for each game imported into and operated in China.

With respect to our online games business, we also hold various licenses in the PRC for the import and licensing of Yulgang, Travia and Special Force.

Use of Wholly Foreign Owned Enterprises

The ICPs Beijing Newpalm and Beijing Wisecom (for Newpalm), Beijing China.com (for the China.com Portal) and Beijing He He (for Go2joy) and Beijing Timeheart (for TimeHeart) act as the primary revenue generating entities of each business unit. In order to provide, among other things, more effective controls over these ICPs, each of the respective beneficiaries of the trusts, under the trust deed

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arrangements for these business units, has formed and invested in a wholly foreign owned enterprise, or WFOE, to act as a long term exclusive partner of the ICP. WFOEs are limited liability companies established under the Chinese Company Law, the shareholders of which are permitted to be 100% foreign (not Chinese nationals).

As the long term exclusive partner of the ICP, the respective WFOE for the ICP provides technical and logistical support for the day to day operations of the ICP, including sales and marketing, billing, and administrative services. To facilitate the delivery of the technical and logistical support, the WFOE owns the physical assets, including servers, switches and computers, and employs the technical, sales and administrative personnel necessary to deliver these services. In exchange for such services, the WFOE charges the ICP a fee.

The WFOE formed to provide services for Beijing Newpalm, Beijing Wisecom and Shenzhen KK is Newpalm (China) Information Technology Co., Limited, and such WFOE charges a fee of approximately 90% of the gross revenue of each of Beijing Newpalm, Beijing Wisecom and Shenzhen KK for its services.

The WFOE formed to provide services for Beijing TimeHeart is TimeHeart (Beijing) Network Technology Limited. This WFOE did not charge Beijing TimeHeart any fees in 2006.

The WFOE formed to provide services for Beijing China.com is Chinadotcom Communications Technology Development (Beijing) Limited This WFOE charged fees averaging approximately 49% and 41% of the gross revenue of Beijing China.com for its services during each of 2005 and 2006, respectively.

The WFOE formed to provide services for Beijing He He is Beijing He He IVR Mobile Technology Ltd. This WFOE did not charge Beijing He He any fees in 2005 or 2006.

The WFOE formed to provide services for Beijing Inter Connected is Beijing 17game Network Technology Co., Ltd. This WFOE is able to directly sell the final online game products to the consumers instead of charging a service fee via Beijing Inter Connected.

D. Property, Plants and Equipment

Facilities

As of April 30, 2008, we owned no real estate and our major leased facilities included our:

• principal executive offices in Hong Kong, where we have leased approximately 13,600 square feet, approximately 40% of which we occupy pursuant to the terms of a Services Agreement;

• corporate, research and development, sales, marketing, consulting and support facilities in Atlanta, Georgia, where we lease approximately 36,200 square feet;

• sales, marketing and support facilities in Northampton, England, where we lease approximately 11,500 square feet;

• service, sales and support facilities in San Francisco, California, and Sydney and Melbourne, Australia where we lease approximately 10,278, 13,210 and 12,426 square feet, respectively;

• professional services, education and research and development facilities in Vancouver, British Columbia, where we lease approximately 133,812 square feet, approximately 96,801 square feet of which is currently sublet;

• product development facilities and Nordic service, sales, marketing and support facilities in Stockholm, Sweden, where we lease approximately 13,500 square feet;

• product development centers in Bangalore, India, where we lease approximately 40,000 square feet and Shanghai, China, where we lease approximately 9,563 square feet;

• local support facilities in Paris, France, where we lease approximately 11,808 square feet, and in Globen, Linköping and Hässleholm, Sweden, where we lease approximately 39,000 square feet;

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• service, sales, marketing and support facilities for our Global Services Group in King of Prussia, Pennsylvania, where we lease approximately 10,000 square feet;

• operational facilities for certain of our enterprise software subsidiaries, located in Campbell, CA, where we lease approximately, 10,000 square feet; and

• operational and support facilities for our China.com and CDC Games businesses in Beijing where we lease approximately 60,216 square feet of office space.

We and our subsidiaries also lease additional office space in various other locations in the United States, Canada, Europe, Asia and Australia. These locations include:

• in the United States: Addison, TX; Bala Cynwyd, PA; Bethesda, MD; Dallas, TX; Des Plaines, IL; Edison, NJ; Fairfield, NJ; Miami, FL; Mt. Laurel, NJ; Naperville, IL; Portland, OR; San Francisco, CA; Westborough, MA; and White Plains, NY;

• in Canada: Toronto, Ontario;

• in Europe: Vantaa, Finland; Paris, France; Unterfohring, Germany; Dublin, Republic of Ireland; Zeist, The Netherlands; Barcelona, Spain; Binfield, Berkshire, UK; Milton Keynes, UK; and Solna, Sweden;

• in Asia: China (including Guangzhou, Chengdu, Shenzhen, Shanghai, Hangzhou, Henan, Nanjing, Shandong, Shanxi and Tianjin); Mumbai, India; Tokyo, Japan; and Seoul, Korea; and

• in Australia: Milton, Brisbane.

In December 2006, China.com entered into contracts to acquire approximately 376,740 square feet of land in Nanjing, China for an aggregate of approximately $0.6 million payable in installments. We intend that these premises will be utilized as corporate facilities for us and our subsidiaries.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 20-F. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from those anticipated in these forward-looking statements as a result of factors including, but not limited to, those set forth under Item 3.D. of this Annual Report, “Key Information – Risk Factors” and Item 11 of this Annual Report, “Quantitative and Qualitative Disclosures About Market Risk”.

Overview

Operating Segments and Discontinued Operations

We report results in five business segments, “Software,” “Global Services,” “CDC Games,” “China.com” and “MVAS.” Due to the decision made in the first quarter of 2008 to discontinue the MVAS business, subsequent filings will show the MVAS segment as a discontinued operation.

Products and Services

CDC Corporation is a global provider of enterprise software, mobile services and internet and media services and is also engaged in the development and operation of online games. We offer the following products and services to customers around the world:

• Software. We are a global provider of enterprise software applications and related services. Our products are designed to support and automate the processes of an organization to help achieve company-wide integration of business and technical

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information across multiple divisions and organizational boundaries, such as finance, manufacturing, logistics, human resources, marketing, sales and customer service, by utilizing common databases and programs that share data real time across multiple business functions. Our products and services seek to help companies worldwide fulfill their business growth objectives through increased operational efficiencies, improved profitability, strengthened customer relationships and improved regulatory compliance. Our software suite includes Enterprise Resource Planning, or ERP, Customer Relationship Management, or CRM, Supply Chain Management, or SCM, Order Management Systems, or OMS, Human Resources and Payroll Management, or HRM, and Business Intelligence, or BI, products.

• Global Services. Our global services offerings include information technology services, eBusiness consulting, web development and outsourcing in Australia and the U.S., and a marketing database and marketing support service offered principally in Australia and New Zealand. Our global services companies provide program management, outsourcing services, application development and ongoing support services using a wide range of technologies.

• CDC Games. Our Games business is principally comprised of online game services in the China. We operate our Massively Multiplayer Online Role-Playing Games, or MMORPGs, under two models. The first model is the traditional subscription based pay-to-play, where users purchase pre-paid cards, or the PP-Cards, to play for a fixed number of hours. The second model is free-to-play, under which players are able to access the games free of charge but may choose to purchase in-game merchandise or premium features to enhance their game playing experience, such purchases can only be made through the use of PP-Cards.

• China.com. Our China.com business encompasses a range of businesses, including our Internet media business which is focused on online entertainment and Internet products and services that target users in China via our portal network (www.china.com and www.hongkong.com) and a Singapore-based travel trade publisher and organizer serving the travel and tourism industry in the Asia Pacific region operated by TTG.

• Mobile Services and Applications (“MVAS”). Our mobile services and applications business provided news and mobile applications services targeting the consumer market in China as well as wireless services including Short Message Service, or SMS, Interactive Voice Response, or IVR, Multimedia Message Service, or MMS and Wireless Application Protocol, or WAP. Our mobile services and applications business was primarily operated through Newpalm and Go2joy, both of which are held through our subsidiary, China.com.

Acquisitions

During 2006 and 2007, we made the following significant business acquisitions, by business segment, the results of which have been consolidated from the respective dates of acquisition. There were no significant acquisitions during 2005.

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Software
Acquired company	Date
Respond Group Ltd. (“Respond”)	February 2007
Saratoga Systems Inc. (“Saratoga”)	April 2007
Catalyst International, Inc. (“Catalyst”)	September 2007
Industri-Matematik International Corp. (“IMI”) *	November 2007
Global Services
Acquired company	Date
D B Professionals, Inc. (“DBPI”)	July 2006
Vis.align, Inc. (“Vis.align”)	December 2006
Mobile Services and Applications
Acquired company	Date
TimeHeart Science Technology Limited (the “TimeHeart Group”)	November 2006
CDC Games
Acquired company	Date
Equity Pacific Limited (the “17game Group”).	March 2006
Guangzhou Optic Communications Co., Ltd (“Optic”)	July 2007

* Acquisition of the remaining 49% interest not previously owned.

For a list of all acquisitions, see Item 4 – “Information on the Company.”

Material Weaknesses

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007, utilizing the criteria described in the “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The objective of this assessment was to determine whether the Company’s internal control over financial reporting was effective as of December 31, 2007. That assessment identified the following control deficiencies as of December 31, 2007, that constituted material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual financial statements will not be prevented or detected on a timely basis.

Financial Statement Close and Reporting

Management has concluded that a material weakness exists in documentation and procedures relating to the financial statement close process that result in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected.

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Specific control deficiencies identified relating to the financial statement close process include:

• Lack of policy, procedures, and controls including review and approval procedures to ensure that financial statements for external purposes are prepared in accordance with generally accepted accounting principles including periodic in-depth review of the proper application of generally accepted accounting principles to the specific facts and circumstances of each of our businesses;

• Lack of adequate controls and procedures to mitigate the risks associated with decentralized accounting operations and systems;

• Lack of adequate policies and procedures with respect to journal entries and account reconciliations, including insufficient supporting detail and inconsistent evidence of management review; and

• Lack of sufficient personnel with appropriate skills and experience to properly prepare journal entries and account reconciliations and to do so in a timely manner.

These control deficiencies related to the financial statement close process affect all of our significant accounts. As a result of these control deficiencies, management recorded material adjustments to the financial statements during the year ended December 31, 2007. These control deficiencies could result in a material misstatement to the annual consolidated financial statements that would not be prevented or detected.

Income Taxes

Management has also concluded that a material weakness exists in accounting for income taxes that results in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected.

Specific control deficiencies identified relating to the accounting for income tax process include:

• Lack of procedures and controls related to the preparation and review of the tax provision designed to ensure that our deferred tax provision and deferred tax asset and liability balances are accurate and determined in accordance with generally accepted accounting principles; and

• Lack of sufficient personnel with appropriate skills and experience to properly account for income taxes in accordance with generally accepted accounting principles.

These control deficiencies could result in a misstatement of the tax provision and deferred tax asset and liability balances that would result in a material misstatement to the annual consolidated financial statements that would not be prevented or detected.

Treasury Management

Management has concluded that a material weakness exists in the management of our investments and other treasury related activities that result in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected. This limits our ability to effectively manage risk in the treasury/capital transactions component of our strategy and could result in unexpected losses and adjustments to the carrying value of investments and derivatives employed by us.

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Specific control deficiencies identified relating to the treasury management process include lack of sufficient personnel with appropriate skills and experience to adequately assess and monitor the accounting, economics, performance and risks related to complex treasury transactions.

The above material weakness resulted in the temporary event of default on our $168 million Convertible Notes as disclosed in Footnote 11 of Notes to Consolidated Financial Statements.

Because of the material weaknesses described above, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2007, based on the criteria in “Internal Control—Integrated Framework” issued by the COSO. The attestation report of our independent registered public accounting firm is included in Part III, Item 18. “Financial Statements” of this report under the captions entitled “Report of Independent Registered Public Accounting Firm”.

Change in Internal Control over Financial Reporting

Management has taken the following steps during 2007 to begin the remediation process:

• Hired a Chief Accounting Officer and additional accounting staff with the technical accounting skill to comply with generally accepted accounting principles.

• Increased accounting resources in November 2007 to assist the accounting group in beginning the remediation process on the material control weaknesses noted above and to improve the timeliness and quality of account reconciliations in preparation for the year end reporting process.

• Redesigned the account reconciliation process to provide better support for account balances and to ensure all significant accounts are reconciled as a part of the year end close process.

• Increased detailed reviews of account balances with additional accounting staff to compensate for the control weaknesses identified.

• Improved our consolidation process to help ensure complete and accurate accounting for all entities.

Remediation activities are underway but have not been fully implemented.

Remediation Steps to Address Material Weaknesses

Our executive, regional and financial management are committed to achieving and maintaining a strong control environment. In addition, management remains

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committed to the process of developing and implementing improved corporate governance and compliance initiatives. Our management team has been actively working on remediation efforts as discussed above to address the material weaknesses, as well as other identified areas of risk. In 2008, we have taken the following additional steps to remediate our material weaknesses:

• Hired a Vice President of Tax.

• Assigned acting Treasurer duties to lead finance person in Hong Kong.

Management has applied the above remediation steps and incorporated substantive review procedures during the year end financial statement close process to compensate for the control weaknesses relating to reporting the financial results as of December 31, 2007.

Prospectively, we intend to undertake further efforts to remediate the control weaknesses identified, including:

• We are in the process of developing, and/or clarifying existing accounting policies related to estimates involving significant management judgments, as well as other financial reporting areas. The new policies are intended to ensure appropriate review and approval, define minimum documentation requirements, establish objective guidelines to minimize the degree of judgment in the determination of certain accruals, enforce consistent reporting practices, and enable effective account reconciliation, trend analyses, and exception reporting capabilities;

• We plan to hire additional tax personnel and a full time treasurer to help address the material weaknesses in these areas;

• We plan to make further additions to our accounting staff to allow for an improved process of month end account reconciliations that includes a more timely reconciliation processes with enhanced review processes of significant accounts and accounting entries including income taxes;

• We plan to complete the consolidation of our entities into geographical centers to leverage our technical accounting resources and to reduce the complexity in our month end consolidation process by eliminating duplicative accounting processes and to leverage the use of a common general ledger and financial reporting system; and

• We are planning to have our regional controllers take the following steps to improve internal control over financial reporting:

• Conducting reviews of accounting processes to incorporate technology improvements to strengthen the design and operation of controls;

• Formalizing the process, analytics, and documentation around the monthly analysis of actual results against budgets and forecasts conducted within the accounting and finance departments;

• Improving quality control reviews within the accounting function to ensure account analyses and reconciliations are completed accurately, timely, and with proper management review; and

• Formalizing and expanding the documentation of our procedures for review and oversight of financial reporting.

We intend to continue to monitor our internal controls and our progress on the remediation steps identified above and, if further improvements or enhancements are identified, take steps to implement such improvement or enhancements.

We believe the measures described above, once designed and operating effectively, will remediate the material weaknesses we have identified and strengthen our internal control over

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financial reporting. We are committed to continuing to improve our internal control processes and will diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional remediation measures or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, goodwill and intangible assets, business combinations, valuation of derivative financial instruments, fair value of investments not actively traded, capitalization of software costs, investments, accounts receivable and allowance for doubtful accounts, deferred tax valuation allowance, stock based compensation, and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in “Note 2- Summary of Significant Accounting Policies” in Item 18- Financial Statements.

We believe the following critical accounting policies are some of the more critical judgment areas in the application of our accounting policies that affect our financial condition and results of operations.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. If an acceptance period is required, revenue is recognized upon the earlier of customer acceptance or the expiration of the acceptance period. In some circumstances, we recognize revenue on arrangements that contain certain acceptance provisions when we have historical experience that the acceptance provision is perfunctory. Our agreements with our customers, resellers and distributors do not contain product return rights. If the fee is not fixed or determinable due to the existence of extended payment terms, revenue is recognized periodically as payments become due, provided all other conditions for revenue recognition are met. Discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period in which the related revenue is recorded. Such provisions are calculated after considering relevant historical data.

We generate revenue from five primary sources: Software, Global Services, CDC Games, China.com and MVAS. We recognize revenue in accordance with US GAAP. The specific literature that we follow in connection with its revenue recognition policy includes the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin 104, “Revenue Recognition” (“SAB 104”), the American Institute of Certified Public Accountants Statement of Position (“SOP”) 97-2, “Software Revenue Recognition” (“SOP 97-2”), as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions,” Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force

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(“EITF”) 00-21, “Revenue Arrangements with Multiple Deliverables,” EITF 00-3, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” and in certain instances EITF 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”) and SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”). In addition to these basic criteria, the following are the specific revenue recognition policies we follow for each major stream of revenue by reporting segment.

Software

We generate software revenue from the sale of software licenses, and the maintenance and services for such software licenses. Such sales often include a combination of software consulting and integration services, implementation training and maintenance services. We allocate the arrangement fee in these multi-element arrangements to each individual element using its relative fair value as based on vendor specific objective evidence (“VSOE”). VSOE of fair value is typically determined by the customary price charged for each element when sold separately after the application of any standard approved discount. In the case of an element not yet sold separately, VSOE of fair value is the price established by authorized management if it is probable that the price, once established, will not change before market introduction. Where fair value exists for all undelivered elements of the arrangement but not the delivered elements, we apply the “residual” method of accounting and defer revenue allocated to the undelivered elements while recognizing the residual revenue allocated to the delivered elements. In the absence of VSOE of fair value for any undelivered element, we defer the entire arrangement fee and recognize revenue when all undelivered elements are delivered assuming all other basic criteria for revenue recognition have been met. We recognize revenue from services separately from license fees revenue because the service arrangements qualify as “service transactions” as defined by SOP 97-2. The factors considered in determining whether the revenue should be accounted for separately include the nature of the services and whether the services are essential to the functionality of the licensed product, availability of services from other vendors, and the impact of payment timing on the realizability of the software license fee.

Software license revenue is normally generated through licensing with end-users, value-added resellers (“VARs”) and distributors, and through the sale of the software with or incorporating third-party products. VARs and distributors do not have rights of return, price protections, rotation rights, or other features that would preclude revenue recognition. When software licenses are sold indirectly to end-users through VARs, we recognize as revenue only the net fee receivable upon sell-through to the end-user. License revenue from distributors is calculated at an agreed upon percentage of the distributors’ net selling price to the end-user. We typically do not earn any portion of fees for services provided by the distributor to the end-user. We earn maintenance fees based on an agreed upon percentage of the maintenance fees that the distributor earns from the end-user.

When software licenses incorporating third-party software products are sold or sold with third-party products that complement our software, we recognize as revenue the gross amount of sales of third-party products. The recognition of gross revenue is in accordance with criteria established in EITF 99-19 because we are ultimately responsible for the fulfillment and acceptability of the products purchased, have full latitude in establishing pricing and assume all credit and general inventory risks.

Revenue related to consulting and integration services and the provision of training services for software products are deferred and recognized as the services are delivered, assuming all other basic criteria for revenue recognition have been met.

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Revenue related to maintenance agreements on software products is deferred and recognized ratably over the terms of the agreements which are normally one year.

We make provisions for discounts and rebates to customers and other adjustments in the same period in which the related revenue is recorded. Such provisions are calculated after considering relevant historical data.

Recognition of revenue from the licensing of our software products requires management judgment with respect to determination of fair values and in determining whether to use the gross versus net method of reporting for certain types of revenue. The timing of our revenue recognition could differ materially if we were to incorrectly determine the fair value of the undelivered elements in an arrangement for which we are using the “residual” method. The composition of revenue and cost of revenue would change if we made a different assessment on the gross versus net method of reporting sales of software licenses which incorporate third-party software products.

Global Services

We generate global services revenue from information technology services, eBusiness consulting, web development and outsourcing.

We recognize revenue from time and materials outsourcing contracts as the services are delivered assuming all other basic criteria for revenue recognition have been met.

We recognize revenue from the design, development and integration of Internet web sites and mobile phone devices using contract accounting based on either client acceptance of completed milestones or using the cost-to-cost percentage-of-completion method. We use the cost-to-cost method based on hours incurred as a percentage of the total estimated hours to complete the project because our historical experience has demonstrated that it produces a reliable indication of the progress on each engagement. We regularly reevaluate estimates of total projected contract costs and revise them if appropriate. Any adjustments to revenue due to changes in estimates are accounted for in the period of the change in estimate. When estimates indicate that a loss will be incurred on a contract upon completion, a provision for the expected loss is recorded in the period in which the loss becomes evident. Historically, we have not experienced material losses on fixed-price contracts. The majority of our contracts are short term in duration, and the use of the completed contract method would not result in a material difference in the timing of revenue recognition. Some projects include acceptance clauses requiring customers’ sign-off at the conclusion of the projects. Historically, we have not experienced projects where sign-off or acceptance has been withheld by a customer resulting in a material loss on a project. Recognition of revenue using contract accounting requires judgment with respect to the method used. The timing of our revenue recognition could differ if we were to use a different methodology for estimating progress to completion, such as an output method based on milestones for contracts where we currently use an input method such as hours incurred.

Revenue from Internet web site maintenance agreements is deferred and recognized ratably over the terms of the related agreements, which are usually for periods of six months or one year.

Database and marketing support services include list rental, database development and supply, data analysis and call center services. Revenue is recognized when the service or list has been delivered assuming all other basic criteria for revenue recognition have been met.

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Advertising revenue arising from direct mailing or placement of print advertising is recognized when the advertisements are sent or published, assuming all other basic criteria for revenue recognition have been met.

We derive advertising and marketing services revenue from consulting services, marketing database and support services, online and print advertising, and our Internet media business which is focused on online entertainment and Internet products services that target users in China via our portal network.

Advertising and marketing consulting services revenue for fixed price contracts is recognized upon completion of contractual milestones which are specified in the contracts along with pricing, payment terms and project timetable. Revenue from time and materials outsourcing contracts is recognized as the services are delivered, assuming all other basic criteria for revenue recognition have been met.

CDC Games

CDC Games revenue is principally derived from the provision of online game services in China. We operate our MMORPGs under two models. The first revenue model is the traditional subscription based pay-to-play, where users purchase PP-Cards to play for a fixed number of hours. The second revenue model is free-to-play, under which players are able to access the games free of charge but may choose to purchase in-game merchandise or premium features to enhance their game playing experience, such purchases can only be made through the use of PP-Cards.

All PP-Cards are sold to distributors and retailers across the country, from whom the Group collects payment on a prepaid basis. The distributors then resell the cards to end users and other retail points. The Group offered sales discounts primarily ranging from 13%-15% to distributors or retailers. The sales discount represents the difference between the price at which the PP-Cards are sold and the face value of the PP-Cards.

The end users are required to activate their PP-Cards by using access codes and passwords to exchange the value of these cards to game points and deposit into their personal accounts. They consume points for online game services by trading them either for a pre-specified length of game playing time or in-game merchandise or premium features sold at online game stores.

All prepaid fees received from distributors are initially recognized as deferred revenue and revenue is recognized when the registered points are consumed for the our online game services, i.e., when game playing time occurs or in-game merchandise or premium features are delivered, or when the end customers are no longer entitled to access the online game services after the expiration of the PP-Cards. Distributors are permitted to return unsold prepaid cards under certain conditions, including termination of game and disqualification of distributor status. Returns of PP-Cards during 2006 and 2007 were not material.

China.com

Revenue from internet and media mainly represents revenue from advertising, which is recognized on a straight-line basis over the period in which the advertisement is displayed, and when collection of the resulting receivable is probable, provided that no significant obligations of the Company remain. Advertising service fees from direct mailings are recognized when each advertisement is sent to a target audience.

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MVAS

We generate mobile services and applications revenue from a comprehensive suite of mobile data applications, including dating, chatting, fortune telling, entertainment, information-related content and community services to mobile subscribers in China utilizing SMS, MMS, WAP and IVR services. We rely on mobile network operators in China to bill mobile phone users for our subscription fees. We have revenue sharing arrangements with China Mobile and China Unicom under which we receive 70% to 85% of the subscription fee collected from a mobile subscriber, with the balance being retained by the mobile operators. In addition to our charges, the mobile operators separately charge their subscribers RMB 0.10 to RMB 1.00 for every SMS, MMS or WAP message sent. These amounts are collected by the mobile operators and are not shared with us.

MVAS revenue is recognized in the month in which the services are performed, provided that all other basic criteria for revenue recognition have been met. The mobile operators provide statements after month-end indicating the amount of fees that were charged to users for mobile services and applications services that we provided during that month and the portion of fees that are due to us in accordance with our contractual arrangements with the mobile operators. We typically receive these statements within 30 to 90 days following month-end, and we typically receive payment within 30 to 90 days following receipt of the statement. We also maintain an internal system that records the number of messages sent to and messages received from mobile users. There are differences between the expected value of delivered messages based on our system records and our portion of the fees confirmed by the mobile operators for the delivered messages. These differences may result from the user’s phone being turned off, problems with the mobile operators’ networks or our billing system or other issues which prevent delivery of our services to users. These are known in the industry as billing and transmission failures. We do not recognize revenue for services which result in billing and transmission failures. Billing and transmission failures can vary significantly from month to month, province to province and between mobile operators. At the end of each reporting period, where an operator fails to provide us with a monthly statement confirming the amount of charges billed to their mobile phone users for that month, we use the information generated from our internal system and historical data to make estimates of the billing and transmission failures and accrue as revenue the estimated amount of collectable mobile services and applications fees. If an actual discrepancy varies significantly from our estimate, it could result in an overstatement or understatement of revenue and costs of revenue.

We are also required to pay some of our content providers either monthly fee or a percentage of the revenue received from or confirmed by the mobile operators, with or without a minimum guaranteed payment, with respect to services incorporating the content providers’ products. In calculating the fees payable to these providers, we reduce the amount of the fee payable by our estimate of account billing and transmission failures which may have been applicable to the services incorporating these products. If we receive confirmation of billing or transmission failures which differ from our estimate after we make payments, we do not ask for refunds, make additional payments, or make adjustments with respect to fees payable for future periods. If the assumptions we use in making such estimates prove inaccurate, we may have paid, and may continue to pay, fees to such providers which are disproportionate to the amount we have been paid for the services.

Recognition of MVAS revenue requires judgment with respect to the estimation of revenue not yet confirmed by the mobile operators at the end of a period, and whether to use the gross versus net method of reporting revenue. We regularly re-evaluate our EITF 99-19 assessment as the mobile services environment continues to evolve with the transition to new platforms and significant changes in the operating practices of the network operators. The

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composition of revenue and cost of revenue would change if we made a different assessment on the gross versus net basis of reporting. Our estimates also rely to some extent on our historical experience. We believe we have the ability to make reasonable estimates. However, material differences in the amount and timing of our revenue and cost of revenue could result during any period because of differences between the actual billing and transmission failure rate per the mobile operators’ statements and our estimates based on our internal records and historical experience, or if we were to use a different methodology for estimating the billing and transmission failure rate applicable to unconfirmed revenue. In the future we may also change our estimation methodology based on future experience or if there are changes in the manner in which the mobile operators confirm revenue.

Goodwill and Intangible Assets

Our long-lived assets include goodwill and other intangible assets. Goodwill represents the excess of cost over the fair value of net intangible assets of businesses acquired. Goodwill and indefinite lived intangible assets are not amortized. All other intangible assets are amortized over their estimated useful lives.

Goodwill is assigned to reporting units based on the reporting unit classification of the entity to which the goodwill is attributable. We have determined our reporting units based on an analysis of our operating segments: (a) the nature of products and services; (b) the nature of the production process; (c) the type and class of customers; (d) the method to distribute products or provide services; and (e) the nature of regulatory environment. In 2007 we reallocated the goodwill from our acquisition of Vis.align from our Software segment to our Global Services segment. Vis.align was originally acquired in December of 2006 and the goodwill was assigned to the Software segment. However, during the integration process, management determined that Vis.align’s product and service offerings were more closely aligned with our Global Services segment, therefore all of the goodwill recognized in connection with this acquisition was reallocated from our Software segment to our Global Services segment.

Our intangible assets represent trademarks and trade names, uniform resource locators (“URLs”), software applications and programs, customer base and contracts, and business licenses and partnership agreements. Definite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the greater of the straight-line method over the estimated useful life of the respective asset or the undiscounted cash flows method. The estimated useful lives of these intangible assets are as follows:

Trademarks	Indefinite
Trade names	3 to 5 years
URLs	20 years
Software applications and programs	3 to 7 years
Customer base and contracts	1 to 10 years
Business licenses and partnership agreements	1 to 7 years

We test goodwill and intangible assets with an indefinite useful life for impairment on an annual basis as of December 31. This testing, carried out using the guidance and criteria described in SFAS No. 142, “Goodwill and Other Intangible Assets,” compares carrying values to fair values at the reporting unit level and, when appropriate, the carrying value of these assets is reduced to fair value. Factors that could trigger an impairment charge include, but are not limited to, significant changes in our overall business or in the manner or use of the acquired assets, underperformance against projected future operating results, and significant negative industry or economic trends. Any impairment losses recorded in the future could have a material adverse impact on our financial condition and results of operations for the periods in which such impairments occur.

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During 2006 and 2007, we performed the required impairment tests on goodwill and intangibles with an indefinite useful life. Management judgment is required with respect to the identification of reporting units based on our internal reporting structure that reflects the way we manage our business or operations, assigning assets and liabilities to reporting units, and assigning goodwill to reporting units. Significant judgment is also required to estimate the fair value of reporting units including estimating future cash flows, determining appropriate discount rates, estimating the applicable tax rates, projecting future industry trends and market conditions, and making other assumptions. The use of different estimates and assumptions could materially affect the determination of fair value for each reporting unit. If we change our estimates and assumptions in the future based on changes in our overall business or in the manner or use of the acquired assets, underperformance against projected future operating results, or significant negative industry or economic trends, such changes might result in an impairment charge.

During 2006, the regulatory environment for the MVAS industry in China changed, and we believe that market conditions will continue to be challenging for the entire MVAS sector in the future. Since the onset of the regulatory changes, we have significantly reduced headcount and the marketing promotion expenses incurred for the MVAS business. In 2007, we explored various strategies to achieve long term growth. These strategies included: (i) continue to move further upstream into the content provider segment of the business; (ii) continue to launch popular mobile games; and (iii) develop mobile applications for enterprises and government offices in China.

However, as the regulatory environment for the MVAS industry continues to be difficult and we see no reasonable instance where our MVAS business may turn profitable in the foreseeable future, in February 2008, we announced that we were in the process of reducing the MVAS workforce and intended to scale down our emphasis on this business. Later in 2008, we made the determination that we were winding down the operations of the MVAS business and would discontinue this segment.

During 2006, we were not required to record any impairment. During 2007, we determined that all of the goodwill associated with our MVAS segment was impaired. Therefore, we wrote off all of the $71.1 million of goodwill that was assigned to this segment. See the “Results of Operations” section where this is discussed further.

We also annually review and adjust the carrying value of amortized intangible assets if facts and circumstances suggest they may be impaired. If this review indicates that amortized intangible assets may not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the carrying value of intangible assets will be reduced by the estimated shortfall in discounted cash flows. Management judgment is required in the assessment of useful lives of amortized intangibles, and our estimates of future cash flows require judgment based on our historical and anticipated results and are subject to many factors including our assessment of the discount rate used and the amounts and timing of future cash flows. We performed the required impairment reviews during 2006 and 2007 and determined that we were required to record Nil and $2.4 million of impairment charges related to our MVAS segment, respectively (see the “Results of Operations” section where this is discussed further). The use of different estimates and assumptions might have resulted in an impairment charge, or might result in an impairment charge in the future. As of December 31, 2007, $124.7 million of our identifiable intangible assets were subject to amortization.

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Business Combinations

We have made a number of acquisitions and may make strategically important acquisitions in the future. When recording an acquisition, we allocate the purchase price of the acquired company to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. These allocations require us to make significant estimates and assumptions which include future expected cash flows from license sales and customer contracts and acquired technologies, discount rates, and assumptions regarding the period of time the acquired technology or customer relationships will continue. Such assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions and estimates.

In addition, acquired deferred revenue is recognized at fair value to the extent it represents a legal obligation assumed by us in accordance with EITF 01-03, “Accounting in a Business Combination for Deferred Revenue of an Acquiree.” We consider service contracts and post-contract customer support contracts to be legal obligations of the acquired entity. We estimate the fair value of acquired deferred revenue based on prices paid by willing participants in recent exchange transactions. Management judgment is also required in determining an appropriate fair value for deferred revenue. If the fair values we determined for deferred revenue acquired in prior years were lower, our revenue for the year would have been lower.

Capitalization of Software Costs

We capitalize computer software product development costs incurred in developing a product once technological feasibility has been established and until the product is available for general release to customers in accordance with SFAS No. 86, “Accounting for the Costs of Software to be Sold, Leased, or Otherwise Marketed.” We evaluate realizability of the capitalized amounts based on expected revenue from the product over the remaining product life. Where future revenue streams are not expected to cover remaining unamortized amounts, we either accelerate amortization or expense the remaining capitalized amounts. Amortization of such costs is computed as the greater of the amount calculated based on (1) the ratio of current product revenue to projected current and future product revenue or (2) the straight-line basis over the expected economic life of the product (not to exceed five years). Software costs related to the development of new products incurred prior to establishing technological feasibility or after general release are expensed as incurred. When technological feasibility of the underlying software is not established until substantially all product development is completed, including the development of a working model, we expense the costs of such development because the impact of capitalizing such costs would not be material.

Management judgment is required with respect to the determination of technological feasibility and the determination of the expected product revenue used to assess realizability of the capitalized amounts. If we were to determine that technological feasibility occurs at a different stage of the process, we may capitalize more or less software development costs. If our assumptions about realizability were to change, our reported operating expenses could increase in the short-term by any amounts we write off. As of December 31, 2006 and 2007, capitalized software development costs were $20.9 million and $28.9 million, respectively, and related accumulated amortization totaled $4.5 million and $8.9 million, respectively.

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Investments

Debt and equity investments designated as available-for-sale are stated at fair value. Unrealized holding gains or losses, net of tax, on available-for-sale securities are reported in accumulated other comprehensive income (loss) and as a separate component of shareholders’ equity. Realized gains and losses and any declines in fair value judged to be other-than-temporary on available-for-sale securities are included in gain (loss) on disposal and impairment, respectively, in our consolidated statements of operations. Gains or losses on the sale of investments and amounts reclassified from accumulated other comprehensive income (loss) to the statement of operations are computed based upon specific identification. Interest on securities classified as available-for-sale securities is included in interest income.

Debt investments, where we have the positive intent and ability to hold the securities to maturity, are designated as held to maturity securities and are stated at amortized cost.

When determining whether an impairment of investments exists or a decline in value of an available-for-sale security is other-than-temporary, we evaluate evidence to determine whether the realizable value is less than the current market price for the securities. Such information may include the investment’s financial performance, the near term prospects of the investment, the current and expected future financial condition of the investment’s issuer and industry, and our investment intent. Management judgment is required in determining fair value of investments, and in determining whether an impairment is other-than-temporary. The use of different estimates and assumptions could affect the determination of fair value for each investment, and could result in an impairment charge. For investments not actively traded, we review a variety of information including financial performance, comparisons to recently traded comparable securities, advice of investment professionals, and financial modeling to determine the fair market value as well as determine in the case of declines in value if the decline is an other than temporary decline in fair value.

All other equity investments for which we do not have the ability to exercise significant influence (generally, when we have an investment of less than 20% ownership and no representation on the company’s board of directors) and for which there is not a readily determinable fair value, are accounted for using the cost method. Dividends and other distributions of earnings from equity investees or investments, if any, are included in income when declared. We periodically evaluate the carrying value of our investments accounted for under the cost method of accounting and any other than temporary impairment is included in the consolidated statement of operations. We wrote off $4.5 million of cost investments in 2007.

Derivative Instruments

SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), as modified by SFAS No. 149, “Amendment of SFAS 133 on Derivative Instruments and Hedging Activities” (“SFAS 149”), requires all contracts which meet the definition of a derivative to be recognized in our consolidated financial statements as either assets or liabilities and recorded at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in the consolidated statement of operations or in the consolidated statement of shareholders’ equity as a component of accumulated other comprehensive income (loss), depending on the use of the derivative and whether it qualifies for hedge accounting. Changes in fair values of derivatives not qualified as hedges are reported in the consolidated statement of operations. The estimated fair values of derivative instruments are determined at discrete points in time based on the relevant market information. These estimates are calculated with reference to the market rates using the industry standard valuation techniques.

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Deferred Tax Valuation Allowance

We record a valuation allowance on our deferred tax assets in an amount that is sufficient to reduce the deferred tax assets to an amount that is more likely than not to be realized. In reaching this determination, we consider the future reversals of taxable temporary differences, future taxable income, exclusive of taxable temporary differences and carryforwards, taxable income in prior carryback years and tax planning strategies. As of December 31, 2006 and 2007, we have provided a valuation allowance of $59.0 million and $62.7 million against our net deferred tax assets. For our calendar year ended December 31, 2007, the valuation allowance increased by $3.7 million, which is the result of the tax effects of our operations as well as our determination of the amount that will be realized. A maximum of $41.7 million of the valuation allowance for which tax benefits are subsequently recognized will be allocated to reduce the goodwill. The portion of the change in the valuation allowance resulting in a decrease in goodwill principally relates to our recovery of deferred tax assets acquired in business combinations for which a valuation allowance was recorded at the time of acquisition.

Stock-based Compensation

On January 1, 2006, we adopted SFAS No. 123(R), “Share Based Payment” (“SFAS 123(R)”). Prior to January 1, 2006, we accounted for share-based employee compensation arrangements under the recognition and measurement principles of Accounting Principles Board Opinion 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related Interpretations, and complied with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under APB 25, share compensation expense was recognized by utilizing the accelerated expense attribution method over the vesting period of the share options based on the difference, if any, between the fair value of the underlying shares at the date of grant and the exercise price of the share options.

Prior to the adoption of SFAS 123(R), cash flows resulting from the tax benefit related to equity-based compensation was required to be presented in the operating cash flows, along with other tax cash flows, in accordance with the provisions of EITF 00-15, “Classification in the Statement of Cash Flows of the Income Tax Benefit Received by a Company upon Exercise of a Nonqualified Employee Stock Option”, (“EITF 00-15”). SFAS 123(R) superseded EITF 00-15, amended SFAS No. 95, “Statement of Cash Flows”, and requires tax benefits relating to excess equity-based compensation deductions to be prospectively presented in the statement of cash flows as financing cash inflows.

We adopted SFAS 123(R) using the modified prospective method. SFAS 123(R) requires measurement of compensation cost for all share based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The recognized expense is net of expected forfeitures and the restatement of prior periods is not required.

The fair value of restricted shares is determined based on the number of shares granted and the quoted market price of our common shares. SFAS 123(R) did not change the accounting guidance for share-based payment transactions with parties other than employees as originally issued by EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”). The fair value of options is determined using the Black-Scholes valuation model, which is consistent with the our valuation techniques previously utilized for options in footnote disclosures under Statement of SFAS 123, as amended by SFAS No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure” (“SFAS 148”). On March 29, 2005, the Securities

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and Exchange Commission (“SEC”) published Staff Accounting Bulletin No. 107 (“SAB 107”), which provides the Staff’s views on a variety of matters related to share based payments. SAB 107 requires that share based compensation be classified in the same expense line items as cash compensation.

Equity-based compensation expense recognized under SFAS 123(R) in the consolidated statements of operations for the years ended December 31, 2006 and 2007 was $7.7 million and $8.5 million, respectively. The estimated fair value of the Company’s equity-based awards, less expected forfeitures, is amortized over the awards’ vesting period on a straight-line basis.

Contingencies

We regularly assess the estimated impact and probability of various uncertain events, or contingencies, and account for such events in accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS 5”). Under SFAS 5, contingent losses must be accrued if available information indicates it is probable that the loss has been or will be incurred given the likelihood of the uncertain event, and the amount of the loss can be reasonably estimated.

Management judgment is required in deciding the amount and timing of accrual of a contingency. For example, legal proceedings are inherently uncertain, and in order to determine the amount of any reserves required, we assess the likelihood of any adverse judgments or outcomes in pending and threatened litigation, as well as potential ranges of probable losses. As of December 31, 2007, we had $4.7 million accrued for legal fees and contingencies. A determination of the amount of loss accrual required for these contingencies is made after analysis of each individual matter. The amount of such accruals may change in the future due to changes in approach or new developments in each case.

Impact of Certain Recently Issued Accounting Standards

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments – an Amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 allows financial instruments that have embedded derivatives that otherwise would require bifurcation from the host to be accounted for as a whole, if the holder irrevocably elects to account for the whole instrument on a fair value basis. Subsequent changes in the fair value of the instrument would be recognized in earnings. The standard also clarifies which interest-only strips and principal-only strips are not subject to the requirement of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”); establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a Replacement of FASB Statement No. 125” (“SFAS 140”) to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued by us after January 1, 2007. SFAS 155 did not have an effect on our financial position or results of operations for the year ended December 31, 2007.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 defines fair value, expands disclosures about fair value measurements, establishes a framework for measuring fair value in generally accepted accounting principles, and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair

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value. We are required to adopt SFAS 157 effective January 1, 2008, on a prospective basis. In February, 2008, the FASB issued Financial Statement of Position No. 157-2, “Partial Deferral of the Effective Date of Statement 157” (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS 157, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. We believe this standard will not have a material impact on our consolidated financial statements.

In September 2006, the SEC issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS 158 requires the recognition of a plan’s overfunded or underfunded status as an asset or liability in the consolidated balance sheet and the recognition of changes in that funded status in the year in which the changes occur through comprehensive income. We settled our defined benefit plan obligations during 2006; therefore, SFAS 158 did not have an effect on our financial position, cash flows or results of operations for the year ended December 31, 2006 or 2007.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We believe this standard will not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), and SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 141R requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to the acquisition, such as contingencies and research and development. SFAS 160 clarifies that a non-controlling interest in a subsidiary should be reported as equity in the consolidated financial statements. Consolidated net income should include the net income for both the parent and the non-controlling interest with disclosure of both amounts on the consolidated statement of income. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. The effective date for both Statements is the beginning of fiscal year 2009. We have currently not determined the potential effects on our combined and consolidated financial statements.

In April 2007, the FASB issued FSP FIN No. 39-1, which amended FIN No. 39, Offsetting of Amounts Related to Certain Contracts — an interpretation of APB Opinion No. 10 and FASB Statement No. 105 (“FIN No. 39”), to indicate that the following fair value amounts could be offset against each other if certain conditions of FIN No. 39 are otherwise met: (a) those recognized for derivative instruments executed with the same counterparty under a master netting arrangement and (b) those recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments. In addition, a reporting entity is not precluded from offsetting the derivative instruments if it determines that the amount recognized upon payment or receipt of cash collateral is not a fair value amount. FSP FIN No. 39-1 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the effects of this statement on our consolidated financial position and results of operations for 2008.

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In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). This statement applies to the accounting for non-controlling interests (previously referred to as minority interest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires non-controlling interests to be reported as a component of equity, which changes the accounting for transactions with non-controlling interest holders. The effective date for SFAS 160 is the beginning of fiscal year 2009. We have currently not determined the potential effects on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). This statement is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact of adopting SFAS 161 on our consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position No. 142-3, “Determining the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effect the implementation will have on our consolidated financial statements.

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Results of Operations

The following table summarizes our historical results of operations in U.S. dollars and as percentages of total revenue for the years ended December 31, 2005, 2006 and 2007:

	Year ended December 31,
	2005					2006					2007
	(in thousands, except percentage data)
Revenue:
Software Group	$	158,804		65	%	$	174,337		56	%	$	238,260		59	%
Global Services Group		42,686		17	%		66,484		21	%		110,777		28	%
Games		—		0	%		26,780		9	%		33,596		8	%
China.com		8,995		4	%		10,064		3	%		11,409		3	%
MVAS		34,389		14	%		31,863		10	%		8,342		2	%
Total revenue		244,874		100	%		309,528		100	%		402,384		100	%
Cost of revenue:
Software Group		(68,070	)	28	%		(73,789	)	24	%		(98,826	)	25	%
Global Services Group		(27,168	)	11	%		(45,943	)	15	%		(84,135	)	21	%
Games		—		0	%		(10,631	)	3	%		(20,108	)	5	%
China.com		(3,449	)	1	%		(4,095	)	1	%		(4,283	)	1	%
MVAS		(15,262	)	6	%		(13,004	)	4	%		(4,757	)	1	%
Total cost of revenue		(113,949	)	47	%		(147,462	)	48	%		(212,109	)	53	%
Gross margin		130,925		53	%		162,066		52	%		190,275		47	%
Operating expenses:
Sales and marketing expenses		(47,611	)	19	%		(59,313	)	19	%		(76,513	)	19	%
Research and development expenses		(22,788	)	9	%		(19,981	)	6	%		(23,836	)	6	%
General and administrative expenses		(56,608	)	23	%		(65,948	)	21	%		(95,733	)	24	%
Amortization expenses		(6,084	)	2	%		(8,315	)	3	%		(12,657	)	3	%
Restructuring and other charges		(1,667	)	1	%		(4,874	)	2	%		(9,056	)	2	%
Goodwill impairment		—		0	%		—		0	%		(71,096	)	18	%
Total operating expenses		(134,758	)	55	%		(158,431	)	51	%		(288,891	)	72	%
Operating income (loss)		(3,833	)	2	%		3,635		1	%		(98,616	)	25	%
Other income (expense), net		6,735		3	%		12,579		4	%		(14,118	)	4	%
Income (loss) before taxes		2,902		1	%		16,214		5	%		(112,734	)	28	%
Income tax expense		(4,957	)	2	%		(3,062	)	1	%		(10,850	)	3	%
Income (loss) before minority interests		(2,055	)	1	%		13,152		4	%		(123,584	)	31	%
Minority interests in income of consolidated subsidiaries		(1,409	)	1	%		(2,312	)	1	%		18,551		5	%
Income (loss) from continuing operations	$	(3,464	)	1	%	$	10,840		4	%	$	(105,033	)	26	%
Discontinued operations
Loss from operations of discontinued subsidiaries, net		(47	)	0	%		—		0	%		—		0	%
Loss on disposal/dissolution of discontinued		(3	)	0	%		—		0	%		—		0	%
Net income (loss)	$	(3,514	)	1	%	$	10,840		4	%	$	(105,033	)	26	%

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Results of Operations of Our Operating Segments for the Year Ended December 31, 2007, as Compared to the Year Ended December 31, 2006:

	Year ended December 31, 2007
	Software Group		Global Services Group			Games			China.com			MVAS			Corporate			Total
	(in thousands)
License	$	62,044	$	3,235		$	—		$	—		$	—		$	—		$	65,279
Maintenance		86,585		—			—			—			—			—			86,585
Consulting services		86,862		103,723			—			—			—			—			190,585
Hardware		2,769		3,819			—			—			—			—			6,588
CDC Games		—		—			33,596			—			—			—			33,596
China.com		—		—			—			11,409			—			—			11,409
MVAS		—		—			—			—			8,342			—			8,342
Total revenue		238,260		110,777			33,596			11,409			8,342			—			402,384
License		18,531		3,143			—			—			—			—			21,674
Maintenance		11,623		—			—			—			—			—			11,623
Consulting services		66,994		77,389			—			—			—			—			144,383
Hardware		1,678		3,603			—			—			—			—			5,281
CDC Games		—		—			20,108			—			—			—			20,108
China.com		—		—			—			4,283			—			—			4,283
MVAS		—		—			—			—			4,757			—			4,757
Total cost of revenue		98,826		84,135			20,108			4,283			4,757			—			212,109
Gross profit		139,434		26,642			13,488			7,126			3,585			—			190,275
Sales and marketing expenses		60,379		4,390			6,893			2,244			2,359			248			76,513
Research and development expenses		22,579		164			—			—			1,093			—			23,836
General and administrative expenses		33,070		19,403			11,626			10,488			4,135			17,011			95,733
Amortization expenses		5,820		3,267			902			131			1,567			970			12,657
Restructuring and other charges		1,909		(6,429	)		8,622			—			2,399			2,555			9,056
Goodwill impairment		—		—			—			—			71,096			—			71,096
Total operating expenses		123,757		20,795			28,043			12,863			82,649			20,784			288,891
Operating income (loss)	$	15,677	$	5,847		$	(14,555	)	$	(5,737	)	$	(79,064	)	$	(20,784	)	$	(98,616	)
Other expense, net																			(14,118	)
Loss before income taxes																			(112,734	)
Income tax expense																			(10,850	)
Loss before minority interests																			(123,584	)
Minority interests in losses of consolidated subsidiaries																			18,551
Net loss from continuing operations																		$	(105,033	)

	Year ended December 31, 2006
	Software Group		Global Services Group		Games		China.com			MVAS		Corporate			Total
	(in thousands)
License	$	46,260	$	—	$	—	$	—		$	—	$	—		$	46,260
Maintenance		63,252		—		—		—			—		—			63,252
Consulting services		64,825		66,484		—		—			—		—			131,309
CDC Games		—		—		26,780		—			—		—			26,780
China.com		—		—		—		10,064			—		—			10,064
MVAS		—		—		—		—			31,863		—			31,863
Total revenue		174,337		66,484		26,780		10,064			31,863		—			309,528
License		13,417		—		—		—			—		—			13,417
Maintenance		9,161		—		—		—			—		—			9,161
Consulting services		51,211		45,943		—		—			—		—			97,154
CDC Games		—		—		10,631		—			—		—			10,631
China.com		—		—		—		4,095			—		—			4,095
MVAS		—		—		—		—			13,004		—			13,004
Total cost of revenue		73,789		45,943		10,631		4,095			13,004		—			147,462
Gross profit		100,548		20,541		16,149		5,969			18,859		—			162,066
Sales and marketing expenses		42,565		1,195		2,567		2,149			10,837		—			59,313
Research and development expenses		19,842		—		—		—			139		—			19,981
General and administrative expenses		22,927		14,418		3,369		11,930			5,269		8,035			65,948
Amortization expenses		4,392		1,050		673		—			1,257		943			8,315
Restructuring and other charges		4,426		448		—		—			—		—			4,874
Total operating expenses		94,152		17,111		6,609		14,079			17,502		8,978			158,431
Operating income (loss)	$	6,396	$	3,430	$	9,540	$	(8,110	)	$	1,357	$	(8,978	)		3,635
Other income, net																12,579
Income before income taxes																16,214
Income tax expense																(3,062	)
Income before minority interests																13,152
Minority interests in income of consolidated subsidiaries																(2,312	)
Net income from continuing operations															$	10,840

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Revenue

Software Group

	Year ended December 31,				Change
	2006		2007		Amount		%
	(in thousands)
License	$	46,260	$	62,044	$	15,784	34	%
Maintenance		63,252		86,585		23,333	37	%
Consulting services		64,825		86,862		22,037	34	%
Hardware		—		2,769		2,769	N/A
Total Software revenue	$	174,337	$	238,260	$	63,923	37	%

• License revenue increased primarily due to the acquisitions of Respond, Catalyst and Saratoga, which collectively contributed $9.5 million of the aggregate increase in revenue. Also, growth in new license sales of our legacy products increased revenue by $6.3 million. New software sales were strong in global vertical industries, including financial services and discrete and process manufacturing.

• Maintenance revenue increased primarily due to the acquisitions of Respond, Catalyst and Saratoga, which collectively contributed $15.4 million of the aggregate increase in revenue. The remaining $7.9 million increase was due to higher license sales and stronger customer retention, which accounted for $5.0 million, and $2.9 million from MVI and c360, which were acquired in 2006, now providing a full year of revenue.

• Consulting services revenue increased due to installation and professional services associated with a larger customer base, which contributed $15.7 million in additional revenue, and acquisitions in our Software Group, which contributed $6.3 million.

• During 2007, we began selling hardware, primarily through the Catalyst acquisition, which generated revenue for the year ended December 31, 2007.

Global Services Group

	Year ended December 31,				Change
	2006		2007		Amount		%
	(in thousands)
License	$	—	$	3,235	$	3,235	N/A
Consulting services		66,484		103,723		37,239	56	%
Hardware		—		3,819		3,819	N/A
Total Global Services revenue	$	66,484	$	110,777	$	44,293	67	%

• During 2007, we began selling licenses, which generated revenue for the year ended December 31, 2007. This license revenue related to third-party software products which are sold in conjunction with our consulting services.

• Consulting services revenue increased primarily due to the acquisitions of Catalyst, Vectra, Snapdragon and Vis.align, which collectively contributed approximately $22.6 million of the aggregate increase in revenue. The remaining increase was the result of growth in services provided to new and existing customers primarily from the companies we purchased in 2006.

115

• During 2007, we began selling hardware, which generated revenue for the year ended December 31, 2007.

CDC Games Group

	Year ended December 31,				Change
	2006		2007		Amount		%
	(in thousands)
CDC Games revenue	$	26,780	$	33,596	$	6,816	25	%

• CDC Games revenue increased primarily due to the acquisition of Guangzhou Optic Communications Co., Ltd (“Optic”), which contributed approximately $6.0 million of the aggregate increase in revenue. The remaining increase was the result of growth in services provided to new and existing customers. Additionally, an ongoing dispute with Mgame, the developer of Yulgang, caused reduced player activity in the second half of 2007, having a negative impact on our revenue. We resolved the issue with Mgame in the first quarter of 2008, and we expect to have increased revenue for Yulgang in 2008.

China.com Group

	Year ended December 31,				Change
	2006		2007		Amount		%
	(in thousands)
China.com revenue	$	10,064	$	11,409	$	1,345	13	%

• China.com revenue increased primarily due to growth in online advertising sales from its portal business. This advertising sales growth was due to enhanced brand equity, strategic partnerships with an increasing number of industry leaders, and encouraging sales growth over the automobile and gaming channels.

MVAS Group

	Year ended December 31,				Change
	2006		2007		Amount			%
	(in thousands)
MVAS revenue	$	31,863	$	8,342	$	(23,521	)	-74	%

• MVAS revenue decreased primarily due to the continued effect of changes in the regulatory environment for the MVAS industry in China in 2006, and we believe that market conditions will continue to be challenging for the entire MVAS sector in the future. Since the onset of the regulatory changes, we have significantly reduced headcount and the marketing promotion expenses incurred for the MVAS business. In 2007, we explored various strategies to achieve long term growth. These strategies included: (i) continue to move further upstream into the content provider segment of the business; (ii) continue to launch popular mobile games; and (iii) develop mobile applications for enterprises and government offices in China.

116

Gross Margin

Software Group

	Year ended December 31,
	2006				2007				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount		%
	(in thousands)
License	$	32,843	71	%	$	43,513	70	%	$	10,670	32	%
Maintenance		54,091	86	%		74,962	87	%		20,871	39	%
Consulting services		13,614	21	%		19,868	23	%		6,254	46	%
Hardware		—	—			1,091	39	%		1,091	N/A
Software gross margin	$	100,548	58	%	$	139,434	59	%	$	38,886	39	%

• Overall, gross margin as a percentage of revenue (“gross margin percentage”) for the Software Group was relatively consistent year over year.

• The increase in consulting services gross margin percentage was primarily due to better utilization rates in North America and better than average gross margin percentage at the acquired companies during 2007. Furthermore, the consulting services gross margin percentage in the fourth quarter of 2006 was negatively impacted by a reversal of $0.5 million in revenues related to a customer dispute for services rendered in 2006.

• During 2007, we began selling hardware, primarily through the Catalyst acquisition, which generated gross margin for the year ended December 31, 2007.

Global Services Group

	Year ended December 31,
	2006				2007				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount		%
	(in thousands)
License	$	—	—		$	92	3	%	$	92	N/A
Consulting services		20,541	31	%		26,334	25	%		5,793	28	%
Hardware		—	—			216	6	%		216	N/A
Global Services gross margin	$	20,541	31	%	$	26,642	24	%	$	6,101	30	%

• The decrease in consulting services gross margin percentage was primarily due to the change in our Global Services business mix due to 2007 acquisitions and divestitures. We acquired Catalyst, which has a relatively low consulting services margin, and we divested Ion Global which had a relatively high consulting services margin due to the nature of its business. Further, additional weakness in the margin was due to the loss of a large customer for our Australia services group. This customer reduction weakened our gross margin due to lower service utilization.

117

• During 2007, we began selling hardware, which generated gross margin for the year ended December 31, 2007.

CDC Games Group

	Year ended December 31,
	2006				2007				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount			%
	(in thousands)
CDC Games gross margin	$	16,149	60	%	$	13,488	40	%	$	(2,661	)	-16	%

• CDC Games gross margin decreased primarily due to the acquisition of Optic, which has lower gross margins than our other gaming services. The lower gross margin is primarily related to the license fee amortization expense resulting from the Optic acquisition. In addition, many of the games acquired in the Optic acquisition are in the start-up phase, which have lower revenue in the early stages of the game life cycle.

China.com Group

	Year ended December 31,
	2006				2007				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount		%
	(in thousands)
China.com gross margin	$	5,969	59	%	$	7,126	62	%	$	1,157	19	%

• China.com’s gross margin percentage increased due to higher revenue from our portal services, which have higher gross margins than our other mobile services.

MVAS Group

	Year ended December 31,
	2006				2007				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount			%
	(in thousands)
MVAS gross margin	$	18,859	59	%	$	3,585	43	%	$	(15,274	)	-81	%

• MVAS gross margin percentage decreased due to the challenging regulatory environment which resulted from the policy changes implemented by China’s Ministry of Information Industry in 2006 that led to reduced revenue and lower gross margin.

118

Operating Income

Software Group

• Operating income for the Software Group for the year ended December 31, 2007, was $15.7 million or 7% of revenue, as compared to $6.4 million or 4% of revenue for the year ended December 31, 2006. This increase was directly related to the growth of revenue and corresponding increase in gross profit. Regarding the increase in operating income as a percentage of revenue, this improvement resulted from the continued realization of efficiencies in research and development (“R&D”) expenses and from decreased restructuring charges.

• The R&D efficiencies primarily resulted from the continuation of the integration of R&D activities at Ross and Pivotal, which were initiated in 2006.

• As we expand into new and existing markets and introduce new products and services, we expect that our operating expenses within the Software Group, particularly research and development expenses and sales and marketing expenses, will continue to increase. However, as we continue to integrate processes from acquired entities, we expect that revenue will increase at a higher rate relative to the increases in operating expenses.

Global Services Group

• Operating income for the Global Services Group for the year ended December 31, 2007, was $5.8 million or 5% of revenue, as compared to $3.4 million or 5% of revenue for the year ended December 31, 2006. Operating expenses as a percentage of revenue were consistent year over year.

• As we expand into new and existing markets and introduce new products and services, we expect that our operating expenses within the Global Services Group, particularly sales and marketing expenses, will continue to increase. However, as we continue to integrate processes from acquired entities, we expect that revenue will increase at a higher rate relative to the increases in operating expenses.

• Regarding restructuring and other charges, this amount is comprised of a $6.7 million gain on the sale of Ion Global, offset by various other charges.

In August 2007, we entered into four separate agreements to sell the principal assets and subsidiaries that comprised our Ion Global business for $9.0 million. Subsequent to the date of sale, we received an additional $0.7 million due to a net asset adjustment. In total, these transactions resulted in a pretax gain of approximately $ 6.7 million. Under the terms of these agreements, we agreed to sell: (i) the assets related to the internet consulting services and website design and development of Ion Global (California), Inc.; (ii) substantially all of the assets of Ion Global Limited; (iii) all of the issued and outstanding shares of Ion Global Korea Ltd. held by Ion Global (BVI) Ltd.; and (iv) the “Ion Global” trademark. Ion Global was included within our Global Services segment, and the goodwill associated with this transaction was allocated on a historical basis as Ion Global was not integrated into the Company.

We have concluded that the financial position, results of operations and cash flows from Ion Global are immaterial to our overall results and, therefore, have not been reported as discontinued operations in the accompanying consolidated statements of operations for the year ended December 31, 2007.

119

CDC Games Group

• Operating loss for the CDC Games Group for the year ended December 31, 2007, was $14.6 million or 43% of revenue, as compared to operating income of $9.5 million or 36% of revenue for the year ended December 31, 2006. This operating loss was primarily attributable to restructuring charges, a decrease in gross profit, which is discussed above, and to higher general and administrative expenses resulting from increased personnel and systems to handle larger and more complex operations from the acquisition of Optic.

• In the first quarter of 2008, we reduced the CDC Games staff by 150 people by realizing synergies from our acquisition of Optic.

• Regarding restructuring and other charges, our business model in the CDC Games segment is to make investments in a diverse set of online computer game licensors. During 2006 and 2007, we entered into several license arrangements with game developers for the right to produce the online computer games in specific countries and/or geographical regions. Not all of these games may be successfully launched due to various factors including: (i) development problems; (ii) poor beta test results; (iii) other games have better potential to become successful; and (iv) limited capital resources. During 2007, we performed an assessment of the recoverability of our license fee assets and determined that we would not generate future cash flows from several licenses. As a result, we impaired $4.2 million of these license fees. In addition, we also made several cost investments in online computer game development companies. During 2007 and early 2008, several of these game developers lost access to the credit markets, thus raising questions as to their ability to continue as a going concern. Therefore, we recorded a charge of $4.3 million to write off our investment in these companies.

China.com Group

• Operating loss for the China.com Group for the year ended December 31, 2007 was $5.7 million or 50% of revenue, as compared to an operating loss of $8.1 million or 81% of revenue for the year ended December 31, 2006. This decrease in operating loss as a percentage of revenue was primarily attributable to a higher gross margin, which is discussed above, and to lower general and administrative expenses relative to revenue, resulting from workforce reductions and operating efficiencies realized in 2007.

MVAS Group

• Operating loss for the MVAS Group for the year ended December 31, 2007, was $79.1 million or 948% of revenue, as compared to operating income of $1.4 million or 4% of revenue for the year ended December 31, 2006. This operating loss was primarily attributable to impairment of goodwill and restructuring charges resulting from our decision to scale down our emphasis on mobile services and applications, in light of the continued difficulties in China’s regulatory environment for the MVAS industry.

120

• Regarding restructuring and other charges, in accordance with our policy on testing long-lived assets for impairment, we had a triggering event that required testing the intangible assets of the MVAS business for impairment. We performed our impairment test and determined that the intangible assets were impaired, because we did not have sufficient discounted cash flows to support the remaining intangible assets due to our decision to exit this business in 2008. Therefore, we wrote off all the remaining intangible assets that related to this segment, which equaled $2.4 million.

• Regarding goodwill impairment, as the regulatory environment for the MVAS industry continues to be difficult and we see no reasonable instance where our MVAS business may turn profitable in the foreseeable future, in February 2008, we announced that we were in the process of reducing our MVAS workforce and intended to scale down our emphasis on this business. Later in 2008, we made the determination that we were winding down the operations of the MVAS business and would discontinue this segment. At December 31, 2007, we performed our annual impairment test and determined that all of the goodwill associated with the MVAS segment was impaired, because the discounted cash flows from this segment were negative. We wrote off all of the goodwill that was assigned to this segment, which equaled $71.1 million.

Corporate

• Regarding restructuring and other charges, we have made cost investments in several companies during our history. In 2007, one of these companies filed bankruptcy, and we were not able to recover our $2.4 million investment. We also wrote off other assets of $0.1 million.

Other Income (Expense), Net Components

	Years ended December 31,
	2006			2007
	(in thousands)
Interest income	$	10,680		$	13,386
Interest expense		(3,038	)		(9,086	)
Gain on disposal of available-for-sale securities		344			514
Gain on disposal of subsidiaries and cost investments		3,087			561
Impairment of available-for-sale securities		—			(13,497	)
Gain (loss) on change in fair value of derivatives		531			(5,996	)
Share of income (losses) in equity investees		975			—
Total other income (expense), net	$	12,579		$	(14,118	)

• Interest income increased due to having higher interest-bearing cash balances throughout 2007 compared to 2006. Note that $168 million of cash at December 31, 2006, came from convertible note proceeds in November 2006.

• Interest expense increased due to having the convertible notes for all of 2007.

121

• Impairment of available-for-sale securities for the year ended December 31, 2007, represented other-than-temporary impairment losses recorded on our collateralized debt obligation (“CDO”) investments. We evaluated the length of time and extent to which the fair market value of these securities had been less than their cost, as well as the financial condition and performance of the issuer and the our intention and ability to hold these securities to recovery or maturity. Management based the fair value on binding quotes received from third parties for these investments. These valuations represent our best estimate of fair value of these investments at December 31, 2007, and may or may not represent the ultimate value of these investments.

• The loss on change in fair value of derivatives for the year ended December 31, 2007, is related to the compound embedded derivative within the convertible notes issued in November 2006 (see footnote 11 where explained in detail). We expect the value of this derivative to continue to increase and be an expense over the next year.

Income Taxes

• We recorded income tax expense of $10.9 million in 2007 as compared to tax expense of $3.1 million in 2006. Our total income tax provision is determined entity by entity in each taxing jurisdiction in which it operates. We recorded tax expense in 2007 even though we had recorded a significant loss from continuing operations. This is a result of having certain of the significant impairment losses including the MVAS impairment charge are not deductible for taxes. In addition, we generated taxable income in jurisdictions that have a high statutory tax rate. Lastly, we increased our valuation allowance by $3.7 million in 2007 because management concluded that they did not believe that the recoverability of certain of our deferred tax assets is more likely than not. As of December 31, 2007, we had a valuation allowance of approximately $62.7 million relating primarily to net operating losses.

Minority Interest in Income of Consolidated Subsidiaries

• Minority interest income was $18.6 million for the year ended December 31, 2007, and related to the minority interest portion of the combined losses of our majority-owned subsidiaries China.com, Software Galeria, Inc. (“SGI”) and Vectra. It also included ten months of activity related to Industri-Matematik International Corp. (“IMI”), which represents the time period prior to our acquisition of the remaining 49% of IMI. Minority interest expense of $2.3 million for the year ended December 31, 2006, related to the minority interest portion of the combined income of China.com, SGI and IMI.

122

Results of Operations of Our Operating Segments for the Year Ended December 31, 2006, as Compared to the Year Ended December 31, 2005:

	Year ended December 31, 2006
	Software Group			Global Services Group		Games		China.com			MVAS		Corporate			Total
	(in thousands)
License	$	46,260		$	—	$	—	$	—		$	—	$	—		$	46,260
Maintenance		63,252			—		—		—			—		—			63,252
Consulting services		64,825			66,484		—		—			—		—			131,309
CDC Games		—			—		26,780		—			—		—			26,780
China.com		—			—		—		10,064			—		—			10,064
MVAS		—			—		—		—			31,863		—			31,863
Total revenue		174,337			66,484		26,780		10,064			31,863		—			309,528
License		13,417			—		—		—			—		—			13,417
Maintenance		9,161			—		—		—			—		—			9,161
Consulting services		51,211			45,943		—		—			—		—			97,154
CDC Games		—			—		10,631		—			—		—			10,631
China.com		—			—		—		4,095			—		—			4,095
MVAS		—			—		—		—			13,004		—			13,004
Total cost of revenue		73,789			45,943		10,631		4,095			13,004		—			147,462
Gross profit		100,548			20,541		16,149		5,969			18,859		—			162,066
Sales and marketing expenses		42,565			1,195		2,567		2,149			10,837		—			59,313
Research and development expenses		19,842			—		—		—			139		—			19,981
General and administrative expenses		22,927			14,418		3,369		11,930			5,269		8,035			65,948
Amortization expenses		4,392			1,050		673		—			1,257		943			8,315
Restructuring and other charges		4,426			448		—		—			—		—			4,874
Total operating expenses		94,152			17,111		6,609		14,079			17,502		8,978			158,431
Operating income (loss)	$	6,396		$	3,430	$	9,540	$	(8,110	)	$	1,357	$	(8,978	)		3,635
Other income, net																	12,579
Income before income taxes																	16,214
Income tax expense																	(3,062	)
Income before minority interests																	13,152
Minority interests in income of consolidated subsidiaries																	(2,312	)
Net income from continuing operations																$	10,840
	Year ended December 31, 2005
	Software Group			Global Services Group		Games		China.com			MVAS		Corporate			Total
	(in thousands)
License	$	38,541		$	—	$	—	$	—		$	—	$	—		$	38,541
Maintenance		59,144			—		—		—			—		—			59,144
Consulting services		61,119			42,686		—		—			—		—			103,805
China.com		—			—		—		8,995			—		—			8,995
MVAS		—			—		—		—			34,389		—			34,389
Total revenue		158,804			42,686		—		8,995			34,389		—			244,874
License		12,278			—		—		—			—		—			12,278
Maintenance		9,335			—		—		—			—		—			9,335
Consulting services		46,457			27,168		—		—			—		—			73,625
China.com		—			—		—		3,449			—		—			3,449
MVAS		—			—		—		—			15,262		—			15,262
Total cost of revenue		68,070			27,168		—		3,449			15,262		—			113,949
Gross profit		90,734			15,518		—		5,546			19,127		—			130,925
Sales and marketing expenses		38,502			921		—		2,497			5,691		—			47,611
Research and development expenses		22,788			—		—		—			—		—			22,788
General and administrative expenses		25,710			10,280		—		6,410			7,776		6,432			56,608
Amortization expenses		4,224			246		—		—			1,063		551			6,084
Restructuring and other charges		1,075			109		—		—			—		483			1,667
Total operating expenses		92,299			11,556		—		8,907			14,530		7,466			134,758
Operating income (loss)	$	(1,565	)	$	3,962	$	—	$	(3,361	)	$	4,597	$	(7,466	)		(3,833	)
Other income, net																	6,735
Income before income taxes																	2,902
Income tax expense																	(4,957	)
Loss before minority interests																	(2,055	)
Minority interests in income of consolidated subsidiaries																	(1,409	)
Net loss from continuing operations																$	(3,464	)

123

Revenue

Software Group

	Year ended December 31,				Change
	2005		2006		Amount		%
	(in thousands)
License	$	38,541	$	46,260	$	7,719	20	%
Maintenance		59,144		63,252		4,108	7	%
Consulting services		61,119		64,825		3,706	6	%
Total Software revenue	$	158,804	$	174,337	$	15,533	10	%

• License revenue increased primarily due to growth in new license sales of our legacy products of $4.7 million and due to the acquisitions of MVI, c360 and JRG, which collectively contributed $3.0 million of the aggregate increase in revenue. New software sales were strong in global vertical industries, including financial services, discrete and process manufacturing, and homebuilding.

• Maintenance revenue increased primarily due to growth in first-year maintenance contract sales.

• Consulting services revenue increased due to installation and professional services associated with a larger customer base, and due to acquisitions in our Software Group.

Global Services Group

	Year ended December 31,				Change
	2005		2006		Amount		%
	(in thousands)
Consulting services	$	42,686	$	66,484	$	23,798	56	%

• Consulting services revenue increased primarily due to the acquisitions of OSTI, DBPI, Horizon and Vis.align (acquired in December 2006), which collectively contributed approximately $22.7 million of the aggregate increase in revenue.

CDC Games Group

	Year ended December 31,				Change
	2005		2006		Amount		%
	(in thousands)
CDC Games revenue	$	—	$	26,780	$	26,780	N/A

• During 2006, we operated one game, Yulgang, which had approximately 42.9 million registered users as of December 31, 2006. There was no CDC Games revenue in 2005, as we held a minority interest in the acquired games subsidiary and, therefore, used the equity method of accounting in 2005 for the games business.

124

China.com Group

	Year ended December 31,				Change
	2005		2006		Amount		%
	(in thousands)
China.com revenue	$	8,995	$	10,064	$	1,069	12	%

• China.com revenue increased primarily due to increased portal services revenue, resulting from targeted investments made in 2004 to establish our portal business as an influential player in China.

MVAS Group

	Year ended December 31,				Change
	2005		2006		Amount			%
	(in thousands)
MVAS revenue	$	34,389	$	31,863	$	(2,526	)	-7	%

• MVAS revenue decreased primarily due to a drop in volume as a result of regulatory rule changes related to billing methods and other factors promulgated by China’s Ministry of Information Industry.

Gross Margin

Software Group

	Year ended December 31,
	2005				2006				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount			%
	(in thousands)
License	$	26,263	68	%	$	32,843	71	%	$	6,580		25	%
Maintenance		49,809	84	%		54,091	86	%		4,282		9	%
Consulting services		14,662	24	%		13,614	21	%		(1,048	)	-7	%
Software gross margin	$	90,734	57	%	$	100,548	58	%	$	9,814		11	%

• Overall, the gross margin percentage for the Software Group was consistent year over year.

• The increase in License gross margin percentage was due to a decrease in amortization expense associated with purchased technologies from acquired entities.

• Maintenance gross margin percentage was generally consistent year over year.

• The decrease in Consulting Services gross margin percentage was due to higher personnel costs.

125

Global Services Group

	Year ended December 31,
	2005				2006				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount		%
	(in thousands)
Global Services gross margin	$	15,518	36	%	$	20,541	31	%	$	5,023	32	%

• The decrease in the gross margin percentage for the Global Services Group was primarily due to the 2006 acquisitions of entities which have lower gross margins than our legacy business.

CDC Games Group

	Year ended December 31,
	2005			2006				Change
	Amount		% of Revenue	Amount		% of Revenue		Amount		%
	(in thousands)
CDC Games gross margin	$	—	—	$	16,149	60	%	$	16,149	N/A

• CDC Games Group gross margin resulted from the purchase of the 17games Group in 2006.

China.com Group

	Year ended December 31,
	2005				2006				Change
	Amount		% of Revenue		Amount		% of Revenue		Amount		%
	(in thousands)
China.com gross margin	$	5,546	62	%	$	5,969	59	%	$	423	8	%

• China.com gross margin percentage decreased due to a 20% increase in the cost of revenue, whereas our revenue only increased 12%.

126

MVAS Group

	Year ended December 31,
	2005				2006				Change
	Amount		% of Revenues		Amount		% of Revenues		Amount			%
	(in thousands)
MVAS gross margin	$	19,127	56	%	$	18,859	59	%	$	(268	)	-1	%

• MVAS gross margin percentage increased due to favorable cost trends associated with acquiring third-party mobile content.

Operating Income

Software Group

• Operating income for the Software Group for the year ended December 31, 2006, was $6.4 million or 4% of revenue, as compared to an operating loss of $1.6 million or 1% of revenue for the year ended December 31, 2005. This increase was primarily due to the realization of efficiencies in R&D expenses and general and administrative expenses as a result of the consolidation of processes from acquired entities. In particular, the decrease in R&D expenses as a percentage of revenue was primarily due to the integration of R&D activities at Ross and Pivotal in 2006.

Global Services Group

• Operating income for the Global Services Group for the year ended December 31, 2006, was $3.4 million or 5% of revenue, as compared to $4.0 million or 9% of revenue for the year ended December 31, 2005. This decrease as a percentage of revenue was directly attributable to the decrease in gross margin percentage, which is discussed above. Operating expenses as a percentage of revenue were consistent year over year.

CDC Games Group

• Operating income for the CDC Games Group for the year ended December 31, 2006, was $9.5 million or 36% of revenue. The CDC Games Group had no operations in 2005.

China.com Group

• Operating loss for the China.com Group for the year ended December 31, 2006, was $8.1 million or 81% of revenue, as compared to an operating loss of $3.4 million or 37% of revenue for the year ended December 31, 2005. This increase in operating loss as a percentage of revenue was due to a lower gross margin, which is discussed above, and to higher general and administrative expenses as a percentage of revenue.

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MVAS Group

• Operating income for the MVAS Group for the year ended December 31, 2006, was $1.4 million or 4% of revenue, as compared to $4.6 million or 13% of revenue for the year ended December 31, 2005. This decrease was due primarily to higher sales and marketing expenditures, offset somewhat by a cost savings realized in our general and administrative expenses.

Other Income (Expense), Net Components

	Years ended December 31,
	2005			2006
	(in thousands)
Interest income	$	8,156		$	10,680
Interest expense		(1,257	)		(3,038	)
Gain on disposal of available-for-sale securities		525			344
Gain on disposal of subsidiaries and cost investments		483			3,087
Gain on change in fair value of derivatives		—			531
Share of gains (losses) in equity investees		(1,172	)		975
Total other income, net	$	6,735		$	12,579

• Interest income increased due to higher interest-bearing cash balances and higher interest rates throughout 2006 compared to 2005.

• Interest expense increased due to higher interest rates, as well as the issuance of convertible notes in November 2006.

• The gain on disposal of subsidiaries and cost investments for the year ended December 31, 2006, was associated with the deemed disposal of China.com shares in regards to the acquisition of the remaining interest in the 17games Group, whereby the value of the disposed shares of China.com were greater than acquired liabilities by an equivalent amount of the recorded gain.

• The share of gains (losses) in equity investees for each year ended December 31, 2005 and 2006, relates to investments in which we had the ability to exercise significant influence, generally 20% to 50% owned investments.

Income Taxes

• We recorded income tax expense of $3.1 million in 2006 as compared to $5.0 million in 2005. The Company’s total income tax provision is determined entity by entity in each taxing jurisdiction in which it operates. A portion of the fluctuations in income tax expense was a result of the changes in income at the entity level. In addition, in 2006, we recorded tax benefits of $2.8 million related to a change in valuation allowance and $0.8 million related to income tax credits.

We must assess the likelihood that our deferred tax assets will be recovered from future taxable income. In making this assessment, all available evidence must be considered, including the current economic climate, our expectations of future taxable income, and our ability to project such income and the appreciation of our

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investments and other assets. As of December 31, 2006, management concluded that it was more likely than not to realize a substantial portion of the existing deferred tax asset and, therefore, released valuation allowance of approximately $18.1 million. As of December 31, 2006, we continued to have a valuation allowance of approximately $59.0 million relating primarily to net operating losses.

Minority Interest in Income of Consolidated Subsidiaries

• Minority interest expense was $2.3 million for the year ended December 31, 2006, and related to the minority interest portion of the combined income of our majority-owned subsidiaries China.com, SGI and IMI. Minority interest expense was $1.4 million for the year ended December 31, 2005, and also related to the minority interest portion of the combined income of China.com, SGI and IMI.

B. Liquidity and Capital Resources

The following table sets forth the summary of our cash flows for the periods presented:

	Year ended December 31,
	2005			2006			2007
	(in thousands)
Net cash provided by operating activities	$	11,948		$	39,329		$	9,284
Net cash provided by (used in) investing activities		8,614			(51,022	)		(98,989	)
Net cash provided by (used in) financing activities		(36,353	)		137,695			4,726
Effect of exchange rate changes on cash		(696	)		3,827			3,649
Net increase (decrease) in cash and cash equivalents		(16,487	)		129,829			(81,330	)
Cash and cash equivalents at beginning of period		110,206			93,719			223,548
Cash and cash equivalents as at end of period	$	93,719		$	223,548		$	142,218

Sources and Uses of Cash for the Year ended December 31, 2007

Operating Activities

Net cash provided by operating activities decreased from $39.3 million in 2006 to $9.3 million in 2007. This $30.0 million decrease partially resulted from a decrease in net income adjusted for noncash charges and gains of $12.4 million, from $45.4 million in 2006 to $33.0 million in 2007. In addition, working capital requirements increased $17.6 million as a result of increases in accounts receivable, deposits, prepayments and other receivables and other assets and decreases in accounts payable, accrued liabilities and income tax payable, offset by increases in deferred revenue and other liabilities. Accounts receivable, deposits, prepayments and other receivables and other assets were a use of cash of $15.3 million in 2006 compared to a use of cash of $22.4 million in 2007. Accounts payable, accrued liabilities and income tax payable were a source of cash of $5.9 million in 2006 compared to a use of cash of $7.8 million in 2007. Deferred revenue and other liabilities were a source of cash of $3.4 million in 2006 compared to a source of cash of $6.6 million in 2007.

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Investing Activities

Net cash used in investing activities increased from $51.0 million in 2006 to $99.0 million in 2007. This reflects an increase in cash used in the acquisition of subsidiaries of $56.0 million, an increase in capital expenditures of $8.1 million, an increase in cost and equity investments of $16.0 million, an increase in game licenses of $9.7 million, and an increase in restricted cash of $7.0 million, offset by a decrease in purchases of marketable securities of $36.0 million, an increase in proceeds from the disposal of marketable securities and investments of $1.4 million, and an increase in proceeds from the disposal of subsidiaries and fixed assets of $8.3 million.

Financing Activities

Net cash provided by financing activities decreased from $137.7 million in 2006 to $4.7 million in 2007. This decrease was primarily the result of proceeds from the issuance of $168.0 million in convertible notes and purchase note agreements of $38.7 million in 2006, compared to proceeds from bank loans of $33.8 million in 2007. This decrease in proceeds from debt was offset by a decrease in cash used for the repayment of bank loans of $27.3 million, an increase in the issuance of share capital of $3.6 million, a decrease in cash used for the repurchase of treasury stock of $5.5 million, and a decrease in cash used for debt issuance costs of $3.5 million.

Future cash requirements and sources of liquidity

Future cash requirements

In the future, we expect that our primary cash requirements will be to fund working capital including payment of contractual obligations and research and development expenses, repay debts, and fund contingent consideration payable for certain of our acquisitions.

The following table summarizes our contractual obligations as of December 31, 2007:

	Payments due by period, in thousands
	Total		Less than 1 year		1–3 years		3-5 years		More than 5 years
Operating lease obligations (1)	$	45,965	$	14,253	$	19,439	$	11,422	$	851
Short-term debt obligations		33,892		33,892		—		—		—
Interest on short-term debt obligations		581		581		—		—		—
Convertible notes		168,000		—		—		168,000		—
Interest on convertible notes		24,360		6,300		12,600		5,460		—
Purchase considerations (2)		4,192		4,192		—		—		—

(1) Operating lease obligations consist of future minimum payments under non-cancelable operating leases.

(2) Purchase considerations include fixed and adjustable payments contingent upon meeting certain performance requirements. These amounts exclude future payments of up to $24.2 million, which are based on total future revenue.

Other long-term liabilities, such as deferred taxes and unrecognized tax benefits, have been excluded from the table due to the uncertainty of the timing of payments combined with the absence of historical trends to be used as a predictor for such payments.

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On June 27, 2008, China.com declared and paid a cash dividend to its shareholders in the aggregate amount of $74.1 million. Of such amount, approximately $57.5 million was paid to us, and the remaining $16.6 million was paid to the independent minority shareholders of China.com. On June 27, 2008, we transferred an aggregate of $64.5 million to CDC Games. CDC Games subsequently paid China.com Capital Ltd. (“CCL”), a wholly owned subsidiary of China.com Inc., the entire balance of $64.5 million of principal and interest due and payable under its promissory note owed to CCL.

Future sources of liquidity

We believe that cash flows from operating activities, combined with our existing cash and cash equivalents of $142.2 million and our available-for-sale securities of $76.2 million as of December 31, 2007, the majority of which will mature at various dates through 2008, will be sufficient to meet our future cash requirements described above.

The following table summarizes the expected maturity dates of our debt securities as of December 31, 2007:

	Expected maturities, in thousands
	Total		Less than 1 year		1–3 years
Unsecured fixed rate debt	$	74,595	$	74,595	$	—

Our ability to meet our expected cash requirements will depend on our ability to generate cash in the future, which is subject to financial, competitive, economic, regulatory and other factors that are beyond our control. If we do not generate sufficient cash from operations or do not otherwise have sufficient cash and cash equivalents, we may need to borrow against our lines of credit or issue other long- or short-term debt or equity, if the market and the terms of our existing debt instruments permit.

Convertible Notes

In November 2006, we issued $168 million aggregate principal amount of 3.75% senior exchangeable, unsecured convertible notes due 2011 to a total of 12 institutional accredited investors in a private placement exempt from registration under the Securities Act. Under the terms of the notes, the holders have the right to exchange such notes into common shares of CDC Corporation or, upon a qualifying initial public offering (“IPO”), common shares of two of our wholly-owned subsidiaries based on a predetermined exchange price when the IPO is consummated (see “Note 11 - Financing Arrangements” in “Item 18 - Financial Statements” for further discussion on our Convertible Notes).

In April 2008, two of our subsidiaries, CDC Games and CCL, entered into an agreement (the “Modification Agreement”) for the purpose of: (i) extending the maturity date of a promissory note in the principal amount of $60.0 million by and between CDC Games and CCL (the “Promissory Note”) from the initial maturity date of June 28, 2008 (the “Maturity Date”), to June 28, 2010, and (ii) including us as a guarantor of the Promissory Note.

The effectiveness of the Modification Agreement was conditioned upon China.com obtaining the approval of its minority shareholders (the “Minority Shareholders”). At an extraordinary general meeting (“EGM”) of China.com held on May 27, 2008, the Minority Shareholders, by way of poll, rejected the proposal to ratify the Modification Agreement. As a result, the Modification Agreement lapsed automatically and did not become effective.

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In June 2008, we determined that the execution of the Modification Agreement had constituted an “Event of Default” under the terms of our convertible notes. The convertible notes provide that, following an Event of Default, payment of all or a portion of any amounts due thereunder may be accelerated and become due and payable immediately upon delivery of a written notice of acceleration to us (an “Acceleration Notice”), unless such Event of Default shall have been cured by us prior to the delivery of such Acceleration Notice. Accordingly, for the period from April 2, 2008, through May 27, 2008 (the date upon which the Minority Shareholders disapproved of the Modification Agreement and it lapsed automatically), any or all of the convertible notes could have been called by the noteholders and become due and payable immediately. However, we did not receive any written Acceleration Notice from any of the noteholders during this period. As a consequence, we believe that the Event of Default that existed from April 2, 2008, through May 27, 2008, under the convertible notes has been fully cured, and under the express terms of the convertible notes, none of the noteholders has any current or continuing right to deliver an Acceleration Notice to us as a result of those past events.

Credit Line Agreements

Under our line of credit arrangement with a financial institution, we may borrow up to $100.0 million on such terms as we and the financial institution mutually agree upon. Interest is payable at the end of each interest period and is calculated using the London Inter-Bank Offered Rate (“LIBOR”) for the applicable interest rate period plus 0.2% per annum (4.42% at December 31, 2007). Except for loans of $10.0 million that were repaid in 2006, this arrangement does not have a termination date but is reviewed annually for renewal. At December 31, 2006 and 2007, we had Nil and $30.0 million outstanding, respectively, and the unused portion of the credit line was $100.0 million and $70.0 million, respectively.

We utilized a margin facility to draw a revolving line of credit, with balances outstanding of Nil and $1.9 million at December 31, 2006 and 2007, respectively. Interest is payable based

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upon LIBOR for the applicable interest rate period plus 0.75% per annum (4.97% at December 31, 2007). To secure the line of credit, we pledged some of our available-for-sale securities, which are recorded as restricted available-for-sale securities on our balance sheet.

One of our subsidiaries had a line of credit with a financial institution in which the subsidiary may borrow up to $6.5 million. The loan had an outstanding balance of Nil and $0.9 million as of December 31, 2006 and 2007, respectively and the unused portion of the credit line was $6.5 million and $5.6 million at December 31, 2006 and 2007, respectively. Accrued unpaid interest is payable monthly based upon LIBOR for the applicable interest rate period plus 2.20% per annum (6.42% at December 31, 2007). The loan is secured by the assets of this subsidiary.

Under the line of credit arrangement between a financial institution and one of our subsidiaries, the financial institution allows the subsidiary to borrow up to 80% of the subsidiary’s accounts receivable balance. There was an outstanding balance of Nil and $0.6 million as of December 31, 2006 and 2007, respectively. Interest is variable and was 11.2% at December 31, 2007.

During 2006, we discontinued a $250.0 million line of credit agreement with a financial institution. This line of credit consisted of a repurchase agreement pursuant to which we sold certain debt securities to the financial institution at a discounted price, and the financial institution agreed to sell the same debt securities back to us at the same price at the termination of the agreement. Throughout the term of the agreement, the financial institution paid us any income associated with the debt securities, and we paid the financial institution interest calculated using the LIBOR plus 0.2% per annum. Loans of $16.2 million were repaid in 2006 prior to the line of credit being discontinued.

In connection with the credit lines granted to us and in compliance with related covenants, we maintained compensating balances of $2.0 million and $5.5 million, in restricted cash at December 31, 2006 and 2007, respectively, pledged available-for-sale debt securities with a net book value of Nil and $30.9 million at December 31, 2006 and 2007, respectively, and held-to-maturity debt securities with a net book value of $30.5 million and Nil at December 31, 2006 and 2007, respectively.

The maturities of long-term debt for the five years subsequent to December 31, 2007, are as follows: 2008 - Nil; 2009 - Nil; 2010 - Nil; 2011 - $168.0 million; and 2012 - Nil.

The weighted average interest rates on short-term borrowings during the year were 3.6% in 2005, 4.6% in 2006 and 5.5% in 2007. The weighted average interest rates on short-term borrowings at December 31, 2006 and 2007, were 4.5% and 5.1% per annum, respectively.

Financing Agreements

In 2006, in connection with the purchase of certain CDO investments, we and our majority owned subsidiary, China.com Inc. entered into separate and independent financing agreements with two financial institutions, collectively referred to as the “Banks”, in the aggregate amount of $38.7 million. We entered into a credit facility agreement with the Bank pursuant to which the Bank agreed to lend us the aggregate amount of $38.7 million for payment of the purchase price of the CDO’s. We pledged certain held-to-maturity U.S. agency bonds as collateral for payments due under the financing agreements. These pledged securities all had maturity dates within 12 months and interest rates ranging from 2.58% to 3.2%. As these securities matured, a portion of the loan was settled with the cash proceeds. At December 31, 2006, the aggregate balance of the financing agreements was $18.7 million, and the total amount of securities pledged at December 31, 2006, was $30.5 million, all of which is classified as a restricted investment. The weighted average interest rate on these agreements during 2006 and at December 31, 2006, was 5.6%. During 2007, the balance of $18.7 million was paid and no pledged securities remained at December 31, 2007. The weighted average interest rate on these agreements during 2007 was 5.6%.

As of December 31, 2007, we were in compliance with all of our debt covenants.

Restrictions on our Liquidity

While we have cash and cash equivalents of $142.2 million and total available-for-sale securities of $76.2 million as of December 31, 2007, $92.9 million of the cash and cash equivalents and $63.1 million of the total securities are held at China.com, a 77% owned subsidiary listed on the Growth Enterprise Market of the Hong Kong Stock Exchange. Although we have the ability to appoint a majority of the board of directors of China.com, the board of directors of China.com owes fiduciary duties to the shareholders of China.com to act in the best

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interests of and use the assets of China.com, including the cash and cash equivalents balance and securities, for the benefit of such shareholders. As a result, aside from the board of directors of China.com declaring a dividend to its shareholders for which we would receive a pro rata portion as an 77% shareholder of China.com or a related party inter-company loan or similar transaction from China.com to us which would likely require the approval of the minority shareholders of China.com, we have limited ability to transfer or move the cash, cash equivalents and securities balance to, or to use the amounts of the cash, cash equivalents and securities balance for the benefit of, CDC Corporation at the parent entity level or our other subsidiaries outside of the China.com chain of subsidiaries.

Substantially all of the revenue and operating expenses of our CDC Games and China.com businesses are denominated in Renminbi (“RMB”). The RMB is currently convertible to foreign exchange with respect to “current account” transactions, but not with respect to “capital account” transactions. Current account transactions include ordinary course import/export transactions, payments for services rendered and payments of license fees, royalties, interest on loans and dividends. Capital account transactions include cross-border investments and repayments of principal of loans. Currently, our PRC subsidiaries may purchase foreign exchange for settlement of “current account transactions,” including payment of dividends to us and payment of license fees to content licensors, without the approval of the State Administration for Foreign Exchange, or SAFE. Our PRC subsidiaries may also retain foreign exchange in their current accounts, subject to a ceiling approved by SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, the relevant PRC governmental authorities may limit or eliminate the ability for our PRC subsidiaries to purchase and retain foreign currencies in the future. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from or registration with SAFE. This could affect our PRC subsidiaries’ ability to obtain debt or equity financing from outside the PRC, including by means of loans or capital contributions from us.

In addition to $142.2 million of cash and cash equivalents at December 31, 2007, we held $9.1 million in restricted cash which is pledged for banking facilities and pending litigation settlements.

Uncertainties regarding our liquidity

We believe the following are the most significant uncertainties regarding our liquidity:

• Ability to Grow Revenue and Manage Costs – Both our revenue and cost base have increased significantly as a result of our acquisition activity in 2006 and 2007. If we are unable to continue to grow our revenue or experience a decline in revenue, or if we are unable to manage costs and reduce operating expenses, our ability to generate positive cash flows from operating activities in a sufficient amount to meet our cash needs would be adversely affected.

• Integrating the Operations of Acquired Businesses – Integration of our acquired businesses could affect our liquidity as continuing integration of the businesses and operations into ours may require significant cash resources.

• Future Acquisitions – Our existing cash and cash equivalents and net cash provided by operating activities may be insufficient if we face unanticipated cash needs such as the funding of a future acquisition. In addition, if we acquire a business in the future that has existing debt, our cash requirements for servicing debt may increase.

• Cash held by China.com – China.com is a 77% owned subsidiary of the Company. Although we have the ability to elect a majority of the board of directors of China.com, the China .com directors owe fiduciary duties to all of the China.com shareholders. Such duties may prevent the directors from voting to declare and pay dividends. There is a limited amount of cash available at China.com for such purpose, and any dividends that the directors may declare must be shared on a pro rata basis with China.com’s minority shareholders. Furthermore, we may not have the ability to enter into an intercompany loan without the support of the minority shareholders of China.com.

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Fair value of Financial Instruments

The total fair value of available-for-sale equity securities in listed companies as of December 31, 2006 and 2007, were $3.5 million and $3.9 million, respectively, based on the market values of publicly traded shares as of December 31, 2006 and 2007.

The total fair value of the CDO investments as of December 31, 2006 and 2007, were $39.1 million and $23.7 million, respectively, based on the determination by the respective brokers and validated by management based on expected cash flow returns discounted by rates consistent with rates of return offered on comparable investments with comparable risks as of December 31, 2006 and 2007.

We currently intend to hold the CDO investments as long term investments, not to be traded in the near term. As the aforementioned investments are not publicly traded and have no active market, fair value as of December 31, 2006 and 2007 was determined by the respective brokers and validated by management based on expected cash flow returns discounted by rates consistent with rate of returns offered on comparable investments with comparable risks. In addition, management based the fair value on binding quotes received from third parties for these investments. These valuations represent management’s best estimate of fair value of these investments at December 31, 2006 and 2007 and may or may not represent the ultimate value of these investments.

In connection with the purchase of the CDOs, we pledged certain held-to-maturity U.S. agency bonds as collateral under multiple note purchase agreements. The pledged U.S. agency bonds are being used to repay the debt when such U.S. agency bonds mature. The total amount of securities pledged at December 31, 2006 and 2007 was $30.5 million and Nil, all of which is classified as a restricted investment.

The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, deposits, prepayments and other receivables, accounts payable, other payables, purchase consideration payable, accrued liabilities, short-term debts and long-term debt approximate their fair values because of their short maturity.

The carrying amount of the variable portion of our variable long-term bank loans approximate their fair value because the interest rates of the loans are close to the prevailing bank interest rate.

The estimated fair value of the convertible notes at December 31, 2006 and 2007, was $167.6 million and $158.4 million, respectively.

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C. Research and Development, Patents and Licenses, etc.

In 2006 and 2007, after acquiring Ross and Pivotal, we incurred significant research and development expenses. As discussed in Item 5.A – “Operating and Financial Review and Prospects – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Capitalization of Software Costs”, we capitalize certain software development costs and expense others. As part of our overall strategy to develop and introduce more proprietary products to sell across our business lines and service offerings, we anticipate that our research and development costs may increase on an absolute basis, but not as a percentage of overall revenue.

D. Trend Information

Our focus on the enterprise software and on-line games industries has positioned us within industry sectors which continued to undergo rapid change over the course of fiscal 2007.

In our Software segment, we made progress during 2007 in our continued integration and focus on operational improvements in relation to our acquisitions of Pivotal and Ross made in 2004. Pivotal’s CRM front-office software and Ross’s comprehensive, modular suite of enterprise software have enlarged our product portfolio; however, we believe it will take several more quarters for us to leverage the synergies that we consider are inherent within our enlarged software businesses. We intend to continue to execute our software strategy through targeted acquisitions and investments in our Software segment and through entering strategic partnerships with leading software vendors.

In our China.com business unit, the operating environment for the MVAS sector continued to be challenging in 2007, with sanctions and new policies imposed by the regulators and mobile operators. We determined that there was no reasonable instance where our MVAS business would be profitable in the foreseeable future. As a result, in February 2008, we announced that we were discontinuing our MVAS business and we have since discontinued these operations.

We continued to execute our online games strategy through the acquisition of Optic during 2007, an online games publisher with a track record in launching and distributing online games in the China market. In the future, we may add investments in online game-related companies, which we expect may allow us to broaden our service offerings, subscriber base, or platform capabilities.

In 2008, we expect continued growth in revenue as a result of acquisitions and investments.

In light of the many risks and uncertainties surrounding our company and the geographies and markets in which we operate, shareholders, investors and prospective investors should keep in mind that we cannot guarantee that the forward-looking statements described in this Annual Report will or can materialize.

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E. Off-balance Sheet Arrangements

We have the following derivative financial instruments:

Horizon

In February 2006, Software Galeria Inc., our 51% owned subsidiary (“SGI”), acquired the IT consulting services business of Horizon, which offers outsourced information technology professional services in the U.S. and Canada, utilizing India-based resources. Under the terms of the agreement, we paid $0.6 million in cash at closing and paid an additional $0.6 million of cash consideration in installments during 2006. We also agreed to pay additional cash consideration of $1,000 in 2007 and 2008 based on earnings before interest, taxes, depreciation and amortization (“EBITDA”). In addition, we agreed to issue to the sellers up to a 20% equity interest in the entity formed to acquire the assets purchased from Horizon in the event the EBITDA generated from the purchased business exceeds specified targets during each of 2006, 2007 and 2008. Specified targets were not met in 2006 or 2007, so no equity was issued to the sellers. The sellers have the right to put their equity interest back to us between April 2009 and April 2011 at a predetermined and fixed cash consideration. See “Note 3- Business Combinations” in “Item 18- Financial Statements” for further discussion on Horizon.

CDC Convertible Notes

As discussed in Item 5.B - “Liquidity and Capital Resources,” in November 2006, we issued $168 million of 3.75% senior exchangeable, unsecured convertible notes in a private placement exempt from registration under the Securities Act.

Conversion Option. Under the terms of the notes, the holders have the right to exchange such notes into our common shares or upon a qualifying initial public offering (“IPO”), common shares of two of our wholly-owned subsidiaries based on a predetermined exchange price and when the IPO is consummated.

The aggregate number of common shares of the our common stock that we may deliver to the holders in connection with exchanges of the notes is capped at a maximum of 19.99% of the number of shares of our common stock outstanding as of the issue date of the note. The aggregate number of common shares of each subsidiary that we are required to deliver to holders in connection with exchanges of the notes is capped at a maximum of 33.33% of the number of shares of each subsidiary’s common stock outstanding as of the time of the exchange.

Upon the occurrence of an IPO of either subsidiary and if the holders of the notes decide to convert the notes into the respective subsidiary’s shares, we have agreed to satisfy the conversion option by delivering the existing shares of its investment into the subsidiary. The investors have agreed to a lock-up period of up to 180 days following the date of an IPO prospectus during which the investors will refrain from selling any of each subsidiary’s respective common shares. See “Note 11 - Financing Arrangements” in “Item 18 - Financial Statements” for further discussion on the Convertible Notes.

Collateralized Debt Obligations

In 2006, we acquired an equity interest in two collateralized debt obligations (“CDOs”) coupled with a U.S. treasury strip for an aggregate nominal amount of $38.7 million (see “Note 7 - Investments” in “Item 18 - Financial Statements” for further discussion on our investments). These investments are subject to variability as there is no stated coupon rate and the equity interest in these investments are subject to changes in returns on the collateralized debt backing the interest. The principal amount in these investments is backed by U.S. treasury strips.

We currently intend to hold the CDO investments as long term investments, not to be traded in the near term. As the aforementioned investments are not publicly traded and have no

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active market, fair value as of December 31, 2007, was determined by the respective brokers and validated by management based on expected cash flow returns discounted by rates consistent with rates of return offered on comparable investments with comparable risks. Moreover, in 2007, management based the fair value on binding quotes received from third parties for these investments. These valuations represent management’s best estimate of fair value of these investments at December 31, 2006 and 2007, and may or may not represent the ultimate value of these investments.

F. Tabular Disclosure of Contractual Obligations

See Item 5.B – “Operating and Financial Review and Prospects – Liquidity and Capital Resources – Future cash requirements and sources of liquidity” above.

G. Safe Harbor

See “General Introduction – Forward-Looking Statements”.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table sets forth information regarding our directors and executive officers as of June 2008:

Board of Directors	Age	Position	Class of Directorship
Raymond K.F. Ch’ien	56	Chairman *	III, term to expire in 2008
Peter Yip	56	Vice Chairman and Chief Executive Officer *	III, term to expire in 2008
Wong Kwong Chi, Simon	56	Director*	III, term to expire in 2008
Thomas M. Britt, III	47	Director	II, term to expire in 2010
Wang Cheung Yue, Fred	64	Director	II, term to expire in 2010
Carrick John Clough	61	Director	I, term to expire in 2009
Fang Xin	55	Director	I, term to expire in 2009
Executive Officers
CDC Corporation
Peter Yip*	56	Chief Executive Officer, CDC Corporation, CDC Games and China.com, Inc., Vice Chairman of the Board of Directors, CDC Corporation and Executive Chairman of the Board of Directors, CDC Software
Michael Latimore	40	Chief Financial Officer, CDC Corporation and CDC Games
Timothy F. Coen	52	Senior Vice President and General Counsel, CDC Corporation
James W. FitzGibbons	39	Chief Accounting Officer, CDC Corporation
CDC Games and China.com
Jeffrey Longoria	47	President, CDC Games International
John Huen	38	Chief Operating Officer, CDC Games
Cheng Loi	54	Chief Financial Officer, China.com
CDC Software
Eric Musser	43	President and Chief Executive Officer, CDC Software
James McDevitt	49	Chief Operating Officer
Bruce Cameron	56	Executive Vice President, Worldwide Sales and Marketing, CDC Software
Alan MacLamroc	53	Chief Technology Officer, Executive Vice President, Technology, CDC Software
Per Norling	52	President, CDC Supply Chain, CDC Software
William Geist	55	Senior Vice President, Customer Services, North America, CDC Software
Oscar Pierre	52	Senior Vice President, Latin America, CDC Software

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Niklas Ronnback	42	Senior Vice President, Services for EMEA, CDC Software
Ian Whitehouse	43	Managing Director, Asia, CDC Software
Anil Dwivedi	38	Vice President and Country Manager, Japan and Korea, CDC Software
Frank Hung	46	Managing Director, Australia, CDC Software
Edmund Lau	48	Vice President, Greater China, CDC Software
Sean Yu	42	Vice President, Development and Chairman of CDC Software (China)
Arthur Masseur	48	Vice President of Finance, CDC Software, EMEA

* Subject to re-election by shareholders at our 2008 annual general meeting.

The address of each of our executive officers and directors is c/o CDC Corporation Limited, 33/F Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong.

The following is a brief biography of each of our directors and executive officers:

Class III Directors

Raymond K.F. Ch’ien has served as Chairman of our board since January 1999, and served as executive chairman of our board from April 2001 until August 2005 at which point he became Chairman of our board. He served as acting chief executive officer between March 2004 and March 2005, and chief executive officer from March 2005 until August 2005. Dr. Ch’ien is Chairman and a member of the executive and remuneration committees of our Hong Kong listed subsidiary, China.com. Dr. Ch’ien is also Chairman of MTR Corporation Limited and Hong Seng Bank Limited, serves on the boards of the Hong Kong and Shanghai Banking Corporation Limited, Inchcape plc, Swiss Reinsurance Company, Convenience Retail Asia Limited, VTech Holdings Limited and The Wharf (Holdings) Limited. Dr. Ch’ien received a Doctoral Degree in economics from the University of Pennsylvania in 1978 and became a Trustee of the University in 2006. He was appointed a Justice of the Peace in 1993 and a Commander in the Most Excellent Order of the British Empire in 1994. In 1999, he was awarded the Gold Bauhinia Star medal.

Peter Yip is our Chief Executive Officer and a Vice Chairman of our board of directors. Mr. Yip has also been the Acting Chief Executive Officer of China.com since August 2006. Mr. Yip was a founder of the Company and served as Chief Executive Officer between 1999 and February 2005, and was re-appointed Chief Executive Officer in April 2006. Under his leadership, the Company was one of the first successful initial public offerings of an internet company from Greater China to be listed on NASDAQ, opening the door for other Chinese entrepreneurs to list their ventures in the U.S. capital markets. Mr. Yip co-founded Yipkon Business Systems in 1978 with his Indian partner from Bangalore, Kumar Konanur. Yipkon, as one of the first Indian outsourcing companies based in New York, pioneered outsourcing for US companies using Indian resources from Bangalore and successfully grew to US$100M revenue. Mr. Yip sold Yipkon to MCI Worldcom in 1987, just before the market crash, and returned to Hong Kong to make investments in software and IT companies. In addition, Mr. Yip has made a number of successful co-investments with institutional investors, corporate investors and high net worth individuals, a Temasek Holdings company, Bechtel Enterprises Inc., Mitsui & Co. Ltd., America Online, Inc. and the Merrill Lynch-Fred Adler Technology Fund II. Mr. Yip has authored research papers published at Harvard Asia Pacific Review, Nanjing University Press, National Science Foundation. He co-authored a book titled “The China’s Century” with former China Premier Zhu Yongji, amongst others. Mr. Yip previously held management positions at KPMG Consulting and Wharton Applied Research. In 2000, the Wharton Business School presented Mr. Yip with its Asian Alumni Entrepreneur Award. Mr. Yip received a MBA from the Wharton School and a MS and BS in Electrical Engineering from the University of Pennsylvania. He also received an Associate degree in Engineering and an honorary Doctorate degree in business from Vincennes University, Indiana.

Wong Kwong Chi has served as an independent member of our board of directors since August 2005, a director of CDC Software since October 2006 and a director of CDC Games since September 2006. Mr. Wong is a managing partner of Asian Global Capital (AGC). Prior to joining AGC, he was a director and Executive Vice President of Transpac Capital Ltd., one of the oldest and largest private equity investment firms in Asia, managing a $820 million portfolio with investments in approximately 200

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companies in East Asia and the United States. Prior to joining Transpac, Mr. Wong was deputy managing director of Cony Electronics Products Ltd. and Hung Nien Electronics Ltd. in Hong Kong and president of Cony Electronics Inc. in Chicago. Mr. Wong serves on the boards of Hang Fung Gold Technology Ltd., Fountain Set (Holdings) Limited and Glory Mark Hi-Tech (Holdings) Ltd. Mr. Wong has served previously as chairman of the Hong Kong Venture Capital Association and was vice chairman of The Hong Kong Electronic Industries Association. He is also a committee member of the Hong Kong Young Industrialists Council; member of Financial Services Advisory Committee of Hong Kong Trade Development Council and board member of Monte Jade Science and Technology Association of Hong Kong. Mr. Wong received Bachelor of Science and MBA Degrees from the Chinese University of Hong Kong.

Class II Directors

Thomas M. Britt, III has served as an independent member of our board of directors since May 2000. Mr. Britt is a partner with the international law firm, Debevoise & Plimpton LLP, resident in the firm’s Hong Kong office. Prior to joining Debevoise & Plimpton in 2004, Mr. Britt was the Managing Director of IRG Limited, an investment banking boutique he co-founded in 2000. Prior to co-founding IRG, Mr. Britt was the senior partner of the US Securities Group in the Hong Kong office of Clifford Chance LLP and the founding and managing partner of the Hong Kong office of Rogers & Wells LLP, a leading US law firm. Mr. Britt has a Juris Doctor and an MBA from New York University and a Bachelor’s Degree from Georgetown University.

Wang Cheung Yue, Fred has served as an independent member of our board of directors since October 2005 and has also served as in independent non-executive member of the board of directors of China.com since February 2002 and as the Chairman of the Board of directors of CDC Games since September 2006. The Wang family founded Salon Films (Hong Kong) Limited, or Salon, in 1969. Mr. Wang has been a director of Salon since 1969 and he has worked with various major Hollywood film and television companies in setting up projects in Asia. Since 1985, Mr. Wang has been involved with various investment groups in Asia, notably, Unifund S.A., a Geneva based investment service company. Mr. Wang is the Hon. Vice President of the China Film Foundation, a member of the Board of Governors of the Federation of Hong Kong Business Associations Worldwide, Director of the Board of the Hong Kong International Film Festival Society Limited and Hon. Vice Director of the China Society of Motion Picture and Television Engineers. Mr. Wang graduated with a Bachelor of Arts Degree in Business and Economics from Whittier College, California.

Class I Directors

Carrick John Clough has served as an independent member of our board of directors since December 2003. In addition, Mr. Clough has served as the Chairman of the executive committee of our board of directors since August 2005 and currently serves as Vice Chairman of the board of directors of CDC Software since May 2006 and Chairman of the board of Praxa Limited. Mr. Clough also currently serves as Chairman of Corgi International Ltd, a NASDAQ listed company. Further, he has been a special advisor to General Atlantic Partners since December 2000. Before joining General Atlantic Partners, Mr. Clough gained over 25 years of management experience in the IT industry internationally. He was a co-founder and managing director of the CSSL Group, a mid-range software distributor and hardware reseller in Asia. Prior to co-founding the CSSL Group, Mr. Clough held the position of general manager of JBA in Asia, an Australia-based worldwide mid-range software distributor, and gained working experience as a consultant in the United Kingdom and Europe. Mr. Clough received his education in New Zealand.

Fang Xin has served as a member of our board of directors since November 2005 and has also served as a non-executive director of China.com since July 2005. He is also currently Deputy Director and General Manager of the Asia-Pacific Regional Bureau and Hong Kong SAR Branch of Xinhua News Agency, or Xinhua, and President of Golden Tripod (Holdings) Limited and Golden Tripod Technology Limited. Golden Tripod Technology Limited, an indirect wholly owned subsidiary of Xinhua, is one of the Company’s major shareholders. Mr. Fang is also a senior correspondent of Xinhua, and also serves as a non-executive director of the Company’s Hong Kong listed subsidiary, China.com. Mr. Fang has approximately 25 years of experience in news reporting, editing, economic information analysis, and business management with governmental and non-governmental organizations and companies. Former positions held by Mr. Fang include serving as the general manager of the Guangdong Provincial Branch of

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Xinhua, the editor of “OUTLOOK” (a weekly publication of Xinhua), a correspondent for the Shenzhen sub-branch of Xinhua, a director of the Domestic News for Foreign Service group of the Guangdong Provincial Branch of Xinhua, chief of the Zhuhai sub-branch of Xinhua, and editor-in-chief and director of Economic Information Services of the Guangdong Provincial Branch of Xinhua. Mr. Fang graduated from Sun Yat-Sen University in Guangzhou, People’s Republic of China.

CDC Corporation Executive Officers

Mr. Peter Yip’s biographical information is set forth above under the caption “Class III Directors.”

Michael Latimore has served as our Chief Financial Officer since April 2007. Mr. Latimore has also served as Chief Financial Officer of CDC Games since April, 2007 and was Chief Financial Officer of China.com from October 2007 to May 2008. Immediately prior to joining CDC, Mr. Latimore was a Senior Equity Analyst with Raymond James & Associates, where he was responsible for producing and marketing institutional equity research since 2000. He focused his research on communications and applications software companies, emphasizing the areas of customer interaction management, wireless applications, and VoIP. Prior to Raymond James, Mr. Latimore served as an Equity Analyst for George K. Baum & Co. and John G. Kinnard & Co. since 1996, concentrating his research efforts there on IP communications software companies. Mr. Latimore has also served as a Policy Analyst and Research Director for the Minnesota Business Partnership, an association of executives advocating public policy reform. Mr. Latimore holds a J.D. degree from William Mitchell College of Law and a Bachelor of Arts in Political Science from The John Hopkins University.

Timothy F. Coen joined the company in April 2008 as Senior Vice President and General Counsel of CDC Corporation. Most recently, from April 2005 to January 2008, Mr. Coen was Vice President, General Counsel & Secretary for IP Unity Glenayre, Inc. and its predecessor Glenayre Technologies, Inc., a publicly-held global company engaged in the worldwide distribution of complex mobile messaging systems platforms, mobile applications and entertainment media. Mr. Coen brings over twenty five years of domestic and international corporate and transaction-oriented experience, during which time he has been an attorney in major law firms and an executive-level in-house lawyer. Mr. Coen was formerly of counsel with King & Spalding, LLP from January 1996 to March 1997, a partner in the law firm of Powell Goldstein LLP from March 1997 to March 2003, in house counsel with Concert Communications from February 1992 to September 1995 and with BellSouth Corporation from January 1986 to March 1997. Mr. Coen has represented numerous technology companies in complex software, technology and professional IT services transactions, as well as in corporate, securities and compliance matters and other complex commercial and financial transactions. Mr. Coen holds a bachelor’s degree in Political Science/Pre-Law from Georgia Southern University and a J.D. degree from University of Georgia School of Law.

James W. FitzGibbons joined CDC Corporation as our Chief Accounting Officer in June 2007. Prior to joining CDC, Mr. FitzGibbons was Controller and Chief Accounting Officer of International Power Group, Ltd., a publicly traded, global alternative energy solutions company from October 2006 to June 2007. Previously, Mr. FitzGibbons served as Vice President, Finance and Chief Accounting Officer of NDCHealth Corp., a NYSE-traded health services company from January 2004 to June 2006, and was also Vice President and Controller for McKesson Corporation’s Information Solutions business unit from July 1999 to December 2003. Mr. FitzGibbons also held a variety of finance management positions, including vice president and principal accounting officer, at Per-Se Technologies, Inc. and was an auditor with Arthur Andersen, LLP. Mr. FitzGibbons holds a bachelor’s degree in Accounting from the University of Alabama and is a certified public accountant in the State of Georgia.

CDC Games and China.com Executive Officers

Jeffrey Longoria was promoted to President of CDC Games International, a subsidiary of CDC Games Corporation, in October 2007. Prior to this appointment, Mr. Longoria previously served as Senior Vice President of Strategic Alliances at CDC Software Corporation from January 2007 to October 2007. In this capacity, he and his team managed key relationships with technology, consulting and channel partners, including the strategic relationship with Microsoft and SAP for CDC Software and other companies in the CDC family. Mr. Longoria joined CDC Software through its acquisition of c360 in April 2006. At c360, a global provider of CRM add-on products, industry-specific CRM solutions and CRM development tools for Microsoft Dynamics CRM, Mr. Longoria served as CEO, from September 2005 to April 2006. Mr.

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Longoria brings more than 25 years of experience in the software and technology industry. From April, 1998 to April 2003, he was President and co-founder of Connect-Care, Inc. an Atlanta-based customer relationship management software company. Mr. Longoria has also held several management positions for L.I.I., a medical technology company, and Dickens Data Systems, a midrange hardware and software distribution company. Mr. Longoria holds a BS in Computer Science from the University of North Texas.

John Huen joined CDC Games Corporation as Chief Operating Officer in January 2008. Prior to this appointment, Mr. Huen served as chief operating officer and general manager of Optic Communications, a subsidiary of CDC Games, from July 2007 to December 2007. Optic Communications was acquired by CDC Games in July 2007 and operates some of the most well-known game titles in the company’s portfolio, including Shaiya Online, EVE Online, Shine Online and MIR III. Mr. Huen has more than 10 years of operating and management experience in the digital content and telecommunications industries in China. Before joining CDC Corporation, from March 2000 to July 2008, Mr. Huen helped manage several subsidiaries and joint ventures of CITIC Pacific Ltd., conglomerate with extensive businesses in telecommunications, media and IT. Mr. Huen holds a bachelor degree of Engineering from the University of Hong Kong. In 1992, he was awarded the Swire/Foreign and Commonwealth Scholarship to study for his Masters Degree of Philosophy in Management Studies at the University of Oxford.

CDC Software Executive Officers

Eric Musser has served as the Chief Executive Officer of CDC Software since May 2007 and was previously President of CDC Software from October 2004 to May 2007. For nearly 15 years, Mr. Musser has served in a variety of management roles at CDC Software and its acquired enterprise software companies. Prior to his current roles, Mr. Musser served as CDC Software’s Executive Vice President, Corporate Strategy from May 2006 to October 2006 and Chief Technology Officer for CDC Software from May 2000. Prior to Ross Systems, Mr. Musser held IT management and production engineering positions in the process industries, where he implemented projects spanning from shop floor automation to ERP integration. As a software entrepreneur earlier in his career, he developed CRM solutions running on the Apple Macintosh platform for non-profit organizations.

James McDevitt joined CDC Software in May 2007, as Senior Vice President & General Manager of Global Services, and was promoted to Chief Operating Officer of CDC Software Corporation in April 2008. In his capacity as Chief Operating Officer of CDC Software, Mr. McDevitt has operating responsibility for the CDC Global Services business unit within CDC Software, as well as responsibility for finance, accounting and IT. Mr. McDevitt brings more than 27 years of operations and finance experience to CDC that includes serving as a Senior Vice President and Chief Financial Officer of GEAC Computer Corporation’s SmartEnterprise Solutions Division from 1997 to 2000 and a senior finance and operations executive for GEAC Computer Corporation from 2002 to 2006 and Chief Financial Officer for Clarus Corporation from 2000 to 2002.

Bruce Cameron has served as the Executive Vice President of Global Sales and Marketing for CDC Software since June 2008 and was previously the Senior Vice President of Global Sales from September 2007 to June 2008. Previously, he was Senior Vice President of Global Sales for CDC Software’s CRM product line from January 2006 until September 2007. From January 2005 to September 2006, Mr. Cameron was our Vice President Sales for North America. Mr. Cameron was previously General Manager of the homebuilding vertical at Pivotal Corporation, a company we acquired, which he joined in April 2004. Mr. Cameron has over 26 years experience in application software management, and has held several positions in the software industry including General Manager at Delano Inc., an e-CRM company from December 1999 to May 2001, Worldwide Vice President of Sales at QAD International, an ERP company from 1996 through 1999, General Manager and Senior Vice president at JBA International, an ERP

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company, from 1989 thru 1995, and Vice President of Sales and then President of Cimcorp Inc., a MES systems company from 1986 through 1989. Mr. Cameron holds a BSME degree from Rochester Institute of Technology.

Alan MacLamroc has served as Chief Technology Officer, Executive Vice President, Technology, of CDC Software since April 2007 and is responsible for product management, product engineering and leading the global development. Mr. MacLamroc has more than 20 years of technology management experience, including seven years serving as chief technology officer. Most recently, Mr. MacLamroc served as Chief Technology Officer at CompuCredit, an information and technology-driven provider and direct marketer of branded credit cards and related fee-based products and services. Prior to CompuCredit, Mr. MacLamroc served as Chief Technology Officer for MAPICS, Inc., an enterprise business software provider. Prior to MAPICS, he served as Chief Technology Officer at Clarus, a provider of web-based commerce applications. He has also served in a variety of senior technology management positions at System Software Associates (SSA), IBM and Sprint. Mr. MacLamroc holds a Bachelor’s of Business Administration Degree in Computer Information Systems and Personnel Management from Washburn University, and an MBA in Finance from the University of Missouri.

Per Norling has served as the President of CDC Supply Chain since January 2006 and is responsible for global operations of CDC Supply Chain, the “supply chain management for distributors” division of CDC Software. His responsibilities include customer-focused software, services, and support solutions, as well as the company’s internal operations. Before joining CDC Software, Mr. Norling was chief operating officer of Baan Company in Europe, the Middle East, and Africa (EMEA). More recently, Mr. Norling was business leader for the EMEA region of Descartes Systems Group (DSG) and a member of the DSG Operations Team. Mr. Norling graduated in 1979 from the School of Industrial Economics in Linköping with a Master of Science Degree in Engineering. Since then he has garnered over 20 years’ experience in the IT and manufacturing industries including sales, marketing, manufacturing, consultancy, and business development roles with Nordic and global industry leaders such as General Electric, Siemens, and Ericsson.

William Geist has served as Senior Vice President, Customer Services, North America since April 2007. He is responsible for delivery of software services to CDC Software’s North American customers and global support for CDC products. Prior to joining CDC Software in October 2006, from October 2005 to October 2006, Mr. Geist served as a partner at Tatum, L.L.C., an Atlanta-based national consultancy focused on providing financial, strategic and technology services to companies in transition, accelerating their business growth and creating value. Previous experience also includes serving as CEO for Application Partners, L.L.C., a consultancy providing business intelligence and data warehousing services, from April 2004 to June 2005; senior vice president and vice president for Headstrong, Inc., an international consultancy, from September 2000 to December 2003; partner at BDO Seidman LLP, an international accounting and advisory services firm, from May 1999 to June 2000; partner and branch manager of Whittman-Hart, Inc. from September 1997 to December 1998; director and group manager of Cambridge Technology Partners, Inc. from February 1995 to September 1997; vice president, Information Technology and Services for Scientific Atlanta, Inc from July 1993 to August 1994; and several other IT management positions. Mr. Geist received his MBA in Operations Management and Information Systems from the University of Rochester and his BS in Mathematics from Bucknell University.

Oscar Pierre has served as Senior Vice President, Latin America for CDC Software since September 2005 and is responsible for operations activity for all of South Europe and Latin America. In this role, Mr. Pierre works closely with other global division heads to deliver solutions that meet area customer needs. Prior to this role, Mr. Pierre served as Vice President, European and Latin American operations for Ross Systems. He joined Ross Systems when it acquired the company he founded, Software International SA, and became the managing director of the Spanish-speaking markets. Prior to Ross Systems, he worked at Data-Pack SA, an ERP software distributor, where he was a managing director before its acquisition by Computer Associates. He then assumed the duties of divisional manager and vice general manager of Computer Associates’ Spanish branch.

Niklas Rönnbäck has served as Senior Vice President, Services for EMEA since January 2008. He is responsible for customer service across all product lines in EMEA. Mr. Rönnbäck joined CDC Software in 2004 as Services Director. He has served in a variety of management roles at CDC Software including Vice President, Operations at CDC Supply Chain from January 2007 to December 2007, Global Services

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Director at CDC Supply Chain from April 2006 to December 2006, Services Director at IMI from August 2004 to March 2006. Mr. Rönnbäck brings more than 15 years of enterprise software experience, specifically in the implementation of ERP, order management and warehouse management systems. Prior to joining CDC Software, he was President at Öhrwall & Rönnbäck, a privately held logistics and supply chain consultancy firm from January 1999 to August 2004. Mr. Rönnbäck received his MSc and Licentiate Degree in Industrial Logistics from Luleå University of Technology.

Ian Whitehouse has served as Managing Director, Asia for CDC Software since January 1, 2006 and is responsible for operations activity for Asia excluding Japan. In this role, Mr. Whitehouse works closely with other global division heads to deliver solutions that meet area customer needs. Prior to this role, Mr. Whitehouse served as Director of Professional Services, CDC Software Asia. He joined CDC Software in 2002 when it acquired the company he co-founded, Platinum China, where he was also Director of Professional Services. Prior to Platinum China he worked for an ERP software distributor of Dun & Bradstreet Software in Hong Kong from April 1991 to September 1993 and Xerox in Australia from January 1990 to January 1991.

Anil Dwivedi has served as CDC Software’s Vice President, Country Manager, Japan and Korea since April 2008. In this role, Mr. Dwivedi is responsible for expanding reseller channels in those countries, and identifying and evaluating merger and acquisition opportunities, including the expansion of the CDC Software franchise partner program to Japan and Korea. Prior to joining CDC Software in April 2008, Mr. Dwivedi served in various executive leadership positions in the enterprise software industry in China and Japan including senior business development management roles at Wipro Japan KK in Yokohama, Japan from June 2000 to March 2008, where his responsibilities included consulting large Japanese corporations on their IT and off-shoring strategies and selling services related to web technologies, Infrastructure, security and ERP; and at HCL in Japan and India from May 1997, where his role was focused on sales of SAP services and alliance with SAP. Mr. Dwivedi is a graduate of the premier Institutes IIT (Indian Institute of Technology) and Management Graduate of IIM (Indian Institute of Management).

Frank Hung has served as Managing Director, Australia of CDC Software since January 2007 and is responsible for operations activity for all of Australia and New Zealand. Mr. Hung has over 25 years of experience in the technology sector and has held various international and senior management positions throughout Asia, Australia, New Zealand and Canada. Before joining CDC Software, Mr Hung served as the Managing Director, Australia and Chief Operating Officer (Asia Pacific) for Maximizer Software from 2001 to 2006 (TSX: MAX), overseeing all CRM operations for the company throughout the entire Asia Pacific region. Prior to Maximizer Software, Mr Hung served as Chief Operating Officer (Asia) for Powerlan Limited from 1999 to 2001 (ASX: PWR).

Edmund Lau has served as Vice President, Greater China for CDC Software since January 2007 and is responsible for sales, services and business development in Greater China (Hong Kong, Taiwan and China). Prior to this role, Mr. Lau served as President of Viador from January 2006 to January 2007, a leading provider of web-based business intelligence solutions. At Viador, Mr. Lau also served in senior sales positions that included vice president of worldwide sales from 2003 to 2005 and Vice President of International Sales from 2001 to 2003, where he expanded company sales in Europe and Asia Pacific, particularly in the Greater China area from 1985 to 1990. Mr. Lau had also previously served as General Manager of the China/Hong Kong region for Hamilton/Brighton Technology Ltd., a US-based IT company.

Sean Yu has served as Vice President for Development of CDC Software and Chairman of CDC Software (China) since May, 2004. He is responsible for establishing, expanding and managing the company’s China offshore operations. Prior to joining CDC Software, Mr. Yu held senior positions in the field of supply chain management at Logility and American Software from October 1997 to April 2004. Earlier in his career, from May 1995 to September 1997, he worked at the Harvard Institute for International Development from conducting economic and investment analysis for international and government institutions such as the World Bank, the Asian Development Bank, and the U.S. Department of Energy. Mr. Yu received his M.S. in operations research and M.A. in urban planning from Harvard University.

Arthur Masseur has served as Vice President of Finance for CDC Software, EMEA since April 2006. Prior to this role, he served as International Finance Director of Ross Systems, Inc., since 2001. Mr. Masseur joined Ross Systems in July 1998 as a business consultant. He was promoted to Area Resource Director in August 1999 and to International Finance Director of Ross Systems in March 2001. Immediately prior to joining Ross Systems, Mr. Masseur served as Finance Director of a division of ITT. Prior to that, Mr. Masseur served as European Controller of Stardent Computers and held senior finance positions at KPN and Hewlett Packard.

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B. Compensation

Directors

During the fiscal year ended December 31, 2007, we paid our directors compensation (including directors’ fees) an aggregate of $0.3 million and granted them stock appreciation rights with respect to 50,000 Class A common shares, with grant prices ranging between $6.18 and $6.36 per share. Directors are reimbursed for all expenses incurred in connection with each meeting of the board of directors and when carrying out their duties as directors of CDC.

From January 2007 through September 2007, our director compensation structure for our non-executive directors was as follows:

For non-executive directors who are not members of the Audit Committee:

	Annual Compensation
Board service	$	12,500
Compensation Committee service	$	3,750
Nominating Committee service	$	3,750
Executive Committee service	$	7,500

For non-executive directors who are members of the Audit Committee:

	Annual Compensation
Board service	$	25,000
Chairman of Audit Committee	$	20,000	*
Audit Committee service (other than chairman)	$	15,000	*
Compensation Committee service	$	7,500
Nominating Committee service	$	7,500
Executive Committee service (other than chairman)	$	15,000
Chairman of Executive Committee	$	20,000

^* As of October 1, 2007, the fees payable to non-executive members of the Audit Committee for service on the Audit Committee were increased such that: (i) the Chairman of the Audit Committee receives $40,000 per annum; and (ii) members of the Audit Committee (other than the Chairman) receive $30,000 per annum.

Under our director compensation structure, director compensation is not linked to attendance.

Executive Officers

During the fiscal year end December 31, 2007, we paid our executive officers named in Item 6.A., “Directors, Senior Management and Employees – Directors and Senior Management” as a group compensation (including salary, bonus and other incentives) an aggregate of approximately $4.5 million and granted to them a total of approximately 605,000 stock appreciation rights (SARS) to Class A common shares of CDC Corporation, with exercise prices ranging between $3.99 and $10.36 per share; 1,045,000 options to purchase Class A common shares of CDC Software Corporation, with exercise prices ranging between $13.33 and $21.40; and, 1,310,000, with exercise prices $2.57. All of such options expire in 2014. We have entered into employment agreements with several of the executive officers named in Item 6.A., “Directors, Senior Management and Employees – Directors and Senior Management”. In the fiscal year end December 31, 2007, the annual remuneration range of our executive officers named in Item 6.A. “Directors, Senior Management and Employees” (including salary, bonus and other incentives) ranged from $150,000 to $471,000.

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Options Held by Directors and Officers

As of December 31, 2007, of the approximately 12,822,678 outstanding options for the purchase of our Class A common shares, our directors and executive officers named in Item 6.A., Directors, Senior Management and Employees – Directors and Senior Management, as a group, held options to purchase a total of approximately 8,107,128 of our Class A common shares. The weighted average exercise price of these options is approximately $4.64 per share. The options granted to such directors and executive officers generally vest 25%, 33-1/3%, 50% or 100% per year on a quarterly basis over a one to four year period, as applicable, commencing immediately upon grant, on the first quarter or first anniversary of the relevant grant. As of December 31, 2007, such directors and executive officers, as a group, held vested options to purchase approximately 3,122,944 Class A common shares. Other than Mr. Yip, none of our directors or executive officers beneficially holds Class A common shares or options to purchase Class A common shares in excess of 1% of our outstanding Class A shares.

Equity and Equity Incentives in Affiliated Companies by Mr. Peter Yip

Equity Interests in CDC Corporation. The following table sets forth information as of December 31, 2007 with respect to Mr. Peter Yip’s beneficial ownership of our Class A common shares, options to purchase Class A common shares and stock appreciation rights.

Name of Director	Number of shares	Number of share options/SARs	Nature of interests/ holding capacity	Appropriate percentage of interests (%)(1)
Peter Yip	16,483,649	5,744,999	Interest of children or spouse(2)	20.8	%
Peter Yip	—	90,000	Personal/beneficiary(3)	0.08	%

(1) Based on 106,930,800 shares of CDC Class A common stock outstanding as of December 31, 2007.

(2) Such amount, includes 16,483,649 Class A common shares and 5,744,999 options/stock appreciation rights (SARs). As of April 30, 2008, APOL held 11,987,253 Class A common shares and 5,744,999 options/SARs (of which 2,387,492 will become exercisable within 60 days of April 30, 2008). APOL is owned 50% by the spouse of Mr. Yip and 50% by a trust established for the benefit of Mr. Yip’s spouse and his children. 4,496,396 of such Class A common shares are held by the spouse of Mr. Yip. Mr. Yip holds 90,000 of such options, all of which are exercisable within 60 days of April 30, 2008.

(3) These options are exercisable within 60 days of December 31, 2007.

Equity Interests in China.com. The following table sets forth information as of December 31, 2007 with respect to Mr. Peter Yip’s beneficial ownership of the ordinary shares of China.com, a 77% owned subsidiary of CDC Corporation that is listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. Other than Mr. Yip, none of our directors or executive officers beneficially holds in excess of 1% interest in China.com.

Name of Director	Number of shares	Number of Share options	Nature of interests/ holding capacity	Appropriate percentage of interests (%)(1)
Peter Yip	3,416,000	—	Corporate (2)	0.08	%
Peter Yip	900,000	17,000,000	Personal/beneficiary	0.41	%
Peter Yip	—	239,356,507	Corporate (3)	5.46	%

(1) Based on 4,381,139,276 shares of China.com issued and outstanding as of December 31, 2007.

(2) These shares are beneficially owned by Asia Internet Holdings Limited, a company 100% owned by Mr. Yip.

(3) These share options are held by Asia Pacific Online Limited, or APOL, a company 50% owned by the spouse of Mr. Yip and 50% owned by a trust established for the benefit of Mr. Yip’s spouse and his children.

Equity Incentives Granted by CDC Corporation. The following table sets forth information with respect to options to purchase our Class A common shares or stock appreciation rights (SARs) granted to Mr. Yip, which were outstanding as of December 31, 2007.

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				Number of options or stock appreciation rights (SARs)
Name of Director	Date of grant	Exercise price ($)	Exercise period	Balance as at January 1, 2007		Granted during the year	Exercised during the year	Transferred/ cancelled during the year		Balance as at December 31, 2007		Options/SARs vested within 60 days after December 31, 2007
Peter Yip	6/22/1999	3.3750	6/22/2000 – 6/21/2009	60,000		—	—	—		60,000		60,000
	1/9/2001	4.2813	1/9/2001 – 1/8/2011	30,000		—	—	—		30,000		30,000
	6/6/2002	2.8200	6/6/2002 – 6/5/2012	200,000	(1)	—	—	200,000	(3)			—
	6/6/2003	4.9500	6/30/2003 – 6/2/2013	200,000	(1)	—	—	—		200,000	(1)	200,000
	6/16/2003	5.1600	9/16/2003 – 6/15/2013	100,000	(1)	—	—	—		100,000	(1)	100,000
	9/15/2005	2.9940	9/15/2005 – 9/14/2015	50,000	(1)	—	—	50,000	(3)	—		—
	9/15/2005	2.9940	12/15/2005 – 9/14/2015	50,000	(1)	—	—	50,000	(3)	—		—
	10/24/2005	3.2100	10/24/2006 – 10/23/2015	45,000	(1)	—	—	—		45,000	(1)	30,005
	1/3/2006	3.2200	4/3/2006 – 1/2/2013	600,000	(1)	—	—	—		600,000	(1)	350,000
	4/12/2006	3.9900	7/12/2006 – 4/11/2013	2,400,000	(1)	—	—	—		2,400,000	(1)	1,200,000
	4/12/2006	3.9900	2007 (2) – 4/11/2013	2,399,999	(1)	—	—	—		2,399,999	(1)	—

(1) Such options/SARs were granted to APOL.

(2) The vesting of such options is contingent upon occurrence of certain events. See Item 7.B. “Major Shareholders and Related Party Transactions, Related Party Transactions—Asia Pacific Online Limited.”

(3) During the year, in accordance with the Option Transfer Agreement dated July 15, 2005 and Amendment No.1 to Option Transfer Agreement dated October 2, 2007 by and among CDC Corporation, Asia Pacific Online Limited and Mr. Peter Yip, an aggregate of 300,000 options were transferred to C W Chu Foundation, a non-profit organization.

Equity Incentives Granted by China.com. The following table sets forth information with respect to options to purchase ordinary shares of China.com granted to Mr. Yip through December 31, 2007, which were outstanding under China.com’s 2002 share option plan.

			Number of options						Price of China.com’s shares (3)
Name of Director	Date of grant of share options(1)	Exercise price of share options(2) HK$	At January 1, 2007		Granted during the year	Exercised during the year	Lapsed during the year	At December 31, 2007	At grant date of options HK$
Peter Yip	6/5/2003	0.626	4,000,000		—	—	—	4,000,000	—
	10/10/2005	0.630	4,000,000		—	—	—	4,000,000	—
	1/3/2006	0.526	9,000,000		—	—	—	9,000,000	0.526
	8/14/2006	0.445	239,356,507	(4)	—	—	—	239,356,507	0.445

(1) Except as otherwise set forth in Note 4 below, such options to purchase ordinary shares vest in equal annual installments over a four year period from anniversary of the date of grant.

(2) The exercise price of such options is subject to adjustment in the case of rights or bonus issues, or other similar changes in China.com share capital.

(3) The price of China.com shares disclosed as at the date of the grant of the share options is The Stock Exchange of Hong Kong Limited closing price on the trading day immediately prior to the date of the grant of the options.

(4) Such options, which were granted to APOL, were approved by the shareholders of China.com at an extraordinary general meeting held on September 18, 2006. 108,798,412 of such options vest quarterly over a period of time beginning October 1, 2006 and ending July 1, 2008, subject to the terms and conditions of the Executive Services (Acting CEO) (the “Services Agreement”), as follows: 12.5% options shall vest from each of 1st October, 2006 and every three months thereafter until July, 2008. With respect to the remaining 130,558,095 of such options, 50% shall vest upon the occurrence of Event 1 or Event 2, as set forth below, subject to such terms and conditions as are set forth in the Services Agreement, provided: (i) Mr. Yip remains employed by China.com to provide the services on the date of vesting of the relevant portion of those options; and (ii) the Services Agreement has not otherwise been terminated. Event 1: The grant by the relevant authorities in the PRC of an asset management license or equivalent that would allow China.com or its affiliates or associates to raise and manage a Renminbi-denominated fund or funds to invest in any of the following: (i) “A” shares listed on a recognized stock exchange in the PRC; (ii) pre-initial public offering “A” shares; and (iii) convertible loans. For Event 1, the vesting date shall be the date of the grant of the license. Event 2: The completion of a real estate development project in the PRC which comprise of both

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residential and commercial units for use by China.com. and CDC Corporation, and for rental to third parties. For Event 2, the vesting date shall be the date of the completion of the real estate development project, such date to be determined by the board of China.com in their absolute discretion.

Equity and Equity Incentives in CDC Corporation by Dr. Raymond Ch’ien

Equity Interests in CDC Corporation. The following table sets forth information as of December 31, 2007 with respect to Dr. Raymond Ch’ien’s beneficial ownership of our Class A common shares, options to purchase Class A common shares and stock appreciation rights.

Name of Director	Number of shares	Number of share options/SARs	Nature of interests/ holding capacity		Appropriate percentage of interests (%) (1)
Raymond Ch’ien	1,023,773	130,000	Personal/beneficiary	(2)	1.08	%

(1) Based on 106,930,800 shares of CDC Class A common stock outstanding as of December 31, 2007.

(2) Of such options, 130,000 options/SARs were exercisable within 60 days of December 31, 2007.

Equity Incentives Granted by CDC Corporation. The following table sets forth information with respect to options to purchase our Class A common shares granted to Dr. Ch’ien, which were outstanding as of December 31, 2007.

				Number of options or stock appreciation rights (SARs)
Name of Director	Date of grant	Exercise price ($)	Exercise period	Balance as at January 1, 2007	Granted during the year	Exercised during the year	Transferred/ cancelled during the year	Balance as at December 31, 2007	Options/SARs vested within 60 days after December 31, 2007
Raymond Ch’ien	6/22/1999	3.3750	6/22/2000 – 6/21/2009	66,667	—	66,667	—	—	—
	10/17/2000	6.8125	1/17/2001 – 10/16/2010	100,000	—	—	—	100,000	100,000
	1/9/2001	4.2813	1/9/2001 – 1/8/2011	30,000	—	—	—	30,000	30,000
	4/27/2001	2.7400	7/27/2001 – 4/26/2011	220,000	—	220,000	—	—	—
	7/13/2001	2.9700	10/13/2001 – 7/12/2011	400,000	—	400,000	—	—	—
	4/27/2005	2.6860	7/27/2005 – 4/26/2015	62,500	—	62,500	—	—	—
	1/1/2006	3.2200	7/1/2006 – 12/31/2015	45,000	—	45,000	—	—	—
	11/9/2007	6.1800	2/9/2009 – 11/8/2014		25,000	—	—	25,000	25,000

CDC Corporation Equity Incentive Plans

2005 Stock Incentive Plan

The CDC Corporation 2005 Stock Incentive Plan, or the 2005 Plan, was adopted by our shareholders at the annual general meeting of our shareholders held on November 4, 2005. The purpose of the 2005 Plan is to make available incentives, including alternatives to stock options that will assist the Company to attract and retain key employees and to encourage them to increase their efforts to promote the business of the Company and its subsidiaries. These incentives include stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash.

A summary of the 2005 Plan is set forth below, and is qualified in its entirety by reference to the 2005 Plan, a copy of which has been filed with the Securities and Exchange Commission.

Purpose. The 2005 Plan is intended to make available incentives that will assist us in attracting and retaining key employees and to encourage them to increase their efforts to promote our business and the business of our subsidiaries. We may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash.

Shares Subject to 2005 Plan. Subject to adjustments under certain conditions, the maximum aggregate number of Class A Common Shares, or Shares, which may be issued pursuant to all awards under the 2005 Plan is the aggregate number of Shares available for future grants and Shares subject to awards which expire or are cancelled or forfeited under our previous equity incentive plan, the 1999 Stock Option Plan, or the 1999 Plan. In November 2007, our shareholders approved an amendment to the 2005 Plan to increase the number of Shares available for future grant by 10.0 million Shares. At December 31, 2007, 3,303,581 Class A common shares of CDC Corporation were outstanding under the 2005 Plan with a weighted average exercise price of approximately $5.23 per share, of which 994,319 options had vested. We currently have an aggregate of 10,674,176 Shares available for future grant under the 2005 Plan and the 1999 Plan.

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Appropriate adjustments will be made in the number of authorized shares and in outstanding awards to prevent dilution or enlargement of grantees’ rights in the event of a stock split or other change our capital structure. Shares as to which an award is granted under the 2005 Plan that remain unexercised at their expiration, are forfeited or are otherwise terminated may be the subject of the grant of further awards under the 2005 Plan. Shares covered by an award granted under the 2005 Plan shall not be counted as used unless and until they are actually issued and delivered to the grantee. The Shares available will not be reduced by awards settled in cash.

Administration. The administrator of our 2005 Plan will generally be a committee appointed by our Board of Directors. We intend that this committee shall consist solely of two or more “outside directors” so that awards granted pursuant to the 2005 Plan will qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code. Subject to the provisions of the 2005 Plan, the administrator determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. All awards must be evidenced by a written agreement between us and the grantee. The administrator may amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The administrator has the authority to construe and interpret the terms of the 2005 Plan and awards granted under it.

Eligibility. Awards may be granted under the 2005 Plan to any of our employees, directors, and consultants or any employees, directors or consultants of any of our related entities including any parent, subsidiary or other business in which we hold a substantial ownership interest. While we grant incentive stock options only to employees, we may grant non-qualified stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash to any eligible grantee.

Stock Options. The administrator may grant non-qualified stock options, “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, or any combination of these. The exercise price of each non-qualified stock option may not be less than 85% of the fair market value of our Shares on the date of grant. The exercise price of each incentive stock option may not be less than the fair market value of our Shares on the date of grant. Any incentive stock option granted to a person who owns stock possessing more than 10% of the voting power of all classes of our stock or any parent or subsidiary must have an exercise price not less than 110% of the fair market value of our Shares on the date of grant and a term not exceeding five years. The term of all other options may not exceed seven years. The administrator may amend the exercise price of any option. Options vest and become exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the administrator. Unless a longer period is provided by the administrator, an option generally will remain exercisable up to one month following the cessation of employment, except that if cessation of employment is as a result of the grantee’s death or disability, the option generally will remain exercisable for the one year period following such cessation, but in any event not beyond the expiration of its term.

Stock Appreciation Rights. A stock appreciation right gives a grantee the right to receive the appreciation, if any, in the fair market value of our Shares on the date of its exercise over the exercise price. We generally pay the appreciation in Shares, in accordance with the terms of the grantee’s award agreement. The administrator may grant stock appreciation rights under the 2005 Plan in tandem with a related stock option or as a freestanding award. A tandem stock appreciation right is exercisable only at the time and to the same extent that the related option is exercisable, and its exercise causes the related option to be canceled. The exercise price of a tandem stock appreciation right shall be the exercise price per share under the related stock option. Freestanding stock appreciation rights vest and become exercisable at the times and on the terms established by the administrator. The exercise price of a freestanding stock appreciation right shall not be less than 85% of the fair market value of our Shares on the date of grant. The maximum term of any stock appreciation right granted under the 2005 Plan is seven years.

Restricted Stock Awards. The administrator may grant restricted stock awards under the 2005 Plan subject to vesting conditions determined by the administrator (including vesting conditions based on service

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or performance criteria). Shares granted as restricted stock awards may not be transferred by the grantee until vested. A grantee’s rights in unvested restricted stock generally will lapse and his unvested restricted stock will be forfeited back to us one month following his termination of employment with us for any reason unless the administrator otherwise determines in its sole discretion. Grantees holding restricted stock will have all the rights of a shareholder with respect to such award (including the right to any dividends paid), except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award. The 2005 Plan also authorizes the administrator to establish a deferred compensation award program under which selected grantees may elect to receive fully vested restricted stock in lieu of compensation otherwise payable in cash or in lieu of cash or shares of stock otherwise issuable upon the exercise of stock options, stock appreciation rights, performance shares or performance cash.

Restricted Unit Awards. Restricted units granted under the 2005 Plan mean the right, awarded to a grantee pursuant to an award agreement, to receive an amount in cash equal to the fair market value of one share for such consideration, if any, and subject to such terms set forth in the award agreement and such other restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions and other terms as established by the administrator. The administrator may grant restricted unit awards subject to the attainment of performance goals similar to those described below in connection with performance shares and performance units, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards. Grantees have no voting rights or rights to receive cash dividends with respect to restricted unit awards until our Shares are issued in settlement of such awards. However, the administrator may grant restricted unit awards that entitle their holders to receive dividend equivalents, which are rights to receive additional restricted units for a number of shares whose value is equal to any cash dividends we pay.

Performance Shares and Performance Cash. The administrator may grant performance shares and performance cash under the 2005 Plan, which are awards that will result in a payment to a grantee only if specified performance goals are achieved during a specified performance period. Performance share awards are denominated in our Shares, while performance cash awards are denominated in cash. To the extent earned, performance share and performance cash awards may be settled in cash, Shares, including restricted stock, or any combination of these. Unless otherwise determined by the administrator, if a grantee’s service terminates due to death or disability before the completion of the applicable performance period, the final award value is determined at the end of the period on the basis of the performance goals attained during the entire period, but payment is prorated for the portion of the period during which the grantee remained in service.

Maximum Grants. The maximum number of options or stock appreciation rights which may be awarded to any grantee during any annual period is 1,000,000 in the aggregate. The maximum number of Shares which may be awarded to any grantee during any annual period as restricted stock, restricted units or performance shares is 500,000 in the aggregate. The maximum amount of performance cash which any grantee may earn during any annual period is $500,000. These maximum grants are included so that awards granted pursuant to the 2005 Plan will qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code.

Nontransferability of Awards. Incentive stock options granted under the 2005 Plan shall by its terms be nontransferable by the grantee except by will or the laws of descent and distribution of the jurisdiction wherein the grantee is domiciled at the time of death. For other awards, the administrator may (but need not, and subject to the terms provided by the award agreement) permit other transfers, where the administrator concludes that such transferability is appropriate and desirable.

Change in Control. If a change in control shall occur, then the administrator may make such adjustments as it, in its discretion, determines are necessary or appropriate in light of the change in control (including, without limitation, the substitution of shares other than our Shares as the Shares subject to award under the 2005 Plan, and the acceleration of the exercisability or vesting of the awards), provided that the administrator determines that such adjustments do not have a substantial adverse economic impact on the grantee as determined at the time of the adjustments.

Amendment and Termination. The 2005 Plan will continue in effect until the tenth anniversary of its approval by the shareholders, unless earlier terminated by our Board of Directors. Our Board of Directors may amend, suspend or terminate the 2005 Plan as it shall deem advisable, except that no amendment may

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adversely affect a grantee with respect to awards previously granted unless such amendments are in connection with compliance with applicable laws; provided that the Board of Directors may not make any amendment in the 2005 Plan that would, if such amendment were not approved by the shareholders, cause the 2005 Plan to fail to comply with any requirement of applicable laws, unless and until shareholder approval is obtained. No award may be granted during any suspension of the 2005 Plan or after termination of the 2005 Plan.

Non-U.S. Subsidiaries. Without amending the 2005 Plan, in consideration of us not being a U.S. corporation, the administrator may allow for participation by employees of our non-U.S. subsidiaries with such modifications of the terms and conditions otherwise specified in the 2005 Plan as may, in the judgment of the administrator, be necessary or desirable to foster and promote achievement of the purposes of the 2005 Plan. Any limitations on the number of Shares which may be issued pursuant to all awards set forth in the 2005 Plan shall be applied and administered with respect to the aggregate of the 2005 Plan and all such separate plans.

1999 Stock Option Plan

We also maintain our 1999 Stock Option Plan, or the 1999 Plan. A summary of the 1999 Plan is set forth below, and is qualified in its entirety by reference to the 1999 Plan, a copy of which has been filed with the Securities and Exchange Commission.

Our directors, executive officers and employees are eligible to receive options under the 1999 Plan. Pursuant to the 1999 Plan, as amended, options may be granted to our directors, executive officers, employees and consultants and the directors, executive officers, employees and consultants of our subsidiaries for the purchase of up to an aggregate of 20.0 million of our Class A common shares, of which 0.6 million remain available for grant under the 1999 Plan. At December 31, 2007, options to purchase 9,519,097 of our Class A common shares of CDC Corporation were outstanding under the 1999 Plan, with a weighted average exercise price of $4.63. Of such outstanding options, 5,342,912 had vested. We currently have an aggregate of 10,674,176 Shares available for future grant under the 2005 Plan and the 1999 Plan.

The 1999 Plan is administered by the compensation committee of our Board of Directors, which determines, at its discretion, the number of Class A common shares subject to each option granted and the related purchase price and option period.

The 1999 Plan requires that each option will expire on the date specified by the compensation committee, but not more than ten years from the date on which the option was granted. Under the 1999 Plan, unless otherwise specified in the option award agreement, upon the voluntary termination of employment by an option holder or termination of an option holder for cause by us, any options granted under the 1999 Plan to the option holder generally will terminate. If termination was due to death, retirement or disability, the option holder, or his or her successors, have a period of one year within which to exercise the option holder’s options. If termination was due to any other reason, options granted under the 1999 Plan may be exercised within three months of the termination. Options granted are nontransferable except by will or as otherwise authorized by the compensation committee.

Upon the occurrence of any change in our capital structure, including any merger, liquidation, reorganization, or recapitalization, the compensation committee may amend the 1999 Plan to preserve the rights of option holders substantially proportionate to their rights existing prior to the occurrence of such event, as it may deem necessary. Upon the occurrence of a change of control, the compensation committee may amend the 1999 Plan as it may deem appropriate provided that such adjustments do not have a substantial adverse impact on the option holder. Unless terminated earlier by action of our board of directors, the 1999 Plan will terminate on May 17, 2009, the ten year anniversary of the approval of the 1999 Plan by our Board of Directors and shareholders.

Assumption of Ross’ 1998 Incentive Stock Plan

In connection with our acquisition of Ross Systems, Inc. which was consummated in August 2004, we agreed to replace Ross stock options with an exercise price of $19.00 per share or less with options to purchase our Class A common shares under substantially similar terms. The Ross stock options had been issued under Ross’ 1998 Incentive Stock Plan, and Ross had previously registered the shares issuable under such plan with the Securities and Exchange Commission. Pursuant to the terms of the amended merger

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agreement with Ross, each Ross stock option was converted into an option to acquire our shares based on a conversion ratio of 4.358 CDC options for each Ross stock option. In connection with the merger, we assumed Ross’ 1998 Incentive Stock Plan, and registered with the Securities and Exchange Commission 950,000 Class A common shares which represented the aggregate number of Class A common shares that may be issued upon exercise of the options which had been granted under Ross’ 1998 Incentive Stock Plan and 1,400,000 Class A common shares which represented the aggregate number of Class A common shares that may be issued upon exercise of options which could still be granted under Ross’ 1998 Incentive Stock Plan.

As of March 31, 2008, we had not granted any additional options under the Ross 1998 Incentive Stock Plan.

2004 Employee Share Purchase Plan

During 2004, we established and implemented an employee share purchase plan, or ESPP, which allows eligible employees to purchase our Class A common shares at a discount through payroll deductions during two annual purchase periods. The eligibility criteria for participation in the ESPP include the following:

• completion of at least 180 days of continuous service with us or an eligible subsidiary;

• customarily work more than 20 hours per week and five months in a year for us or an eligible subsidiary; and

• the participant owns less than 5% ownership of the total combined voting power or value of all classes of our capital stock or the capital stock of any of our subsidiaries.

Nationals of the PRC who reside in the PRC as a permanent resident are not eligible to participate in the ESPP. The two purchase periods over every twelve-month time span are from October 1 to March 31 of the following year and April 1 to September 30 of the same year. Participants in the ESPP may select payroll deductions in whole percentages, from 1% to 10% of base salary. Class A common shares are purchased using the funds set aside through the payroll deductions at the end of each purchase period at a 15% discount to the lower of the market value of a Class A common share on the first day of the purchase period or the last day of the purchase period. We have set a limit of 1,000 shares as the number of shares that any single employee may purchase in any single purchase period. We have reserved an aggregate of 2,000,000 Class A common shares for issuance under the ESPP, and an aggregate of no more than 300,000 Class A common shares are available for purchase during any purchase period. In connection with implementing the 2004 ESPP, we terminated our prior employee share purchase plans which had previously been suspended.

As of December 31, 2007, we had issued 533,103 Class A common shares under the ESPP.

China.com Equity Incentive Plans

China.com has adopted three share option schemes pursuant to which it may issue options to acquire its ordinary shares, par value HK$0.10 per share: (i) the Pre-IPO Share Option Scheme; (ii) the Post-IPO Share Option; and (iii) the 2002 Share Option Scheme. Under these share option schemes, China.com may generally issue options to directors, employees, advisors, consultants, vendors and suppliers. The maximum number of shares which can be granted under the Pre-IPO Scheme and the Post-IPO Scheme must not exceed 10% of the issued share capital of China.com as of the date of the listing of its shares on the Growth Enterprise Market, or GEM, of the Hong Kong Stock Exchange. The maximum number of shares which can be granted under the 2002 Scheme must not exceed 10% of the issued share capital of China.com at the date of approval of the scheme. As of December 31, 2007, the number of shares issuable under the Pre-IPO Scheme, the Post-IPO Scheme and the 2002 Scheme were 11,980,000 shares, 1,279,012 shares and 340,899,322 shares, respectively, which represented approximately 8.1% of the aggregate of China.com’s shares in issue at that date. Pursuant to the Pre-IPO Scheme and the Post-IPO Scheme, no participant shall be granted an option which, if accepted and exercised in full, would result in such a participant’s maximum

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entitlement exceeding 25% of the aggregate number of shares of China.com subject to such schemes. The maximum number of shares issuable as options to each eligible participant in the 2002 Scheme in any 12 month period shall not exceed, without shareholder approval, 1% of the issued share capital of China.com from time to time. All share options must be exercised within 10 years from the date of grant. The exercise price for options issued under the Pre-IPO Scheme was set at HK$1.88 per share. The exercise price of options issued under the Post-IPO Scheme and the 2002 Scheme is determined by the directors of China.com, but may not be less than the higher of the following:

• the closing price of China.com’s shares on the Hong Kong Stock Exchange on the date of grant of the options;

• the average of the closing prices of China.com’s shares for the five trading days immediately preceding the date of grant of the share options; and

• the nominal value of China.com’s shares.

CDC Software Corporation 2007 Stock Incentive Plan

CDC Software has adopted and we, as sole shareholder, have approved the CDC Software Corporation 2007 Stock Incentive Plan, or the 2007 Plan. A summary of the 2007 Plan is set forth below, and is qualified in its entirety by reference to the 2007 Plan, a copy of which has been filed with the Securities and Exchange Commission as an exhibit to this Annual Report.

Purpose. The 2007 Plan is intended to make available incentives that will assist CDC Software in attracting and retaining key employees and to encourage them to increase their efforts to promote the business of CDC Software and its subsidiaries. CDC Software may provide these incentives through the grant of share options, share appreciation rights, restricted share awards, restricted unit awards, performance shares and performance cash.

Shares Subject to 2007 Plan. Subject to adjustments under certain conditions, the maximum aggregate number of CDC Software Corporation Class A common shares, or CDC Software Shares, that may be issued pursuant to all awards under the 2007 Plan is 3,750,000. At December 31, 2007 options to purchase 1,975,000 of CDC Software Shares have been granted under the 2007 Plan. The options will vest in equal installments on a quarterly basis over the three year period immediately following the consummation of an initial public offering of CDC Software Shares, and have an expiration date on the seventh anniversary of the date of grant.

Appropriate adjustments will be made in the number of authorized shares and in outstanding awards to prevent dilution or enlargement of grantees’ rights in the event of a share split or other change in CDC Software’s capital structure. Shares as to which an award is granted under the 2007 Plan that remain unexercised at their expiration, are forfeited or are otherwise terminated may be the subject of the grant of further awards under the 2007 Plan. CDC Software Shares covered by an award granted under the 2007 Plan shall not be counted as used unless and until they are actually issued and delivered to the grantee. The CDC Software Shares available will not be reduced by awards settled in cash.

Administration. The administrator of the 2007 Plan will generally be the compensation committee of CDC Software appointed by the CDC Software Board of Directors. Subject to the provisions of the 2007 Plan, the administrator determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. All awards must be evidenced by a written agreement between CDC Software and the grantee. The administrator may amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The administrator has the authority to construe and interpret the terms of the 2007 Plan and awards granted under it.

Eligibility. Awards may be granted under the 2007 Plan to employees, directors, and consultants of CDC Software or any related entity, including any parent, subsidiary or other business in which CDC Software, any parent or subsidiary holds a substantial ownership interest. While CDC Software grants

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“incentive stock options” only to employees, CDC Software may grant non-qualified options, share appreciation rights, restricted share awards, restricted unit awards, performance shares and performance cash to any eligible grantee.

Stock Options. The administrator may grant non-qualified options, “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, or any combination of these. The exercise price of each non-qualified option may not be less than 85% of the fair market value of CDC Software’s shares on the date of grant. The exercise price of each incentive stock option may not be less than the fair market value of CDC Software’s shares on the date of grant. Any incentive stock option granted to a person who owns shares possessing more than 10% of the voting power of all classes of shares of CDC Software or any parent or subsidiary must have an exercise price not less than 110% of the fair market value of CDC Software’s shares on the date of grant and a term not exceeding five years. The term of all other options may not exceed seven years. The administrator may amend the exercise price of any option. Options vest and become exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the administrator. Unless a longer period is provided by the administrator, an option generally will remain exercisable up to one month following the cessation of employment, except that if cessation of employment is as a result of the grantee’s death or disability, the option generally will remain exercisable for the one year period following such cessation, but in any event not beyond the expiration of its term.

Share Appreciation Rights. A share appreciation right gives a grantee the right to receive the appreciation, if any, in the fair market value of CDC Software’s shares on the date of its exercise over the exercise price. CDC Software generally pays the appreciation in shares, in accordance with the terms of the grantee’s award agreement. The administrator may grant share appreciation rights under the 2007 Plan in tandem with a related option or as a freestanding award. A tandem share appreciation right is exercisable only at the time and to the same extent that the related option is exercisable, and its exercise causes the related option to be canceled. The exercise price of a tandem share appreciation right shall be the exercise price per share under the related option. Freestanding share appreciation rights vest and become exercisable at the times and on the terms established by the administrator. The exercise price of a freestanding share appreciation right shall not be less than 85% of the fair market value of CDC Software’s shares on the date of grant. The maximum term of any share appreciation right granted under the 2007 Plan is seven years.

Restricted Share Awards. The administrator may grant restricted share awards under the 2007 Plan subject to vesting conditions determined by the administrator (including vesting conditions based on service or performance criteria). Shares granted as restricted share awards may not be transferred by the grantee until vested. A grantee’s rights in unvested restricted shares generally will lapse and his unvested restricted share will be forfeited back to CDC Software one month following his termination of employment with CDC Software for any reason unless the administrator otherwise determines in its sole discretion. Grantees holding restricted shares will have all the rights of a shareholder with respect to such award (including the right to any dividends paid), except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award. The 2007 Plan also authorizes the administrator to establish a deferred compensation award program under which selected grantees may elect to receive fully vested restricted shares in lieu of compensation otherwise payable in cash or in lieu of cash or shares otherwise issuable upon the exercise of options, share appreciation rights, performance shares or performance cash.

Restricted Unit Awards. Restricted units granted under the 2007 Plan mean the right, awarded to a grantee pursuant to an award agreement, to receive an amount in cash equal to the fair market value of one share for such consideration, if any, and subject to such terms set forth in the award agreement and such other restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions and other terms as established by the administrator. The administrator may grant restricted unit awards subject to the attainment of performance goals similar to those described below in connection with performance shares and performance units, or may make the awards subject to vesting conditions similar to those applicable to restricted share awards. Grantees have no voting rights or rights to receive cash dividends with respect to restricted unit awards until CDC Software shares are issued in settlement of such awards. However, the administrator may grant restricted unit awards that entitle their holders to receive dividend equivalents, which are rights to receive additional restricted units for a number of shares whose value is equal to any cash dividends we pay.

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Performance Shares and Performance Cash. The administrator may grant performance shares and performance cash under the 2007 Plan, which are awards that will result in a payment to a grantee only if specified performance goals are achieved during a specified performance period. Performance share awards are denominated in CDC Software shares, while performance cash awards are denominated in cash. To the extent earned, performance share and performance cash awards may be settled in cash, shares, including restricted shares, or any combination of these. Unless otherwise determined by the administrator, if a grantee’s service terminates due to death or disability before the completion of the applicable performance period, the final award value is determined at the end of the period on the basis of the performance goals attained during the entire period, but payment is prorated for the portion of the period during which the grantee remained in service.

Maximum Grants. The maximum number of options or share appreciation rights which may be awarded to any grantee during any annual period is 1,000,000 in the aggregate. The maximum number of shares which may be awarded to any grantee during any annual period as restricted shares, restricted units or performance shares is 500,000 in the aggregate. The maximum amount of performance cash which any grantee may earn during any annual period is $0.5 million.

Amendment and Termination. The 2007 Plan will continue in effect until the tenth anniversary of its approval by the shareholders, unless earlier terminated by CDC Software’s board of directors. CDC Software’s board of directors may amend, suspend or terminate the 2007 Plan as it shall deem advisable, except that no amendment may adversely affect a grantee with respect to awards previously granted unless such amendments are in connection with compliance with applicable laws; provided that the board of directors may not make any amendment in the 2007 Plan that would, if such amendment were not approved by the shareholders, cause the 2007 Plan to fail to comply with any requirement of applicable laws, unless and until shareholder approval is obtained. No award may be granted during any suspension of the 2007 Plan or after termination of the 2007 Plan.

CDC Games Corporation 2007 Stock Incentive Plan

CDC Games has adopted and we, as sole shareholder, have approved the CDC Games Corporation 2007 Stock Incentive Plan, or the 2007 Games Plan. A summary of the 2007 Games Plan is set forth below, and is qualified in its entirety by reference to the 2007 Games Plan, a copy of which has been filed with the Securities and Exchange Commission as an exhibit to this Annual Report.

Purpose. The 2007 Games Plan is intended to make available incentives that will assist CDC Games to attract and retain key employees and to encourage them to increase their efforts to promote its business and the business of its subsidiaries. CDC Games may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash.

Shares Subject to 2007 Games Plan. Subject to adjustments under certain conditions, the maximum aggregate number of Class A common shares of CDC Games Corporation which may be issued pursuant to all awards under the 2007 Games Plan is 3,750,000. At December 31, 2007 options to purchase 1,718,000 of CDC Games Shares have been granted under the 2007 Games Plan. The options will vest in equal installments on a quarterly basis over the three year period immediately following the consummations of an initial public offering of CDC Games Shares, and have an expiration date on the seventh anniversary of the date of grant.

Appropriate adjustments will be made in the number of authorized shares and in outstanding awards to prevent dilution or enlargement of grantees’ rights in the event of a stock split or other change in CDC Games’ capital structure. Shares as to which an award is granted under the 2007 Games Plan that remain unexercised at their expiration, are forfeited or are otherwise terminated may be the subject of the grant of further awards under the 2007 Games Plan. Shares covered by an award granted under the 2007 Games Plan shall not be counted as used unless and until they are actually issued and delivered to the grantee. The CDC Games shares available will not be reduced by awards settled in cash.

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Administration. The administrator of the 2007 Games Plan will generally be a committee appointed by the board of directors, which committee we intend to consist solely of two or more “outside directors” so that awards granted pursuant to the 2007 Games Plan will qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code. Subject to the provisions of the 2007 Games Plan, the administrator determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. All awards must be evidenced by a written agreement between CDC Games and the grantee. The administrator may amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The administrator has the authority to construe and interpret the terms of the 2007 Games Plan and awards granted under it.

Eligibility. Awards may be granted under the 2007 Games Plan to employees, directors, and consultants of CDC Games or any related entity, including any parent, subsidiary or other business in which CDC Games, any parent or subsidiary thereof holds a substantial ownership interest. While CDC Games grants incentive stock options only to employees, it may grant non-qualified stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash to any eligible grantee.

Stock Options. The administrator may grant non-qualified stock options, “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, or any combination of these. The exercise price of each non-qualified stock option may not be less than 85% of the fair market value of CDC Games’ shares on the date of grant. The exercise price of each incentive stock option may not be less than the fair market value of CDC Games’ shares on the date of grant. Any incentive stock option granted to a person who owns stock possessing more than 10% of the voting power of all classes of stock of CDC Games or any parent or subsidiary thereof must have an exercise price not less than 110% of the fair market value of CDC Games’ shares on the date of grant and a term not exceeding five years. The term of all other options may not exceed seven years. The administrator may amend the exercise price of any option. Options vest and become exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the administrator. Unless a longer period is provided by the administrator, an option generally will remain exercisable up to one month following the cessation of employment, except that if cessation of employment is as a result of the grantee’s death or disability, the option generally will remain exercisable for the one year period following such cessation, but in any event not beyond the expiration of its term.

Stock Appreciation Rights. A stock appreciation right gives a grantee the right to receive the appreciation, if any, in the fair market value of CDC Games shares on the date of its exercise over the exercise price. CDC Games may pay the appreciation either in cash or in shares in accordance with the terms of the grantee’s award agreement. The administrator may grant stock appreciation rights under the 2007 Games Plan in tandem with a related stock option or as a freestanding award. A tandem stock appreciation right is exercisable only at the time and to the same extent that the related option is exercisable, and its exercise causes the related option to be canceled. The exercise price of a tandem stock appreciation right shall be the exercise price per share under the related stock option. Freestanding stock appreciation rights vest and become exercisable at the times and on the terms established by the administrator. The exercise price of a freestanding stock appreciation right shall not be less than 85% of the fair market value of CDC Games’ shares on the date of grant. The maximum term of any stock appreciation right granted under the 2007 Games Plan is seven years.

Restricted Stock Awards. The administrator may grant restricted stock awards under the 2007 Games Plan subject to vesting conditions determined by the administrator (including vesting conditions based on service or performance criteria). Shares granted as restricted stock awards may not be transferred by the grantee until vested. A grantee’s rights in unvested restricted stock generally will lapse and his unvested restricted stock will be forfeited back to CDC Games one month following his termination of employment with CDC Games for any reason unless the administrator otherwise determines in its sole discretion. Grantees holding restricted stock will have all the rights of a shareholder with respect to such award (including the right to any dividends paid), except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award. The 2007 Plan also authorizes the administrator to establish a deferred compensation award program under which selected grantees may elect

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to receive fully vested restricted stock in lieu of compensation otherwise payable in cash or in lieu of cash or shares of stock otherwise issuable upon the exercise of stock options, stock appreciation rights, performance shares or performance cash.

Restricted Unit Awards. Restricted units granted under the 2007 Games Plan mean the right, awarded to a grantee pursuant to an award agreement, to receive an amount in cash equal to the fair market value of one share for such consideration, if any, and subject to such terms set forth in the award agreement and such other restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions and other terms as established by the administrator. The administrator may grant restricted unit awards subject to the attainment of performance goals similar to those described below in connection with performance shares and performance units, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards. Grantees have no voting rights or rights to receive cash dividends with respect to restricted unit awards until CDC Games’ shares are issued in settlement of such awards. However, the administrator may grant restricted unit awards that entitle their holders to receive dividend equivalents, which are rights to receive additional restricted units for a number of shares whose value is equal to any cash dividends we pay.

Performance Shares and Performance Cash. The administrator may grant performance shares and performance cash under the 2007 Games Plan, which are awards that will result in a payment to a grantee only if specified performance goals are achieved during a specified performance period. Performance share awards are denominated in CDC Games shares, while performance cash awards are denominated in cash. To the extent earned, performance share and performance cash awards may be settled in cash, shares, including restricted stock, or any combination of these. Unless otherwise determined by the administrator, if a grantee’s service terminates due to death or disability before the completion of the applicable performance period, the final award value is determined at the end of the period on the basis of the performance goals attained during the entire period, but payment is prorated for the portion of the period during which the grantee remained in service.

Maximum Grants. The maximum number of options or stock appreciation rights which may be awarded to any grantee during any annual period is 1,000,000 in the aggregate. The maximum number of shares which may be awarded to any grantee during any annual period as restricted stock, restricted units or performance shares is 500,000 in the aggregate. The maximum amount of performance cash which any grantee may earn during any annual period is $0.5 million.

Amendment and Termination. The 2007 Games Plan will continue in effect until the tenth anniversary of its approval by the shareholders, unless earlier terminated by CDC Games’ board of directors. CDC Games’ board of directors may amend, suspend or terminate the 2007 Games Plan as it shall deem advisable, except that no amendment may adversely affect a grantee with respect to awards previously granted unless such amendments are in connection with compliance with applicable laws; provided that the board of directors may not make any amendment in the 2007 Games Plan that would, if such amendment were not approved by the shareholders, cause the 2007 Games Plan to fail to comply with any requirement of applicable laws, unless and until shareholder approval is obtained. No award may be granted during any suspension of the 2007 Games Plan or after termination of the 2007 Games Plan.

Acceleration of Stock Options in response to FASB 123 (revised 2004)

FASB Statement No. 123 (revised 2004), Share-Based Payment, requires that the compensation cost relating to share-based payment transactions, such as the options issued under our 2005 Stock Option Plan and the options assumed under Ross’ 1998 Incentive Stock Plan, be recognized in our financial statements. Since the first quarter of 2006, the Securities and Exchange Commission has required public companies to implement the standards of FASB Statement No. 123R. To mitigate the potential impact of FASB Statement No. 123R on our financial statements, in December 2005, our board of directors approved the vesting of all stock options granted to employees and directors with a strike price of $3.50 or higher. Further, to prevent senior executives and directors personally benefiting from the acceleration, our board of directors also resolved that all employees with aggregate option grants greater than 25,000 option and all members of the board of directors of the Company should agree to restrictions that would prevent the sale of any share received from the exercise of an accelerated option prior to the original vesting date of the option. The

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purpose of the acceleration was to enable us to avoid recognizing compensation expense associated with these options upon the adoption of SFAS 123R in January 2006. We also believed that because the options that were accelerated had exercise prices in excess of the current market value of our Class A common stock, the options had limited economic value and were not fully achieving their original objective of employee retention and incentive compensation.

C. Board Practices

Terms of Directors and Executive Officers

Our board of directors is divided into three classes, each class generally having a term of three years. Each year the term of one class expires and nominees for membership in that class are eligible to be elected at the relevant annual meeting of shareholders. All directors hold office until the relevant annual meeting of shareholders or until their successors have been duly elected and qualified. Executive officers are elected by and serve at the discretion of the board of directors. Information relating to the terms of office of our board members is set forth herein under Item 6.A., “Directors, Senior Management and Employees, Directors and Senior Management.”

Pursuant to arrangements between CDC and APOL effective April 2006, so long as: (i) Mr. Peter Yip, or together with his immediate family, is the beneficial owner of more than 50% of APOL; and (ii) APOL beneficially owns at least 5% of our Class A common shares, APOL has the right to designate a director to serve on our board.

No director or executive officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation in which he or she is a director or executive officer, to engage in normal business activities of such person or corporation.

Except as disclosed herein, there are no family relationships between any of the named directors and executive officers and there are no material arrangements or understandings that exist between any such director or executive officer and CDC pursuant to which any such person was appointed as a director or executive officer of CDC. Mr. Antony Ip, who serves as a director of CDC Games is the son of Peter Yip. For details of such material arrangements or understanding that exist between any of the named directors or executive officers and CDC, see Item 7.B., “Major Shareholders and Related Party Transactions – Related Party Transactions.”

Committees of the Board of Directors

During the fiscal year ended December 31, 2007, our Board of Directors had four standing committees:

• the executive committee;

• the audit committee;

• the compensation committee; and

• the nominating committee.

The executive committee of the board has been authorized, during any interim period between quarterly meetings of the full board of directors, to act for and in lieu of the full board of directors and to approve of any transaction requiring board approval by the board of directors that does not exceed aggregate consideration to be paid by us of more than $40.0 million in cash and equity, with any equity component not to exceed 1,000,000 Class A common shares.

As of April 30, 2008, Messrs. Ch’ien, Yip, Wong and Clough served on the executive committee, with Mr. Clough serving as chairman.

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The audit committee selects and engages, on our behalf, the independent public accountants to audit our annual financial statements, and reviews and approves the planned scope of our annual audit. In addition, since February 2002, the audit committee has reviewed the terms of proposed transactions with related parties in accordance with the terms of our articles of association. Since May 2003, the audit committee has also been responsible for reviewing our compliance with the Sarbanes-Oxley Act. This responsibility includes reviewing documentation of our internal controls and key processes and procedures in order to report on compliance with Section 404, “Management Assessment of Internal Controls”. The Audit Committee is comprised of directors who qualify as an independent director for purposes of the rules and regulations of the Nasdaq Global Market and the Sarbanes-Oxley Act of 2002 and operates under a charter that is compliant with the rules and regulations of the Nasdaq Global Market. As of April 30, 2008, Messrs. Britt, Clough, Wang and Wong serve on the audit committee with Mr. Britt serving as chairman.

The compensation committee establishes remuneration levels for our officers, performs such functions as provided under employee benefit programs and administers our 2005 Stock Option Plan, our 1999 Stock Option Plan, the Ross 1998 Stock Option Plan and our 2004 Employee Share Purchase Plan. As of April 30, 2008, Messrs. Wong and Wang served on the compensation committee with Mr. Wong serving as chairman.

The nominating committee formulates and reviews appropriate criteria to be used in connection with selection of persons to serve on our board of directors and assesses and recommends nominees for election to our board of directors by shareholders at our annual general meeting. As of April 30, 2008 Messrs. Britt and Wong served on the nominating committee with Mr. Britt serving as chairman.

Subsidiary Boards of Directors

As of April 30, 2008:

• The Board of Directors of CDC Software was comprised of: Yip Hak Yung, Peter, Carrick John Clough, Wong Kwong Chi, Simon, Wong Sin Just, Wong Chung-kiu, Tam Wai Ho and Francis Kwok-Yu Au.

• The Board of Directors of CDC Games was comprised of: Yip Hak Yung, Peter, Wang Cheung Yue, Fred, Wong Kwong Chi, Simon, Ip Ren-haw, Antony, Francis Kwok-Yu Au and Dr. Lam Lee G.

• The Board of Directors of China.com was comprised of: Yip Hak Yung, Peter, Dr. Cheng Loi, Dr. Ch’ien Kuo Fung, Raymond, Fang Xin, Wong Sin Just, Wang Cheung Yue, Fred, Chia Kok Onn, Dr. Lam Lee G and Anson Wang.

D. Employees

As of December 31, 2007, we had approximately 3,125 full-time, part-time and temporary employees, as compared to 2,839 as of December 31, 2006. Of our 3,125 employees, approximately 1,095 are in professional services and consulting positions, 554 are in sales, marketing and business development positions, 660 are in research and development positions, and 816 are in various finance, back office and administration positions. Further, of such 3,125 persons, approximately 1,164 are employed in the Americas, 410 in Europe, and 1,551 in Hong Kong, the PRC and Asia.

Going forward, we aim to continue to attract, retain and motivate highly qualified technical, sales and management personnel, particularly highly skilled technical personnel and engineers involved in new product development and productive sales personnel. From time to time, we also employ independent contractors to support our research and development, marketing, sales and support and administrative organizations. Our employees are not represented by any collective bargaining unit, and we have never experienced a work stoppage.

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E. Share Ownership

Beneficial ownership of our Class A common shares by our directors, senior executive officers and other major shareholders is determined in accordance with the rules of the Securities and Exchange Commission, and generally includes voting or investment power with respect to those shares. In computing the number of Class A common shares beneficially owned by a person, and the percentage ownership of that person, Class A common shares subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days after December 31, 2007 are deemed beneficially owned and outstanding, but such Class A common shares are not deemed outstanding for the purposes of computing the ownership percentage of any other person.

As of April 30, 2008, none of our directors and senior executive officers, except for Mr. Yip and Dr. Ch’ien, beneficially owns more than 1% of our Class A common shares. Mr. Yip is the beneficial owner of approximately 20.9% of our Class A common shares. Dr. Ch’ien is the beneficial owner of approximately 1.08% of our Class A common shares.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

We are a publicly owned corporation, and our Class A common shares are owned by U.S. residents and residents of other countries. As of March 31, 2008, we were not directly owned or controlled by another corporation or by any foreign government, and a total of 625 shareholders of record were U.S. residents holding approximately 80% of our Class A common shares. Holders of our Class A common shares do not have different voting rights.

The following table sets forth information concerning each person known by us who beneficially own 5% or more of our Class A common shares as of April 30, 2008:

	Beneficial Ownership
Shareholder	Shares	Percent*
Asia Pacific Online Limited(1)	22,384,648	20.9
Xinhua News Agency(2)	7,362,734	6.9
Jayhawk China Fund (Cayman) Ltd. (3)	8,981,893	8.4

* Based on 106,992,519 CDC Corporation Class A common shares outstanding as of March 31, 2008.

(1) Such amount, includes 16,639,649 Class A common shares and 5,744,999 options/stock appreciation rights (SARs). As of April 30, 2008, APOL held 11,987,253 Class A common shares and 5,744,999 options/SARs (of which 2,387,492 will become exercisable within 60 days of April 30, 2008). APOL is owned 50% by the spouse of Mr. Yip and 50% by a trust established for the benefit of Mr. Yip’s spouse and his children. 4,652,396 of such Class A common shares are held by the spouse of Mr. Yip. Mr. Yip holds 90,000 of such options, all of which are exercisable within 60 days of April 30, 2008.

(2) Xinhua holds our shares through a wholly-owned subsidiary, Golden Tripod Technology Limited.

(3) Based upon a Schedule 13-G filed jointly by Jayhawk Capital Management, L.L.C., or JCM, Jayhawk China Fund (Cayman) Ltd., or JCF, Buffalo Jayhawk China Fund, or BJCF, and Kent McCarty, with the Securities and Exchange Commission on March 20, 2008, JCF directly owns 8,815,393, or 8.24% of our Class A common shares and BJCF directly owns 166,500, or 0.16% of our Class A common shares. JCM is the manager and investment advisor of both JCF and BJCF, and Mr. McCarthy is the manager of JCM. As a result of the relationship of Mr. McCarthy to JCM and JCM to JCF and BJCF, each of Mr. McCarthy, JCM and JCF may be deemed to have shared power to vote, or direct the vote of, and dispose, or direct the disposition of, the Class A common shares as held by JCF and BJCF representing an aggregate of 8,981,893 Class A common shares, or 8.4%.

For a discussion of risks associated with the holdings of our major shareholders, see Item 3.D., “Key Information – Risk Factors – Risks Relating to Our Class A Common Shares”.

B. Related Party Transactions

BBMF Group Inc. In January 2007, we entered into a senior secured loan agreement with BBMF Group Inc. pursuant to which we provided a US$3.0 million loan to BBMF, for working capital purposes and to accelerate the business expansion of the BBMF group of companies. In January 2008 all principal amounts outstanding together with interest accrued thereon was converted into common shares of BBMF Group Inc. In addition, in December 2007, CDC Games entered into a purchase agreement with an existing shareholder of BBMF Inc. to purchase 346,800 shares of BBMF, Inc. for aggregate consideration in the amount of $6.8 million. Under the purchase agreement, CDC Games transferred $6.8 million to an escrow

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account in December 2007. The share purchase was completed by CDC Games in January 2008. Subsequent to CDC’s investment, BBMF, Inc. distributed all of the shares of BBMF Group, Inc. held by it to its shareholders on a pro rata basis and BBMF, Inc. Currently, CDC Games directly owns approximately 20.8% of BBMF Group, Inc.

BBMF Group Inc. is owned 16.03% by Outerspace Investments Limited, an entity in which Ms. Nicola Chu is the ultimate beneficial owner. Ms. Chu is the spouse of Mr. Peter Yip, the chief executive officer of CDC Corporation. In addition, Mr. Antony Ip serves as the chairman and a director of BBMF. Antony Ip is the son of Peter Yip. In addition, Mr. Ip serves as a director of CDC Games.

Golden Tripod. For the year ended December 31, 2005, 2006 and 2007, we paid management fees of approximately $77,000, $77,000 and $44,870, respectively, to Golden Tripod Limited, an entity affiliated with Xinhua, one of our major shareholders, for the provision of general management services to us, including consultancy fees of consultants provided by Golden Tripod Limited.

Asia Pacific Online Limited. Effective April 12, 2006, we entered into an agreement with Asia Pacific Online Limited, or APOL, pursuant to which APOL would provide the services of Mr. Peter Yip as our Chief Executive Officer and Vice Chairman. The agreement has an initial term of three years, and is automatically renewable for successive terms of one year each.

In consideration of providing the services of Mr. Yip, we agreed to pay APOL cash remuneration of $1 per annum; grant APOL options to purchase 2.4 million shares of our Class A common stock, which options shall vest quarterly over a three year period, the “Quarterly Vest Options”; and grant of options to purchase up to 2,399,999 shares of our Class A common stock which options vest in installments upon the achievement of specified milestones, which include the following, the “Contingent Options”:

• a public listing of our software related business;

• a listing of China.com outside of Hong Kong or moving China.com’s listing to the main board of the Hong Kong Stock Exchange;

• a public listing of our online games business;

• a public listing of any other business acquired by us after the date of this agreement or the acquisition of at least 20% of a company listed on a recognized stock exchange; and

• a public listing of any other businesses of ours.

The consideration paid to APOL will be reviewed at the end of the initial term.

If the agreement with APOL is terminated for any reason other than cause, Mr. Yip’s death or by APOL by giving six (6) months advance notice, the Quarterly Vest Options accelerate and fully vest. In addition, in the event that Mr. Yip’s death or disability is tangibly related to the performance of the duties by Mr. Yip for us, then the Quarterly Vest Options shall accelerate and fully vest.

In the event a change of control of CDC Corporation occurs, and the agreement is terminated for a reason other than cause, Mr. Yip’s death or by APOL giving six (6) months advance notice of termination, then the Quarterly Vest Options and the Contingent Options shall accelerate and fully vest. In addition, in the event a change of control of CDC Corporation occurs, and Mr. Yip remains in good standing with us or our successor through the first anniversary of such change in control, then the Quarterly Vest Options and the Contingent Options shall accelerate and fully vest. A change of control shall be deemed to occur in the event any person, other than us or APOL, becomes the owner of 20% or more of the combined voting power of our outstanding securities.

Under the terms of the agreement, we also agreed to reimburse APOL for Mr. Yip’s reasonable expenses incurred in the performance of his duties related to travel and entertaining, including duties performed on behalf of us, in accordance with the our internal policies.

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In addition, as long as APOL holds at least 5% of our Class A common shares, APOL will be entitled to nominate one director to our board, subject to the shareholders electing such nominee as a director at the next general meeting of shareholders. APOL and Mr. Yip have also agreed to a non-competition period of twelve (12) months after the termination of the agreement. In addition, we have agreed to reimburse all medical expenses incurred by Mr. Yip and his immediate family during the 36 months prior to the date of the agreement.

Employment Agreements

CDC Corporation

Michael Latimore. In April 2007, CDC Corporation entered into an employment agreement with Mr. Latimore. Under the terms of the employment agreement, either party may terminate Mr.Latimore’s employment agreement upon three months advance written notice. If Mr.Latimore is terminated without cause, he is entitled to a severance payment equal to six months salary.

Timothy Coen. In April 2008, Ross Systems, one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. Coen. Under the terms of the employment agreement, either party may terminate Mr. Coen’s employment upon three (3) months’ advance notice in writing, and Ross Systems may terminate Mr. Coen’s employment for cause. In the event Ross Systems terminates Mr. Coen’s employment without cause, he is entitled to his base compensation for a period of three (3) months with an additional one (1) month of base compensation for each year of service up to a maximum of twelve (12) months, after such termination.

CDC Software

Eric Musser. In October 2000, Ross Systems, one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. Musser. Under the terms of the employment agreement, either party may terminate Mr. Musser’s employment upon thirty (30) days’ advance notice in writing, and Ross Systems may terminate Mr. Musser’s employment for cause. In the event Ross Systems terminates Mr. Musser’s employment without cause, he is entitled to one-half of his annual rate of base compensation and continuation of benefits for a period of six (6) months after such termination.

James McDevitt. In May 2007, Ross Systems, one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. McDevitt. Under the terms of the employment agreement, either party may terminate Mr. McDevitt’s employment at any time with or without notice, and Ross Systems may terminate Mr. McDevitt’s employment for cause. In the event Ross Systems terminates Mr. McDevitt’s employment without cause, he is entitled to his base compensation for a period of three (3) months with an additional one (1) month of base compensation for each year of service up to a maximum of twelve (12) months, after such termination.

Frank Hung. In December 2006, Praxa Limited, one of our wholly owned subsidiaries, entered into an employment agreement with Mr. Hung. Under the terms of the employment agreement, either party may terminate Mr. Hung’s employment upon three (3) calendar months’ advance notice in writing; provided, however, that we may terminate Mr. Hung’s employment immediately at any time for cause.

Alan MacLamroc. In March 20, 2007, Ross Systems, one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. MacLamroc. Under the terms of the employment agreement, either party may terminate Mr. MacLamroc’s employment at any time with or without notice, and Ross Systems may terminate Mr. MacLamroc’s employment for cause.

Arthur Masseur. In July 1995, Ross Systems Nederland b.v., one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. Masseur. Under the terms of the employment agreement either party may terminate Mr. Masseur’s employment upon one calendar month advance notice in writing, and in the event that Ross Systems Nederland b.v. terminates Mr. Masseur’s employment without cause, Mr. Masseur is likely to be entitled to receive at least one (1) month’s salary for each year worked subject to the local laws of the Netherlands.

Per Norling. In September 2004, Industri-Matematik AB, one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. Norling. Under the terms of the employment agreement, either party may terminate Mr. Norling’s employment upon six (6) months advance notice in writing, and in the event that Industri-Matematik AB terminates Mr. Norling’s employment without cause, he is entitled to six months of his base salary.

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Oscar Pierre. In January 1997, Ross Systems Iberica, S.L. one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. Pierre. Under the terms of the employment agreement, either party may terminate Mr. Pierre employment upon three (3) calendar months advance notice in writing, and in the event that Ross Systems Iberica, S.L. terminates Mr. Pierre’s employment without cause or Mr. Pierre resigns for good reason (as described in his employment agreement), he is entitled to one (1) year gross salary in addition to a potential sum of one (1) year gross salary in relation to Mr. Pierre’s non-complete obligations.

Bruce Cameron. In June 2004, Pivotal Corporation, one of our wholly-owned subsidiaries, entered into an employment agreement with Mr. Cameron. Under the terms of the employment agreement, either party may terminate Mr. Cameron’s employment upon ninety (90) days’ advance notice in writing, and Pivotal Corporation may terminate Mr. Cameron’s employment for cause. In the event Pivotal Corporation terminates Mr. Cameron’s employment without cause, he is entitled to his base compensation for a period of three (3) months after such termination.

Edmund Lau. In November 2006, CDC Software entered into an employment agreement with Mr. Lau. Under the terms of the employment agreement, either party may terminate Mr. Lau’s employment by giving no less than three months’ notice in writing. After one year of service, if Mr. Lau’s employment is terminated for any reason other than cause, Mr. Lau is entitled to four months’ written notice by the company. After a second year of service, Mr. Lau is entitled to one additional month written notice by the company for each additional year thereafter, up to a maximum of 12 months at 9 years of employment.

William Geist. In October 2006, CDC Software entered into an employment agreement with Mr. Geist. Under the terms of the employment agreement, either party may terminate Mr. Geist’s employment by giving one months’ notice in writing to the other party.

C. Interests of experts and counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

We have appended our Consolidated Financial Statements as of and for the year ended December 31, 2007 commencing on page F-1 of this Annual Report.

B. Significant Changes

Not applicable.

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ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Our Class A common shares have been quoted on NASDAQ under the symbol “CHINA” since our IPO on July 12, 1999. Prior to July 12, 1999, there was no public market for our shares. The following table sets forth, for the years indicated, the high and low closing prices per share as reported on NASDAQ. On December 31, 2007, the closing price for our Class A common shares on NASDAQ was $4.87 per share.

	Closing prices
	High	Low
	(in U.S. dollars per share)
2003:
Annual	14.46	2.73
2004:
Annual	12.65	4.05
2005:
Annual	4.48	2.40
2006:
First quarter	4.89	3.19
Second quarter	4.82	3.95
Third quarter	5.91	3.95
Fourth quarter	9.50	5.50
Annual	9.50	3.19
2007:
First quarter	10.94	8.48
Second quarter	9.54	7.89
Third quarter	9.84	6.93
Fourth quarter	8.51	3.74
Annual	10.94	3.74
Past six calendar months:
December 2007	5.98	3.74
January 2008	4.56	3.64
February 2008	4.16	3.72
March 2008	3.97	3.53
April 2008	4.14	3.45
May 2008	3.68	3.31

B. Plan of Distribution

Not applicable.

C. Markets

Our Class A common shares have been traded on NASDAQ under the symbol “CHINA” since our IPO on July 12, 1999. Prior to July 12, 1999, there was no public market for our shares. There can be no assurance we can continue to satisfy the relevant criteria for maintaining our listing on NASDAQ.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

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F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not Applicable.

B. Memorandum and Articles of Association

The following description of the terms and provisions of our amended and restated memorandum and articles of association, as amended, is qualified in its entirety by reference to such documents which are attached as exhibits to this Annual Report on Form 20-F.

General

We are a Cayman Islands company and operate under the Cayman Islands Companies Law (2004 Revision), or the Companies Law. Our company number is No. CR-74277. Our corporate objectives and purpose are unrestricted.

Directors

A director may vote in respect of any contract or transaction in which he is interested provided that such director shall, if his interest in such contract or arrangement is material, declare the nature of his interest at the earliest meeting of our board at which it is practicable for him to do so, either specifically or by way of a general notice stating that, by reason of the facts specified in the notice, he is to be regarded as interested in any contracts of a specified description which may subsequently be made by us.

The directors may determine remuneration to be paid to the directors.

The directors may exercise all our powers to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any of our debts, liabilities, or obligations or those of any third party.

There are no membership qualifications for directors. Further, there are no age limitations or retirement requirements and no share ownership qualifications for directors unless so fixed by shareholders in a general meeting.

Rights, Preferences and Restrictions of Ordinary Shares

Dividends. The holders of ordinary shares are entitled to such dividends as may be declared by our board. At our annual general meeting held on November 15, 2007 our shareholders approved an amendment to our amended and restated memorandum and articles of association to permit the board of directors, without the approval of shareholders, to declare and pay dividends of assets held by us.

Voting Rights. Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote, including the election of directors. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the Chairman or any other shareholder present in person or by proxy. The quorum required for a meeting of shareholders shall be members present in person or by proxy holding not less than one-third of the issued shares of the company entitled to vote at the meeting in question.

Directors are divided into three classes, designated as Class I, Class II and Class III, all of which classes shall be as nearly equal in number as possible. Upon expiration of the term of office of each class, the directors in each class shall be elected for a term of three (3) years to succeed the directors whose terms of office expire. Each director shall hold office until the expiration of his term and until his successor shall

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have been elected and qualified. The classification of our Board may have the effect of delaying the replacement of a majority of our directors and make changes to our board more difficult than if such provisions were not in place.

Profits. Our profits may be distributed to shareholders as dividends, as determined by our board.

Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares) assets available for distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares pro rata. If the assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.

Calls on Shares and Forfeiture of Shares. Our board may, from time to time, make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least fourteen (14) days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid are subject to forfeiture.

Redemption of Shares. We may issue shares on the terms that they are, or at our option or at the option of the holders are, subject to redemption on such terms and in such manner as we may determine by special resolution.

Variations of Rights of Shares

If at any time the our share capital is divided into different classes of shares, all or any of the rights attached to any class of shares for the time being issued (unless otherwise provided for in the terms of issue of the shares of that class) may, subject to the provisions of the Companies Law, be varied or abrogated with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of shares of that class.

General Meetings of Shareholders

We are required to hold a general meeting each year in addition to any other meeting in that year and shall specify the meeting as such in the notices calling it; and not more than 15 months shall elapse (or such longer period as NASDAQ may authorize) between the date of one annual general meeting of the Company and that of the next. The annual general meeting shall be held at such time and place as our board shall appoint. All general meetings other than an annual general meeting shall be called extraordinary general meetings.

The Board may, at its discretion, convene an extraordinary general meeting.

General meetings shall also be convened on the written requisition of any two or more members of the Company deposited at the registered office specifying the objects of the meeting and signed by the requisitionists, provided that such requisitionists held as at the date of deposit of the requisition not less than one-tenth of our paid up capital which carries the right of voting at our general meetings. General meetings may also be convened on the written requisition of any one member of the Company which is a clearing house (or its nominee) deposited at our registered office specifying the objects of the meeting and signed by the requisitionist, provided that such requisitionist held as at the date of deposit of the requisition not less than one-tenth of our paid up capital which carries the right of voting at our general meetings. If the Board does not within 21 days from the date of deposit of the requisition proceed duly to convene the meeting, the requisitionist(s) themselves or any of them representing more than one-half of the total voting rights of all of them, may convene the general meeting in the same manner, as nearly as possible, as that in which meetings may be convened by the Board provided that any meeting so convened shall not be held after the expiration of three months from the date of deposit of the requisition, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to them by the Company.

An annual general meeting and any extraordinary general meeting called for the passing of a special resolution shall be called by not less than 21 days’ notice in writing and any other extraordinary general meeting shall be called by not less than 14 days’ notice in writing. The notice shall be exclusive of the day

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on which it is served or deemed to be served and of the day for which it is given, and shall specify the time, place, and agenda of the meeting, particulars of the resolutions to be considered at the meeting and in the case of special business (as defined in Article 81 of our Amended and Restated Articles of Association) the general nature of that business. The notice convening an annual general meeting shall specify the meeting as such, and the notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as a special resolution. Notice of every general meeting shall be given to:

(a) all members, other than those that, under the provisions hereof or the terms of issue of the shares they hold, are not entitled to receive such notice from us;

(b) the Auditors; and

(c) for so long as our shares are listed on the Exchange, the Exchange.

Notwithstanding that a meeting of the Company is called by shorter notice than that referred to in Article 76 of our Amended and Restated Articles of Association, it shall be deemed to have been duly called if it is so agreed:

(a) in the case of a meeting called as an annual general meeting, by all the members of the Company entitled to attend and vote thereat or their proxies; and

(b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving that right.

There shall appear with reasonable prominence in every notice of our general meetings a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and, on a poll, vote instead of him and that a proxy need not be a member of the Company.

The accidental omission to give any such notice to, or the non-receipt of any such notice by, any person entitled to receive notice shall not invalidate any resolution passed or any proceeding at any such meeting. In cases where instruments of proxy are sent out with notices, the accidental omission to send such instrument of proxy to, or the non-receipt of such instrument of proxy by, any person entitled to receive notice shall not invalidate any resolution passed or any proceeding at any such meeting.

Limitations on the Right to Own Shares

There are no limitations on the right to own our shares.

Limitations on Transfer of Shares

There are no provisions in our restated memorandum or articles of association that would have an effect of delaying, deferring or preventing a change in control and that would operate only with respect to a merger, acquisition or corporate restructuring.

Disclosure of Shareholder Ownership

There are no provisions in our Amended and Restated Articles and Memorandum of Association governing the ownership threshold above which shareholder ownership must be disclosed.

Changes in Capital

Subject to the provisions of our Amended and Restated Articles and Memorandum of Association and to any direction that may be given by us in a general meeting and without prejudice to any special rights conferred on the holders of any existing shares or attaching to any class of shares, any share including the Preferred Shares may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise, and to such persons at such times and for such consideration as the Board may determine. We may, in a general meeting, from time to time, whether or not all the shares for the time being authorized shall have been issued and whether or not all the shares for the time being issued shall have been fully paid up, by ordinary resolution, increase our share capital by the creation of new shares, such new capital to be of such amount and to be divided into shares of such respective amounts as the resolution shall prescribe.

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C. Material Contracts

Cayman First Tier. In September 2003, we acquired a majority interest in IMI, an international provider of software to the supply chain management sector principally across Europe and the United States, by acquiring 51% of IMI’s holding company, Cayman First Tier, or CFT, in exchange for $25.0 million to subscribe for new shares in Cayman First Tier. Symphony Technology Group, a Palo Alto, California based venture capital company, held the remaining 49% in Cayman First Tier.

In November 2003, CFT loaned $25.0 million to Symphony to provide Symphony with additional capital to fund future Symphony investments. The loan was secured by Symphony’s 49% holding in IMI (through CFT). Principal and interest on the Symphony Note were due and payable in full in November 2007.

In November 2007, we, CFT and Symphony entered into a letter agreement whereby all amounts due and payable to CFT pursuant to the $25.0 million note made by Symphony were deemed discharged and paid in full in exchange for the transfer by Symphony to CFT of all of Symphony’s rights, title, and interest in Symphony’s 49% interest in CFT.

Go2joy. In May 2004, we acquired Go2joy, a mobile services and applications provider in the PRC with established partnerships with media companies in the PRC. In connection with the acquisition, we made an initial payment of $9.6 million in April 2004. In July 2004, China.com acquired Go2joy from us. In this acquisition, China.com paid us $9.6 million and made our second payment to the sellers of Go2joy of $13.0 million, in 2005. A third payment to the sellers of Go2joy was not required in 2006 because certain milestone obligations were not met.

Shenzhen KK Technology. In June 2005, a subsidiary of China.com acquired 100% of the shares in Shenzhen KK Technology, an MVAS service provider in the PRC that participates in the WAP business. The total cash consideration was $2.9 million.

JRG Software Inc. In January 2006, CDC Software acquired the assets of JRG, a provider of on-demand supply chain solutions for planning and scheduling, delivered as Software as a Service (SaaS). In connection with the acquisition, we made an advance payment of $25,000 plus a closing payment of $0.4 million. In addition, to the closing payment, we made a hold back payment of $0.1 less post-closing adjustments.

Horizon Companies. In February 2006, we acquired, through our 51%-owned subsidiary, Software Galeria, certain assets of Horizon Companies related to the provision of outsourced IT support and consulting services. Under the terms of the asset purchase agreement, we paid $0.6 million in cash at closing and paid an additional $0.6 million of cash consideration in installments during 2006. We also agreed to pay additional cash consideration of $1.0 million in 2006 and 2007 in the event 2006 EBITDA and 2007 EBITDA generated from the purchased assets was, in each such year, at least $1.35 million. Additional consideration payments are subject to upward and downward adjustment, dollar-for-dollar, in the event 2007 EBITDA and 2008 EBITDA is less than or greater than the targeted EBITDA amounts. The additional consideration payments are also subject to adjustment in the event of breaches of representations and warranties. In addition, we agreed to issue to the sellers up to a 20% equity interest in the entity formed to acquire the assets purchased from Horizon in the event that certain conditions are met including, but not limited to, the EBITDA generated from the purchased assets exceeding specified targets during each of 2006, 2007 and 2008. As of June 2008, we have not issued any portion of such equity interest. However, if we issue the sellers any equity in the future, the sellers shall have the right to put their equity interest back to us between April 2009 and April 2011 at a fixed valuation.

17game. In March 2006, a subsidiary of China.com acquired the remaining 52% of Equity Pacific Limited, or Equity Pacific, which ultimately owns Beijing 17game Network Technology Co Limited, or 17game, amongst other subsidiaries, for aggregate total consideration of $18 million. Such amounts were paid in a combination of cash and restricted common shares of China.com, with approximately $4.8 million paid in cash and $13.2 million paid in restricted shares. These restricted shares will vest over a period of

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two years, with 25% vesting on the first six (6) months anniversary of closing and 12.5% vesting on each subsequent three (3) month anniversaries of closing. In connection with our internal restructuring, which was completed in December 2006, 17game was transferred to CDC Games.

c360 Solutions Incorporated. In April 2006, we acquired 100% of the shares of c360 Solutions Incorporated, a provider of add-on products, industry solutions and development tools for the Microsoft Dynamics CRM platform. Under the terms of the stock purchase agreement, we paid $1.25 million of cash and issued 50,000 of our unregistered Class A common shares at closing. In addition, we paid $0.9 million of additional cash consideration in January 2007 and paid $0.9 million of additional cash consideration in October 2007. We also agreed to issue to the sellers an additional 50,000 of our unregistered Class A common shares every three months through the twenty-one month anniversary of closing. Through March 31, 2008, an additional 400,000 of our unregistered Class A common shares have been issued. In addition, we have agreed to issue up to an aggregate of an additional 150,000 of our unregistered Class A common shares between the twenty-four and thirty-three month anniversary of closing in the event c360 achieves certain revenue targets and, as of June 2008, we have issued 50,000 of such 150,000 shares. Approximately $0.5 million of the purchase price is subject to adjustment for breaches of representations and warranties.

OST International, Inc. In June 2006, we acquired 100% of the shares of OST International, Inc., an outsourced IT support and consulting services provider. Under the terms of the stock purchase agreement, we paid $3.0 million in cash at closing. In addition, we agreed to issue to the selling shareholder $0.3 million of our unregistered Class A common shares prior to June 15, 2008 and agreed to issue an additional $0.2 million of our unregistered Class A common shares prior to June 15, 2009. We also agreed to pay additional cash consideration in the amounts of $0.3 million and $0.4 million in the event 2007 adjusted earnings before interest, income taxes, depreciation and amortization, or EBITDA, and 2008 EBITDA for OST International is $1.35 million and $1.45 million, respectively. The additional consideration payments are subject to upward and downward adjustment, dollar-for-dollar, in the event 2007 EBITDA and 2008 EBITDA are less than or greater than the targeted EBITDA amounts. The additional consideration payments are also subject to adjustment in the event of breaches of representations and warranties.

DB Professionals, Inc. In June 2006, we acquired 100% of the shares of DB Professionals, Inc., an outsourced IT support and consulting services provider. Under the terms of the share purchase agreement, as amended, we paid $8.5 million in cash at closing, $0.4 million within 90 days of closing and agreed to pay additional cash consideration of $1.4 million in installments based upon excess cash available in DBPI’s bank account. We also agreed to pay additional cash consideration in the amount of $1.4 million in the event 2007 EBITDA for DB Professionals, Inc. is $2.5 million, subject to upward and downward adjustment, in the event 2007 EBITDA is less than or greater than the targeted EBITDA amount. In March 2007, we entered into an addendum to our stock purchase agreement pursuant to which, among other things, we accelerated the payment of the second cash installment payable to the sellers and provided for certain tax-related elections to be made by the sellers. In August 2007, we entered into a second addendum to our share purchase agreement under which we agreed to accelerate the third tranche payment by paying an aggregate of $1.25 million in four installments ending in November 2007.

TimeHeart. In November 2006, CDC Mobile Media Corporation, a subsidiary of China.com, acquired 100% of the issued and outstanding share capital of TimeHeart Science Technology Limited, an MVAS provider in China and 100% of the equity in its related entity, Beijing TimeHeart Information Technology Limited, or Beijing TimeHeart. Under the terms of the share purchase agreement, as amended, at closing: (i) China.com paid approximately $1.6 million in cash; (ii) China.com issued 27,320,490 of its restricted shares to the Sellers, which may only be sold or transferred after 90 days upon the issuance of the corresponding share certificate; and (iii) 10% of the issued and outstanding share capital of CDC Mobile Media Corporation, was transferred to the Sellers. Furthermore, the maximum additional consideration payable, subject to the achievement of certain financial milestones through approximately April 30, 2008, is approximately $15.6 million, which may be comprised of a combination approximately $2 million, payable in no more than 39,464,850 China.com restricted shares. Portions of the consideration paid to sellers are subject to adjustment in the event of breaches of representations and warranties given by the sellers.

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MVI Holdings Limited. In October 2006, we acquired 100% of the shares of MVI Holdings Limited, a provider of real-time performance management solutions for the food and beverage, pharmaceuticals and chemicals industries. Under the terms of the stock purchase agreement, we paid approximately $6 million at closing, subject to various adjustments. In addition, we agreed to pay up to a maximum of $12 million of additional consideration based upon the revenues of MVI between the first and twelfth months, thirteenth through twenty fourth months, and twenty fifth through thirty sixth months following the closing. Revenues must exceed $6 million during each twelve month period for any additional consideration to be payable for that period. Certain payments comprising the consideration paid or payable in connection with our acquisition of the shares of MVI are required to be made in the form of notes issued or to be issued to certain shareholders of MVI. As such, in October 2007, we issued an aggregate of $0.9 million in loan notes. Any such additional consideration payments are subject to adjustment in the event of breaches of representations and warranties, and various other adjustments.

Internal Restructuring Agreement. In December 2006, we completed our plans for an internal restructuring of CDC Games under which CDC Games was moved from within China.com to become a direct business unit of CDC Corporation. A part of this restructuring, 17game was also transferred to CDC Games. The independent shareholders of China.com, presented in person or by proxy at China.com’s shareholders meeting, approved the restructuring. In connection with the restructuring, CDC Games entered into a stock purchase agreement whereby it acquired all issued and outstanding shares of its common stock from China.com for a purchase price of $110 million. Of such amount, $50 million was paid in cash at closing and $60 million was funded through CDC Games’ issuance of a note bearing interest at 5% per annum, due June 28, 2008. This note was paid in full in June 2008. Additionally, CDC Games agreed to pay up to an additional $25 million, subject to adjustment, to China.com in the event it completes a successful listing of its shares on certain recognized stock exchanges before December 29, 2007 and its market capitalization on such exchange or exchanges is greater than $110 million during such time. In connection with the restructuring, a valuation was performed by an independent appraisal firm. The additional consideration payments are also subject to holdback in the event of breaches of representations and indemnified liabilities.

Vis.align, Inc. In December 2006, we acquired Vis.align, Inc., an enterprise solutions and IT services company, via merger. Under the terms of the merger agreement, we paid approximately $6.5 million of cash at closing, subject to various adjustments. In addition, we agreed to pay up to a maximum of $5.7 million of additional consideration based upon 2007 and 2008 revenues. Revenues must exceed $20 million during each annual period for any additional consideration to be payable for that period. Any additional consideration may be paid 60% in the form of cash and 40% in the form of our unregistered Class A common shares. The additional consideration payments are also subject to holdback in the event of breaches of representations and warranties, and various other adjustments. As of June 2008, no additional consideration has been paid with respect to this acquisition.

BBMF Group Inc. In January 2007, we entered into a senior secured loan agreement with BBMF Group Inc. pursuant to which we provided a US$3.0 million loan to BBMF, for working capital purposes and to accelerate the business expansion of the BBMF group of companies. In January 2008 all outstanding principal amounts outstanding together with interest accrued thereon was converted into common shares of BBMF Group Inc. In addition, in December 2007, CDC Games entered into an agreement with an existing shareholder of BBMF Inc. to purchase 346,800 shares of BBMF, Inc. Subsequent to CDC’s investment, BBMF, Inc. distributed all of the shares of BBMF Group, Inc. held by it to its shareholders on a pro rata basis and BBMF, Inc. Currently, CDC Games directly owns approximately 20.8% of BBMF Group, Inc.

Respond Group Ltd. In February 2007, we acquired 100% of the shares of Respond Group Limited, a provider of enterprise class complaints, feedback and customer service solutions. Under the terms of the share purchase agreement, we paid approximately $15 million of cash at closing, subject to various adjustments. In addition, we agreed to pay up to a maximum of $14 million of additional consideration based upon 2007, 2008 and 2009 revenues. Revenues must exceed $12 million during each annual period for any additional consideration to be payable for that period. Any additional consideration will be paid in the form of cash. The additional compensation payments are subject to holdback in the event of breaches of representations and warranties, and various other adjustments. As of June 2008, no additional consideration has been paid with respect to this acquisition.

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Saratoga Systems Inc. In April 2007, we entered into an agreement to acquire through a merger Saratoga Systems Inc., a provider of enterprise CRM and wireless CRM applications. Under the terms of the agreement, we agreed to pay not more than $35 million in cash in connection with the merger, with $30 million paid at closing and $5 million placed into escrow for an 18 month period and subject to holdback in the event of breaches of representations and warranties and various other adjustments.

Ion Global (BVI) Limited. In August 2007, we entered into four separate agreements to sell the principal assets of our Ion Global business for pre-tax consideration of $9.0 million. Under the terms of the agreements, we agreed to sell (i) the assets related to the internet consulting services and website design and development business of Ion Global (California) Inc., (ii) substantially all of the assets of Ion Global Limited, (iii) all of the issued and outstanding shares of Ion Global Korea Ltd. held by Ion Global (BVI) Ltd., and (iv) the “Ion Global” trademark.

Vectra. In May 2007, our subsidiary, Praxa Limited, completed the acquisition of a majority interest in Vectra Corporation, a provider of information security consulting services, managed services and enterprise security solutions. Under the terms of a share purchase agreement, we paid approximately $0.1 million in cash at closing for such majority interest in Vectra.

Guangzhou Optic Communications Co., Ltd. In July 2007, CDC Games completed the acquisition of Guangzhou Optic Communications Co., Ltd, or Optic, through the acquisition of its entire issued share capital. Optic is an online games publisher in China with several online game titles including Shaiya, Mir III and Eve Online. Under the terms of the transaction documents, we paid approximately RMB 100.0 million cash consideration, with RMB 10.0 million being paid for the registered capital of a related wholly-owned foreign enterprise and RMB 30.0 million being paid for the registered capital of Optic. At the time of the transaction, Optic owed a total debt of RMB 193.0 million to a related party in the original shareholders’ group. We repaid RMB 60.0 million of the debt on behalf of Optic as part of the cash consideration of the transaction. The remaining debt amounted to RMB 133.0 million. The shares of Optic are owned by three PRC employees of CDC Games who own 34%, 33% and 33% each.

Catalyst International, Inc. In September 2007, we entered into an agreement to acquire through a merger Catalyst International, Inc., which has two business segments: (i) provision of integrated supply chain execution software that manages the physical movement and storage of goods at or between locations, facilitates information and product flow in an extended supply chain network and provides an analysis of execution and process activities, and (ii) a SAP consulting practice for customers running the SAP R/3 or mySAP.com platforms. Catalyst believes that their solution allows its customers to optimize the performance of their enterprise supply chains. Under the terms of the agreement, we agreed to pay up to $29.5 million, with $25 million in cash paid at closing and $4.5 million placed into escrow for a 24 month period and subject to holdback in the event of breaches of representations and warranties and other adjustments.

Assets of PlanTec Pty Ltd. In July 2007, our subsidiary, Praxa Limited, completed the acquisition of certain assets of PlanTec, a provider of information technology services to a broad range of industries including health, retail, telecommunications, waste management, transportation, state and federal governments in Australia. Under the terms of the purchase agreement, we paid approximately $0.6 million in cash at closing. In addition, we agreed to pay additional consideration payable in 2008 and 2009 based upon earnings before interest and tax performance with an additional incentive payable in the event PlanTec achieves its forecast results for 2008 and 2009. If PlanTec achieves its forecast results, the total additional consideration payable to PlanTec would be approximately $1.2 million.

Snapdragon. In October 2007, our subsidiary, Praxa Limited, completed the acquisition of Snapdragon Consulting Pty. Ltd., an information service provider focused on Microsoft CRM based in Australia. Under the terms of the share purchase agreement, we paid approximately $0.3 million at closing. In addition, we agreed to pay additional consideration payable in 2008 and 2009 based upon consolidated earnings of Snapdragon before interest income and interest expenses and income tax, but after amortization and depreciation. If Snapdragon achieves its forecast results, the total additional consideration payable would be approximately $1.4 million.

Integrated Solutions Limited (“ISL”). In March 2008, we announced that we had completed our acquisition of a 51 percent stake in ISL, a Hong Kong-based vendor of ERP systems designed for small and medium-sized discrete manufacturers in China. Under the terms of a subscription agreement and a stock purchase agreement with ISL, certain of its subsidiaries and other sellers, we paid approximately $0.8 million at closing for our majority interest in ISL.

Inter-Company Promissory Note and Modification Agreement. In April 2008, CDC Games Corporation and China.com Capital Ltd., or CCL, a wholly owned subsidiary of China.com entered into a modification agreement for the purpose of: (i) extending the maturity date of a promissory note in the principal amount of $60.0 million by and between CDC Games and CCL from the initial maturity date of June 28, 2008 to June 28, 2010, and (ii) including us as a guarantor of the promissory note.

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The effectiveness of the modification agreement was conditioned upon China.com obtaining the approval of its minority shareholders. At an extraordinary general meeting of China.com held on May 27, 2008, the minority shareholders, by way of poll, rejected the proposal to ratify the modification agreement. As a result, the modification agreement lapsed automatically and did not become effective.

In June 2008, we determined that the execution of the modification agreement had constituted an event of default as defined in those certain 3.75% Senior Exchangeable Convertible Notes due 2011 issued by us in November 2006 for the aggregate principal amount of $168.0 million, or the Convertible Notes. The Convertible Notes provide that, following an event of default, payment of all or a portion of any amounts due thereunder may be accelerated and become due and payable immediately upon delivery of a written notice of acceleration to us, unless such event of default shall have been cured by us prior to the delivery of such acceleration notice. Accordingly, for the period from April 2, 2008 (the date we entered into the modification agreement) through May 27, 2008 (the date upon which the minority shareholders disapproved of the modification agreement and it lapsed automatically, such lapse having cured the event of default), any or all of the Convertible Notes could have been called by the noteholders and become due and payable immediately. However, we did not receive any written acceleration notice from any of the noteholders during this period as required under the Convertible Notes. Therefore, the event of default that existed from April 2, 2008 through May 27, 2008 under the Convertible Notes has been fully cured, and under the express terms of the Convertible Notes none of the noteholders has any current or continuing right to deliver an acceleration notice to us as a result of those past events.

On June 27, 2008, China.com declared and paid a cash dividend to its shareholders in the aggregate amount of $74.1 million. Of such amount, approximately $57.5 million was paid to us and the remaining $16.6 million was paid to the independent minority shareholders of China.com. On June 27, 2008, we transferred an aggregate of $64.5 million to CDC Games. CDC Games subsequently paid CCL the entire balance of $64.5 million of principal and interest due and payable under the promissory note.

Indemnification Agreements with Directors and Officers

We have entered into indemnification agreements with some of our directors, officers and employees that may require us to indemnify them against liabilities that may arise by reason of their status or service as directors, officers or employees, and to advance their expenses (including legal expenses) incurred as a result of any investigation, suit or other proceeding against them as to which they could be indemnified. Generally, the maximum obligation under such indemnifications is not explicitly stated and, as a result, the overall amount of these obligations cannot be reasonably estimated. If we were to incur a loss in connection with these arrangements, it could affect our business, operating results and financial condition.

D. Exchange Controls

General

There are no exchange control restrictions on payments of dividends on our Class A common shares or on the conduct of our operations in Hong Kong, where our principal executive offices are located, or the Cayman Islands, where CDC is incorporated. In addition, both Hong Kong and the Cayman Islands are not party to any double tax treaties and no exchange control regulations or currency restrictions exist in these countries.

We are a Cayman Islands company and our affairs are governed by, among other things, the Companies Law of the Cayman Islands. The following is a summary of material differences between the Companies Law and general corporate law in the United States insofar as they relate to the material terms of our Class A common shares.

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Differences in Corporate Law

The Companies Law is modeled after similar laws in the United Kingdom but does not follow recent changes in English law. In addition, the Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the State of Delaware.

Mergers and Similar Arrangements. Cayman Islands law does not provide for mergers as that expression is understood under the Delaware General Corporations Law, or DGCL. However, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement in question is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction should not be approved, the court can be expected to approve the arrangement if it determines that:

• the company is not proposing to act illegally or beyond the scope of its authority and the statutory provisions as to majority vote have been complied with;

• the shareholders have been fairly represented at the meeting in question;

• the arrangement is such as a businessman would reasonably approve; and

• the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law or that would amount to a “fraud on the minority.”

When a takeover offer is made and accepted by holders of 90% of the shares within four months, the offeror may, within a two-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection may be made to the Grand Court of the Cayman Islands but is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction are thus approved, any dissenting shareholders would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholders’ Suits. We are not aware of any reported class action or derivative action having been brought in a Cayman Islands court which have not been withdrawn. In principle, we will normally be the proper plaintiff and a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:

• a company is acting or proposing to act illegally or beyond the scope of its authority;

• the act complained of, although not beyond the scope of its authority, could be effected duly if authorized by more than a simple majority vote that has not been obtained; and

• those who control our company are perpetrating a “fraud on the minority.”

Corporate Governance. Cayman Islands laws do not restrict transactions with directors, requiring only that directors exercise a duty of care and owe a fiduciary duty to the companies for which they serve.

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Under our amended and restated memorandum and articles of association, subject to the separate requirement for audit committee approval under the applicable rules of the Nasdaq Global Market or unless disqualified by the chairman of the relevant board meeting, so long as a director discloses the nature of his interest in any contract or arrangement that he is interested in, such a director may vote in respect of any contract or proposed contract or arrangement in which such director is interested and may be counted in the quorum at such meeting.

Inspection of Corporate Records. Shareholders of a Cayman Islands company have no general right under the Companies Law to inspect or obtain copies of a list of shareholders or other corporate records of the company. In comparison, under Delaware law, shareholders have the right to inspect for any proper purpose, and to obtain copies of list(s) of shareholders and other books and records of the corporation and any subsidiaries to the extent the books and records of such subsidiaries are available to the corporation.

Calling of Special Shareholders Meetings. The Companies Law does not provide shareholders with any right to requisition a general meeting and does not have provisions governing the proceedings of shareholders meetings. In comparison, under Delaware law a special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

Bringing Business Before a Meeting. The Companies Law does not provide shareholders with any right to bring business before a meeting or requisition a general meeting. In comparison, under Delaware law a shareholder has the right to put any proposal before the annual meeting of shareholders, provided that it complies with the notice provisions in the governing documents.

Proxy materials

Under Cayman Islands law, we are only obligated to send proxy materials to “members” which is equivalent to the registered shareholders of record. Our proxy materials are delivered to all of our registered shareholders. We offer electronic delivery of proxy materials to our registered shareholders, and we mail proxy materials to each registered owner who has not opted to receive proxy materials electronically. In an effort to maintain cost effectiveness, we have, and will continue to, mail the proxy materials to those beneficial shareholders who hold greater than 10,000 of our shares.

Restrictions on Nonresident or Foreign Shareholders

Under Cayman Islands law there are no limitations on the rights of nonresident or foreign shareholders to hold or vote our Class A common shares.

E. Taxation

The following is a summary of the material Cayman Islands and United States Federal income tax consequences of an investment in the Class A common shares based upon laws and relevant interpretations thereof in effect as of the date of this Annual Report, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in the Class A common shares, such as the tax consequences under state, local and other tax laws. You are urged to consult a tax advisor regarding the tax treatment of our common shares.

Cayman Islands Taxation

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of, the Cayman Islands. The Cayman Islands are not party to any double taxation treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.

United States Federal Income Taxation

The following summary sets forth certain material United States Federal income tax consequences

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of the purchase, ownership and disposition of the Class A common shares as a capital asset. This summary is based upon the Internal Revenue Code of 1986, as amended, or the Code, legislative history, existing and proposed U.S. Treasury regulations promulgated thereunder, published rulings by the U.S. Internal Revenue Service, or the IRS, and court decisions, all in effect as of the date of this Annual Report, all of which authorities are subject to change or differing interpretations, which changes or differing interpretations could apply retroactively. This summary does not purport to discuss all aspects of U.S. Federal income tax which may be relevant to particular investors, such as financial institutions, insurance companies, dealers or traders in securities or currencies, regulated investment companies, tax-exempt entities, U.S. holders, as defined below, liable for alternative minimum tax, persons holding Class A common shares as part of a position in a straddle or as part of a hedging transaction or conversion transaction for U.S. tax purposes, persons that enter into a constructive sale transaction with respect to Class A common shares, persons holding 10% or more of our voting shares or U.S. holders whose functional currency as defined in Section 985 of the Code is not the U.S. dollar. In addition, this summary does not discuss any foreign, state or local tax considerations. This summary only applies to original purchasers of Class A common shares who purchase Class A common shares as capital assets, or property held for investment within the meaning of Section 1221 of the Code.

The term U.S. holder means a beneficial owner of a note or Class A common shares who or which is:

• a citizen or resident of the United States;

• a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision of the United States;

• an estate the income of which is subject to U.S. Federal income tax regardless of source;

• a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust, or the trust elects under U.S. Treasury Regulations to be treated as a U.S. person; or

• any other person who is subject to U.S. Federal income taxation on a net income basis with respect to a Class A common share.

Partners of a partnership holding Class A common shares should consult their tax advisor.

Tax Consequences of U.S. Holders

Dividends

Subject to the discussion in Passive Foreign Investment Company Status below, in the event that a U.S. holder receives a distribution, other than pro rata distributions of Class A common shares or rights with respect to Class A common shares, on the Class A common shares, that U.S. holder will be required to include the distribution in gross income as a taxable dividend to the extent such distribution is paid from our current or accumulated earnings and profits as determined for United States Federal income tax purposes. Distributions in excess of our current and accumulated earnings and profits will first be treated, for United States Federal income tax purposes, as a nontaxable return on capital to the extent of the U.S. holder’s basis in the Class A common shares and thereafter as gain from the sale or exchange of a capital asset. Dividends paid by us will not be eligible for the corporate dividends received deduction. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution. Since inception, we have not declared or paid any cash dividends.

Dividends will constitute foreign source income for foreign tax credit limitation purposes. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to Class A common shares will be passive income or, in the case of U.S. holders, financial services income. Special rules apply to individuals whose foreign source income during the taxable year consists entirely of qualified passive income and whose creditable foreign taxes paid or accrued during the taxable year do not exceed $300 or $600 in the case of a joint return. Further, in particular circumstances, a U.S. holder that:

• has held Class A common shares for less than a specified minimum period during which it is not protected from risk of loss;

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• is obligated to make payments related to the dividends; or

• holds Class A common shares in arrangements in which the U.S. holder’s expected economic profit, after non-U.S. taxes, is insubstantial,

will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on Class A common shares.

Distributions to a U.S. holder of Class A common shares or rights to subscribe for Class A common shares that are received as part of a pro rata distribution to all our shareholders should not be subject to United States Federal income tax. The basis of the new Class A common shares or rights so received will be determined by allocating the U.S. holder’s basis in the old Class A common shares between the old Class A common shares and the new Class A common shares or rights received, based on their relative fair market values on the date of distribution. However, the basis of the rights will be zero if (i) the fair market value of the rights is less than 15% of the fair market value of the old Class A common shares at the time of distribution or (ii) the rights are not exercised and expire.

Dispositions of Shares

Subject to the discussion in Passive Foreign Investment Company Status below, gain or loss realized by a U.S. holder on the sale or other disposition of the Class A common shares will be subject to United States Federal income tax as capital gain or loss in an amount equal to the difference between that U.S. holder’s basis in the Class A common shares and the amount realized on the disposition. Such capital gain or loss will be long-term capital gain or loss if the U.S. holder has held the Class A common shares for more than one year at the time of the sale or exchange. Generally, gain or loss realized by a U.S. holder will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes.

Passive Foreign Investment Company Status

In General. We do not believe that we should be treated as a PFIC for U.S. federal income tax purposes for our taxable year ended December 31, 2007, based upon our analysis of: (1) our assets held at the end of each quarter of our taxable year ending December 31, 2007, and (2) our income for our taxable year ended December 31, 2007. However, the PFIC determination is inherently factual and there is limited guidance regarding the application of the PFIC rules. There can be no assurance that the IRS will not successfully contend, or that a court would not otherwise conclude, that we are a PFIC. Accordingly, prospective investors are strongly urged to consult with their tax advisor as to the effects of the PFIC rules.

Further, the PFIC determination is made annually, and therefore may be subject to change in future years. Thus, we can provide no assurance that we will not be classified as a PFIC in 2008 and beyond. However, we will take steps to reduce the possibility of being a PFIC for 2008 and beyond. The determination of whether we would become a PFIC in a future tax year would be principally based upon:

• the composition of our assets, including goodwill, the amount of which will depend, in part, on our total net assets and the market value of our Treasury portfolio, which is subject to change; and

• the amount and nature of our income over the course of the year.

We have limited control over these variables. To the extent we do have control over these variables, we may take steps to reduce the possibility of being a PFIC.

In general, we will be a PFIC with respect to a U.S. holder for any taxable year during the U.S. holding period in which:

• at least 75% of our gross income for such taxable year is passive income; or

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• at least 50% of our gross assets, measured by value on a quarterly average basis, produce or are held for the production of passive income.

For this purpose, passive income generally includes dividends, interest, rents, royalties, other than certain rents and royalties derived in the active conduct of a trade or business, annuities, gains from assets that produce passive income, net income from notional principal contracts and certain payments with respect to securities loans. In addition, if we own, directly or indirectly, at least 25% by value of the stock of another foreign corporation, we will be treated as owning a proportionate share of the assets of the other corporation and as receiving directly a proportionate share of the other corporation’s income.

Notwithstanding the general PFIC income and asset tests stated above, if we are a PFIC for any year during a U.S. holder’s holding period and the U.S. holder does not make a valid mark-to-market or qualified electing fund (“QEF”) election with respect to such year, we will continue to be treated as a PFIC with respect to such a U.S. holder in subsequent years even if we do not qualify as a PFIC in such years under the income or asset tests (the “once a PFIC, always a PFIC” rule). However, it may be possible for any such U.S. holder to remove the PFIC “taint” on the U.S. holder’s Class A common shares by making one or more “purging” elections provided for in the Internal Revenue Code and the regulations thereunder.

If we are a PFIC in any year, you will be required to make an annual return on Internal Revenue Service (“IRS”) Form 8621 regarding distributions received with respect to the Class A common shares and any gain realized on the disposition of the Class A common shares, as well as income inclusions in connection with a mark-to-market election or QEF election (if applicable) with respect to such shares.

If we are a PFIC in any year, upon the death of any U.S. holder of Class A common shares, such individual’s heirs or estate would not be entitled to a “step-up” in the basis of their Class A common shares that might otherwise be available under U.S. federal income tax laws.

Certain subsidiaries of CDC Corporation may qualify as PFICs. Under certain circumstances, a U.S. holder of Class A common shares may be treated as owning stock in such lower-tier PFICs, in which case the U.S. holder would need to separately take into account its indirect investment in such entity under the PFIC rules, including the filing requirements noted above. See “Indirect Interests in PFICs” below for a discussion of the application of PFIC rules in such circumstances.

Excess Distribution Regime. If we are a PFIC for any taxable year in a U.S. holder’s holding period and that U.S. holder does not have a valid mark-to-market or QEF election in place for such year (see “Mark-to-Market Election” and “Qualified Electing Fund Election” sections below), that U.S. holder is subject to special rules applicable to “excess distributions” for that taxable year (the “excess distribution regime”). In addition, that U.S. holder will be subject to excess distribution rules for all subsequent years in the U.S. holder’s holding period, regardless of whether the company continues to qualify as a PFIC (under the “once a PFIC, always a PFIC” rule), unless the U.S. holder makes a QEF election (in connection with a “purging” election noted above), or a mark-to-market election, with respect to the U.S. holder’s Class A common shares. In general, the excess distribution rules apply to:

• any “excess distribution” by us to the U.S. holder, which means any distributions, possibly including any return of capital distributions, received by the U.S. holder on the Class A common shares in a taxable year, to the extent such distribution is greater than 125% of the average annual distributions received by the U.S. holder in the three preceding taxable years, or the U.S. holder’s holding period for the Class A common shares, if shorter; and

• any gain realized on the sale or other disposition, including a pledge, of Class A common shares.

In general, under these special tax rules:

• the excess distribution or gain is allocated ratably over the U.S. holder’s holding period for the Class A common shares;

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• the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC is treated as ordinary income;

• the amount allocated to each of the other years (i.e., years in which we were a PFIC) would be taxed as ordinary income at the highest tax rate in effect for that year; and

• the interest charge applicable to underpayments of tax would be imposed with respect to the resulting tax attributable to each prior year in which we were a PFIC.

Mark-to-Market Election. As an alternative to the excess distribution regime, a U.S. holder may elect to mark-to-market our Class A common shares that constitute “marketable stock” under the regulations. If the election is made, the U.S. holder would be required to include as ordinary income the amount of any increase in the market value of the Class A common shares since the close of the preceding taxable year, or the beginning of the U.S. holder’s holding period, if such holding period began during the taxable year. Likewise, the U.S. holder would be allowed an ordinary deduction for the amount of any decrease in the market value of the Class A common shares since the close of the preceding taxable year, subject to certain limitations. In general, the U.S. holder can deduct only the lesser of: (1) the amount by which the stock’s adjusted basis exceeds its fair market value on the last day of the U.S. holder’s taxable year, or (2) the excess of the mark-to-market gain included in prior taxable years over the amount allowed as a deduction in prior taxable years (the “unreversed inclusions”). The U.S. holder’s basis in our Class A common shares is increased by the amount of any ordinary income, and reduced by the amount of any deduction, arising under the mark-to-market election. In the case of a sale or other disposition of Class A common shares as to which a mark-to-market election is in effect, any gain realized on the sale or other disposition is treated as ordinary income. Any loss realized on the sale or other disposition is treated as an ordinary deduction, up to the amount of the unreversed inclusions attributable to such stock. To the extent the loss exceeds the unreversed inclusions, it will be subject to the rules generally applicable to losses provided elsewhere in the Internal Revenue Code and the regulations thereunder. We expect that the Class A common shares to be marketable within the meaning of the Treasury Regulations. See “Indirect Interests in PFICs” below for information regarding the availability of mark-to-market elections with respect to indirect interests in PFICs.

Qualified Electing Fund Election. As a second alternative to the excess distribution regime, a U.S. holder can make a QEF election to include currently in income that U.S. holder’s pro rata share of a PFIC’s earnings and net capital gains each year, regardless of whether or not dividend distributions are actually distributed. This means a U.S. holder could have a tax liability for the earnings or gain without a corresponding receipt of cash (however, an election is available to defer income recognition in certain circumstances). In general, the U.S. holder’s basis in the Class A common shares is increased to reflect the amount of the taxed but undistributed income, and distributions of previously taxed income are not taxed but result in a corresponding reduction of the U.S. holder’s basis in the Class A common shares. Losses do not flow up to a U.S. holder of Class A common shares for which a QEF election has been made.

Each U.S. holder who desires QEF treatment must separately make a QEF election. In general, the first U.S. person in a chain of ownership may make the QEF election. For example, a U.S. partnership makes the QEF election on behalf of its U.S. partners. To avoid the excess distribution rules, the election must be made beginning with the first year in the U.S. holder’s holding period in which the company qualifies as a PFIC (see the discussion of the “once a PFIC, always a PFIC” rule above). To make a QEF election you will need to have an annual information statement from the PFIC setting forth the earnings and capital gains for the year. We will make our 2006 PFIC annual information statement and other PFIC-related information available upon request. Any such information provided upon request does not constitute a part of this Annual Report.

In general, a U.S. holder must make a QEF election on or before the due date for filing its income tax return, including extensions (but not on an amended return), for the year to which the QEF election will apply. However, U.S. holders are permitted to make retroactive elections in certain circumstances. Investors should consult their tax advisors as to the circumstances under which a QEF election can be made and the consequences of making a QEF election. See “Indirect Interests in PFICs” below for information regarding the availability of QEF elections with respect to indirect interests in PFICs.

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Indirect Interests in PFICs. In certain circumstances, a U.S. holder of Class A common stock may be subject to the PFIC rules with respect to subsidiaries of CDC Corporation, or other foreign corporations in which CDC Corporation directly or indirectly invests, that separately qualify as PFICs. In this regard, the PFIC rules generally treat a shareholder of a first-tier foreign corporation as if it owned stock of lower-tier corporations directly or indirectly owned by such first-tier foreign corporation if certain ownership tests are met. If the first-tier foreign corporation does not qualify as a PFIC, a shareholder of such corporation is treated as owning stock of lower-tier subsidiaries of such corporation only if such shareholder owns at least 50% of the value of the first-tier corporation’s stock. However, if the first-tier foreign corporation qualifies as a PFIC, a shareholder of such corporation is treated as owning stock of any subsidiary directly owned by such first-tier foreign corporation in proportion to the value of such shareholder’s interest in such first-tier foreign corporation. The ownership attribution rules are applied successively through tiers of ownership, including through pass-through entities such as partnerships. Thus, for example, a shareholder of the first-tier foreign corporation could be treated as owning stock in a third-tier foreign corporation, depending upon the respective ownership percentages in the chain of ownership.

The rules applicable to such indirect investments in foreign entities are complex. In general, the excess distribution rules may treat an indirect shareholder of PFIC stock as (1) recognizing income with respect to distributions on such PFIC stock to the actual owner of such stock, and (2) as recognizing gain with respect to the disposition of such PFIC stock by the actual owner of such stock, or the disposition of the interest in the actual owner (or any other intermediate entity) through which the indirect shareholder is treated as owning stock in the PFIC.

In addition, mark to market elections generally are not available with respect to interests in lower-tier PFICs that are owned indirectly through one or more foreign corporations. However, QEF elections generally are permitted for interests in lower tier PFICs. U.S. holders that are treated as owning lower-tier PFICs are required to make a separate QEF election for each such PFIC if they want to treat it as a QEF. As discussed above, making a QEF election requires that the PFIC supply certain information to the shareholder. There can be no assurance that any such lower-tier PFIC would provide U.S. holders the necessary information to make the QEF election. U.S. holders are urged to consult their tax advisers regarding the consequences of the indirect acquisition, ownership and disposition of interests in PFICs.

Although we generally will be treated as a PFIC as to any U.S. holder if we are a PFIC for any year during a U.S. holder’s holding period, if we cease to satisfy the requirements for PFIC classification, you may avoid such classification for years after such cessation if (1) you have made a QEF election in the first taxable year in which you own the Class A common shares, or (2) you elect to recognize gain based on the realized appreciation in the Class A common shares through the close of the tax year in which we cease to be a PFIC.

We have made our 2005, 2006 and 2007 PFIC annual information statements and other PFIC-related information available under a link entitled “Tax Information” under the “Investor Relations” section on our corporate website which you may access at . Information contained on our website does not constitute a part of this Annual Report.

Transfer Reporting Requirements

Under recently promulgated regulations, a U.S. holder, including a tax exempt entity, that purchases Class A common shares for cash will be required to file an IRS Form 926 or similar form with the IRS, if (1) the U.S. holder owned, directly or by attribution, immediately after the transfer at least 10% by vote or value of us, or (2) the purchase, when aggregated with all purchases made by that U.S. holder, or any related person thereto, within the preceding 12 month period, exceeds $0.1 million. If a U.S. holder fails to file any such required form, the U.S. holder could be required to pay a penalty equal to 10% of the gross amount paid for the Class A common shares, subject to a maximum penalty of $0.1 million, except in cases involving intentional disregard. You should consult your tax advisors with respect to this or any other reporting requirement which may apply with respect to their acquisition of the Class A common shares.

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Backup Withholding and Information Reporting

The relevant paying agents for the shares must comply with information reporting requirements in connection with dividend payments or other taxable distributions made within the U.S. on the Class A common shares to a non-corporate U.S. person. In addition, “backup withholding” at the rate of 31% generally will apply to those payments unless the beneficial owner provides an accurate taxpayer identification number on a properly completed IRS Form W-9, certifies its non-U.S. status under penalties of perjury on a properly completely IRS Form W-8BEN, or otherwise certifies that the beneficial owner is not subject to backup withholding.

Payment of the proceeds from sale of the Class A common shares to or through a U.S. office of a broker is subject to both U.S. backup withholding and information reporting requirements, unless the beneficial owner provides an accurate taxpayer identification number or establishes an exemption from backup withholding, as described in the preceding paragraph. In general, neither U.S. backup withholding nor information reporting will apply to a payment of sale proceeds made outside the U.S. through an office outside the U.S. of a non-U.S. broker. Special rules may require information reporting in the case of payments of sale proceeds made outside the U.S. through a U.S. broker.

Amounts withheld under the backup withholding rules may be credited against a U.S. holder’s U.S. federal income tax liability, and a holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS.

F. Dividends and Paying Agents

None.

G. Statement by Experts

Not applicable.

H. Documents on Display

Any statement in this Annual Report about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the registration statement, the contract or document is deemed to modify the description contained in this Annual Report. You should review the exhibits for a complete description of the contract or document.

We are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended. As such, we are required to file reports and other information with the Securities and Exchange Commission. Specifically, we are required to file an Annual Report on Form 20-F no later than six months after the end of our fiscal year, which is December 31. Copies of the this Annual Report on Form 20-F and its accompanying exhibits, as well as reports and other information, when filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may access the Securities and Exchange Commission’s Web site at http://www.sec.gov. Our Class A common shares are listed for trading on NASDAQ under the symbol “CHINA”. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing of proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

We furnish our shareholders with annual reports, which include a review of operations and annual audited consolidated financial statements prepared in conformity with US GAAP.

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I. Subsidiary Information

For a listing of our material subsidiaries, see Item 4.C – “Information on the Company – Organizational Structure.”

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

You should read the following discussion of our Quantitative and Qualitative Disclosures About Market Risk together with our financial condition and results of operations as set forth in Item 5 of this Annual Report, Operating and Financial Review and Prospects and with our consolidated financial statements and the related notes included elsewhere in this Annual Report.

Market risk is the risk related to adverse changes in market prices of financial instruments. We are exposed to various types of market risks, including changes in interest rates and foreign currency exchange rates, in the normal course of business. In addition, we are exposed to investment risks due to our substantial investment holdings of available-for-sale debt securities. Our market risk exposure categories at December 31, 2007 are the same as the categories at December 31, 2006. Our quantitative exposures within those categories at December 31, 2007 have decreased from the exposures at December 31, 2006. Certain risks (namely, interest rate and credit risk) have also decreased due to lower balances of securities in 2007. The amount of the carrying value on our “available for sale” investments is the same as the fair value because we have marked our investments to market at the end of the period (through Accumulated Other Comprehensive Income when gains/losses are deemed to be temporary and through the Income Statement when losses are deemed to be other than temporary). Investments that are held to maturity are stated at their original cost and gains/losses are not recognized in the Income Statement until they are realized.

Interest Rate Risk. Our exposure to interest rate risk relates primarily to our short-term and long-term available-for-sale debt securities. We are most vulnerable to changes in short-term U.S. interest rates. In general, when interest rates change, the price of a fixed-coupon bond changes in the opposite direction. Thus, when interest rates increase, a bond’s value drops. If we were to sell securities under such adverse interest rate conditions, we could lose some of our principal. Historically, the fluctuation in value of our debt portfolio has not exceeded 5% although there can be no guarantee that our portfolio will not undergo greater fluctuations in the future.

As of December 31, 2006 and 2007, we had invested $153.4 million and $153.4 million, respectively, in fixed and variable rate debt securities which are denominated in US dollars. At December 31, 2006, our debt securities balances included $30.5 million of restricted debt securities set aside as collateral pursuant to $18.7 million in drawdowns under our credit and repurchase facilities. At December 31, 2007, our debt securities balances included $30.9 million of restricted debt securities set aside as collateral pursuant to $30.0 million in drawdowns under our credit and repurchase facilities.

The following table sets forth information as of December 31, 2007 about our debt security investments that are sensitive to changes in interest rates:

	Expected Maturity Dates
	2008			2009	2010	2011	Total
	(in thousands of U.S. dollars, except percentages)
Debt securities:
Unsecured	$	74,595		—	—	—	$	74,595
Fixed Rate		3.03%-4.125	%	—	—	—		—
Secured		—		—	—	—		—
Fixed rate		—		—	—	—		—
Total	$	74,595		—	—	—	$	74,595

Foreign Exchange Risk. Most of our monetary assets and liabilities are denominated in Australian dollars, Canadian dollars, Euros, Hong Kong dollars, RMB, and U.S. dollars. We do not use derivatives to hedge against foreign currency fluctuations. As exchange rates in these currencies vary, our revenues and operating results, when translated, may be adversely impacted and vary from expectations. The effect of

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foreign exchange rate fluctuations on our financial results for the year ended December 31, 2007 was not material. All of our debt securities are US-dollar denominated and therefore not subject to foreign currency risk. However, as long as we continue to rely on US-dollar denominated interest income for a significant portion of our cash flows and use this to support our operations, any material depreciation of the U.S. dollar against currencies of the countries where we have operations might have a negative effect on our cash flows.

The PRC Renminbi, or RMB, is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China. However, the unification of the exchange rates does not imply the convertibility of RMB into United States dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Credit Default and Investment Risk. When we purchase debt securities as part of our treasury management program, we are subject to risks that can reduce the value of our investments. The primary factors that can cause significant fluctuations or a decline in the fair market value of our investments include:

• the issuer’s actual or perceived credit quality;

• increased writedowns for goodwill or intangible assets;

• declining revenues or earnings that fall short of expectations; and

• inability to comply with financial instrument covenants.

These and other indicators could reduce the value of our investments due to:

• reduced liquidity;

• ratings downgrades, or a negative outlook by credit agencies;

• a decline in the price of an issuer’s equity or debt securities; or

• an issuer being placed on CreditWatch.

While all of our current investments in debt securities are believed to be investment grade, there can be no assurance that the issuers of those securities will not default on their obligations or their ratings will remain investment grade. A debt security may remain an investment grade instrument, but events such as those listed above could cause the value of that debt security to decline. In such an instance, we would suffer either an actual loss if we sell the debt security, a mark to market loss in the statement of operations if the decline in fair market value is deemed to be other-than-temporary, or a loss in accumulated other comprehensive loss if the decline is not other-than-temporary. For the year ended December 31, 2007, we recorded approximately $2.2 million in accumulated other comprehensive loss in the shareholder’s equity account in our consolidated balance sheet as a result of declines in value.

We are exposed to the risk of default by the issuers of our debt securities. We can quantify the risk by dividing our debt securities portfolio into the four primary risk categories based on the Standard and Poor’s credit ratings of the debt issuers as of December 31, 2007. Even if an issuer did not default, but the market perceives an increased likelihood of a default, we may suffer a principal loss if we sell a debt security of such issuer under unfavorable market circumstances. The table below sets forth the value of our debt securities as of December 31, 2006 and 2007 as categorized based on ratings assigned to our debt securities by each of Standard & Poor’s and Moody’s Investors Service.

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Rating (Standard & Poor’s) Rating (Moody’s Investors Service)	AAA Aaa	AA Aa2	A A2	BBB Baa2	Total
	(in millions of U.S. dollars)
Amounts of debt securities outstanding as of December 31, 2006
Moody’s Investors Service	114.4	—	—	39.0	153.4
Standard & Poor’s	114.4	—	—	39.0	153.4
Rating (Standard & Poor’s) Rating (Moody’s Investors Service)	AAA Aaa	AA Aa2	A A2	BBB Baa2	Total
	(in millions of U.S. dollars)
Amounts of debt securities outstanding as of December 31, 2007
Moody’s Investors Service	74.6	—	—	—	74.6
Standard & Poor’s	74.6	—	—	—	74.6

Reinvestment Risk/Call Risk. If interest rates decrease, it is possible that issuers of debt securities with the right to call such instruments might exercise their right to call, or exercise the right to buy back their debt at predetermined dates prior to their maturity date at a predetermined price. If this were to happen our portfolio yield could potentially decrease as we might have to reinvest proceeds at lower interest rates. In addition, the cash flows associated with callable bonds are somewhat unpredictable, since the bond life could be much shorter than it’s stated maturity.

Illiquidity and Market Value Volatility Risk (CDO Specific). The preference shares of a CDO investment should be viewed as a longer term investment, not a trading vehicle. There can be no assurance of a liquid secondary market for our CDO investments. Our investment in preference shares could be particularly exposed to both liquidity and market value volatility risk if a CDO is required to liquidate assets (such as in connection with an optional redemption, auction call redemption, mandatory redemption or a liquidation of the portfolio following an event of default) and is forced to accept sales prices less than those paid for the assets or less than what the collateral manager may consider to be their fair value. The collateral consists primarily of securities not registered under the Securities Act of 1933 and should be considered illiquid. As a result, should a default or event of default occur under the CDO Indenture which would permit or require liquidation of the collateral, there is no assurance that a ready market will exist for the collateral and the proceeds of such sale may not be sufficient to repay the preference shares in full.

Prepayment Risk (CDO Specific). The amount and frequency of payments of amounts due to the holders of preference shares in a CDO investment will depend on, among other things, the level of LIBOR, treasury yields and spreads, returns with respect to eligible investments, the extent to which portfolio collateral becomes defaulted portfolio collateral and scheduled payments of principal or retirement prior to the stated maturity of the underlying collateral through mandatory or optional redemption, sale, maturity or other liquidation or disposition. In addition, the redemption (upon a mandatory redemption) or other payment of principal of the underlying collateral, which will depend in part on the foregoing factors, will result in reduced leverage and may affect the yield to holders of the preference shares.

Default and Yield Risk (CDO Specific). Preference shares in a CDO investment typically bear the risk of loss or other shortfalls prior to any classes of securities which are senior to them, and as a consequence are extremely sensitive to the delinquency and loss performance of the underlying assets. Any such losses and other shortfalls with respect to the collateral will be borne first by the holders of the preference shares and then by the holders of the most junior class of notes then outstanding. Further, the rate at which principal payments will be received on the securities will be dependent on the rate of principal payments (including prepayments) on the underlying assets and may fluctuate significantly over time. Such fluctuations will affect the yield to the issuer, as holder of such securities. The entities housing the CDO investments are VIEs, however, as our ownership in each does not constitute a primary beneficiary interest, we have not consolidated either entity.

Risks Related to the Collateralized Line of Credits. We have a collateralized credit facility in place with Standard Chartered Bank. As of December 31, 2007, we have a balance outstanding on this line of credit of $30.0 million. This credit facility creates the following three primary risks for us:

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• The risk associated with increased leverage, which includes our ability to pay back the borrowed funds in a timely manner and without which we may need to liquidate a portion of our debt security portfolio at a time where we may need to incur losses on the sale of sufficient debt instruments to repay the borrowing.

• By setting aside debt securities as collateralized credit facility under our repurchase facilities, we incur the risk that if the credit facilities themselves were to undergo an insolvency event, we could lose all or part of our debt securities set aside at such time with the bank. Currently, Standard Chartered Bank Aa3 by Moody’s Investors Service, and Standard Chartered Bank’s credit rating is A by Standard & Poor’s and A2 by Moody’s Investors Service.

• The interest that we pay under our repurchase facilities is dependent upon LIBOR and therefore, our future interest expenses with respect to any amounts drawn down under the repurchase facilities may exceed our expectations due to changes in interest rates. For example, if LIBOR rises rapidly over the next few years, interest expenses will rise, as well.

Negative Interest Rate Differential. When purchasing debt securities using proceeds from our repurchase facilities, we expect the coupon paid on these debt securities will be higher than the interest we pay on our repurchase facilities. However, we will be exposed to the risk of a negative interest rate differential, or negative carry situation, if interest rates rise. For example, if on the day of a drawdown current LIBOR is 1.2%, and our cost of borrowing is LIBOR plus 0.2%, our total cost of borrowing will be 1.4%. Since the interest rate on our repurchase facilities are reset either every three, six or twelve months as we so choose prior to each drawdown, assuming we use the proceeds from our repurchase facilities to purchase a fixed-rate coupon bond yielding 2.3% and a 1.0% increase in LIBOR occurs, our total borrowing cost on the facility would increase to 2.4%.

Equity Price Risk

As of December 31, 2007, we had $3.9 million invested in shares of publicly listed companies. The table below presents the carrying amounts and fair values of our investment in shares of publicly listed companies, which are held for non-trading purposes. The amount of the carrying value is the same as the fair value, because we have marked to market the carrying amount of our investments as at the end of the period.

	December 31, 2006				December 31, 2007
	Carrying amount		Fair value		Carrying amount		Fair value
Available-for-sale equity securities (in millions)	$	3.5	$	3.5	$	3.9	$	3.9

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

In November 2006, we issued $168 million aggregate principal amount of 3.75% senior exchangeable convertible notes due 2011 to a total of 12 institutional accredited investors in a private placement exempt from registration under the Securities Act.

In connection with our issuance of the notes, we are subject to various negative covenants until the earlier of the date that less than 25% of the notes remain outstanding or in the event that a public offering by CDC Software or CDC Games has occurred, the three-year anniversary of the issue date. We agreed that we will not incur any debt other than permitted debt unless after giving effect to such debt:

• the leverage ratio is less than 6.0 to 1 as reflected in our consolidated financial statements for the immediately preceding four fiscal quarters;

• our aggregate debt does not exceed 50% of our total capitalization on a consolidated basis as reflected in our consolidated financial statements for the immediately preceding four fiscal quarters; or

• our consolidated cash flow exceeds two times the sum of consolidated interest expense and capital expenditures during the immediately preceding four fiscal quarters.

We also may not create, assume or incur any mortgage, pledge lien, or other security interest except for certain permitted liens, which include existing liens, intracompany liens, liens over assets of CDC Software to secure a credit facility to CDC Software in an amount not exceeding $30 million, liens securing assets acquired or constructed after the closing to secure the cost of such acquisition or construction, provided such liens do not exceed 80% of the fair market value of the asset, or any lien resulting from renewing extending or replacing a lien.

Pursuant to the negative covenants we are also not permitted to pay dividends to our common shareholders (other than dividends of our common shares) or repurchase any shares of our capital stock or any of our subsidiaries, provided, however, that we may purchase voting equity in any non-wholly owned subsidiary or make purchases pursuant to a stock repurchase program.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management, under the supervision and with the participation of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Act), as of the end of period covered by this report. Management concluded that, as of December 31, 2007, the Company’s disclosure controls and procedures were not effective primarily because of the identification of material weaknesses in our internal control over financial reporting, which we view as an integral part of our disclosure controls and procedures. In addition, our disclosure controls and procedures not relating to internal control over financial reporting were not sufficiently documented and were not designed to require all accounting and financial employees, and other corporate employees with specific knowledge of, or responsibility for, other disclosures to complete quarterly certifications (management representations).

Based on a number of factors, including our internal review that identified revisions to our previously issued financial statements, efforts to remediate the material weaknesses in internal control over

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financial reporting described below, and the performance of additional procedures by management designed to ensure the reliability of our financial reporting, we believe that the consolidated financial statements in this report fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods, presented, in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

We have reviewed and implemented additional disclosure controls and procedures. We intend to implement an enhanced quarterly certification (management representation) process that is expected to include not just the signoff by executive management and the business unit executives, but also by managers of the corporate finance departments, senior leadership at the corporate office and other business and finance employees who are significantly involved in the financial reporting process. These new processes is expected to help ensure Company employees at various levels make full and complete representations concerning, and assume accountability for, the accuracy and integrity of our financial statements and other public disclosures.

Attached as exhibits to this Annual Report on Form 20-F are certifications of our CEO and CFO, which are required by Rule 13a-14 of the Act. This Disclosure Controls and Procedures section includes information concerning management’s evaluation of disclosure controls and procedures referred to in those certifications and, as such, should be read in conjunction with the certifications of the CEO and CFO.

Management’s Report on Internal Control over Financial Reporting

CDC Corporation’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officer and effected by CDC Corporation’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. This includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007, utilizing the criteria described in the “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The objective of this assessment was to determine whether the Company’s internal control over financial reporting was effective as of December 31, 2007. That assessment identified the following control deficiencies as of December 31, 2007, that constituted material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual financial statements will not be prevented or detected on a timely basis.

Financial Statement Close and Reporting

Management has concluded that a material weakness exists in documentation and procedures relating to the financial statement close process that result in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected.

Specific control deficiencies identified relating to the financial statement close process include:

• Lack of policy, procedures, and controls including review and approval procedures to ensure that financial statements for external purposes are prepared in accordance with generally accepted accounting principles including periodic in-depth review of the proper application of generally accepted accounting principles to the specific facts and circumstances of each of our businesses;

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• Lack of adequate controls and procedures to mitigate the risks associated with decentralized accounting operations and systems;

• Lack of adequate policies and procedures with respect to journal entries and account reconciliations, including insufficient supporting detail and inconsistent evidence of management review; and

• Lack of sufficient personnel with appropriate skills and experience to properly prepare journal entries and account reconciliations and to do so in a timely manner.

These control deficiencies related to the financial statement close process affect all of our significant accounts. As a result of these control deficiencies, management recorded material adjustments to the financial statements during the year ended December 31, 2007. These control deficiencies could result in a material misstatement to the annual consolidated financial statements that would not be prevented or detected.

Income Taxes

Management has also concluded that a material weakness exists in accounting for income taxes that results in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected.

Specific control deficiencies identified relating to the accounting for income tax process include:

• Lack of procedures and controls related to the preparation and review of the tax provision designed to ensure that our deferred tax provision and deferred tax asset and liability balances are accurate and determined in accordance with generally accepted accounting principles; and

• Lack of sufficient personnel with appropriate skills and experience to properly account for income taxes in accordance with generally accepted accounting principles.

These control deficiencies could result in a misstatement of the tax provision and deferred tax asset and liability balances that would result in a material misstatement to the annual consolidated financial statements that would not be prevented or detected.

Treasury Management

Management has concluded that a material weakness exists in the management of our investments and other treasury related activities that result in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected. This limits our ability to effectively manage risk in the treasury/capital transactions component of our strategy and could result in unexpected losses and adjustments to the carrying value of investments and derivatives employed by us.

Specific control deficiencies identified relating to the treasury management process include a lack of sufficient personnel with appropriate skills and experience to adequately assess and monitor the accounting, economics, performance and risks related to complex treasury transactions.

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The above material weakness resulted in the temporary event of default on our $168 million Convertible Notes as disclosed in Footnote 11 of Notes to Consolidated Financial Statements.

Because of the material weaknesses described above, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2007, based on the criteria in “Internal Control—Integrated Framework” issued by the COSO. The attestation report of our independent registered public accounting firm is included in Part III, Item 18. “Financial Statements” of this report under the captions entitled “Report of Independent Registered Public Accounting Firm”.

Change in Internal Control over Financial Reporting

Management has taken the following steps during 2007 to begin the remediation process:

• Hired a Chief Accounting Officer and additional accounting staff with the technical accounting skill to comply with generally accepted accounting principles.

• Increased accounting resources in November 2007 to assist the accounting group in beginning the remediation process on the material control weaknesses noted above and to improve the timeliness and quality of account reconciliations in preparation for the year end reporting process.

• Redesigned the account reconciliation process has been redesigned to provide better support for account balances and to ensure all significant accounts are reconciled as a part of the year end close process.

• Increased detailed reviews of account balances with additional accounting staff to compensate for the control weaknesses identified.

• Improved our consolidation process to help ensure complete and accurate accounting for all entities.

Remediation activities are underway but have not been fully implemented.

Remediation Steps to Address Material Weaknesses

Our executive, regional and financial management are committed to achieving and maintaining a strong control environment. In addition, management remains committed to the process of developing and implementing improved corporate governance and compliance initiatives. Our management team has been actively working on remediation efforts, as discussed above, to address the material weaknesses, as well as other identified areas of risk. In 2008, we have taken the following additional steps to remediate our material weaknesses:

• Hired a Vice President of Tax.

• Assigned acting Treasurer duties to lead finance person located in Hong Kong.

Management has applied the above remediation steps and incorporated substantive review procedures during the year end financial statement close process to compensate for the control weaknesses relating to reporting the financial results as of December 31, 2007.

Prospectively, the company intends to undertake further efforts to remediate the control weaknesses identified, including:

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• We are in the process of developing, and/or clarifying existing accounting policies related to estimates involving significant management judgments, as well as other financial reporting areas. The new policies are intended to focus on ensuring appropriate review and approval, define minimum documentation requirements, establish objective guidelines to minimize the degree of judgment in the determination of certain accruals, enforce consistent reporting practices, and enable effective account reconciliation, trend analyses, and exception reporting capabilities.

• We plan to hire additional tax personnel and a full time treasurer to help address the material weakness in these areas.

• We plan to make further additions to our accounting staff to allow for an improved process of month end account reconciliations that includes a more timely reconciliation processes with enhanced review processes of significant accounts and accounting entries including income taxes.

• We plan to complete the consolidation of our entities into geographical centers to leverage our technical accounting resources and to reduce the complexity in our month end consolidation process by eliminating duplicative accounting processes and to leverage the use of a common general ledger and financial reporting system.

• We are planning to have our regional controllers take the following steps to improve internal control over financial reporting:

• Conducting reviews of accounting processes to incorporate technology improvements to strengthen the design and operation of controls;

• Formalizing the process, analytics, and documentation around the monthly analysis of actual results against budgets and forecasts conducted within the accounting and finance departments;

• Improving quality control reviews within the accounting function to ensure account analyses and reconciliations are completed accurately, timely, and with proper management review; and

• Formalizing and expanding the documentation of our procedures for review and oversight of financial reporting.

We intend to continue to monitor our internal controls and our progress on the remediation steps identified above and, if further improvements or enhancements are identified, take steps to implement such improvement or enhancements.

We believe the measures described above, once designed and operating effectively, will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. We are committed to continuing to improve our internal control processes and will diligently and vigorously review our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional remediation measures or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

Inherent Limitations over Internal Controls

Our system of controls is designed to provide reasonable, not absolute, assurance regarding the reliability and integrity of accounting and financial reporting. Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the following:

• Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes.

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• Controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override.

• The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

• Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures.

• The design of a control system must reflect the fact that resources are constrained, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

ITEM 15T. CONTROLS AND PROCEDURES

Not applicable.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Thomas M. Britt, III is an audit committee financial expert. Mr. Britt is an independent audit committee member, as such term is defined in the listing standards applicable to us. See Item 6.A – “Directors, Senior Management and Employees – Directors and Senior Management”.

ITEM 16B. CODE OF ETHICS

We have adopted a Code of Ethics and Guidelines for Employee Conduct, or Code of Conduct, that applies to our principal executive officer, principal financial officer and principal accounting officer as well as all our directors, other officers and employees. We undertake to provide to any person, without charge, upon request, a copy of such Code of Conduct. Such a request may be sent to the address on the cover of this Form 20-F to the attention of Investor Relations.

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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Deloitte & Touche LLP served as our independent registered public accounting firm for the fiscal year ended December 31, 2006 and 2007 and Ernst & Young served as our independent public accountant for the fiscal year ended December 31, 2005, for which audited financial statements appear in this Annual Report on Form 20-F. Our auditor is ratified annually by our shareholders at the Annual General Meeting.

(a) Audit Fees. Aggregate audit fees billed were $2.0 million in fiscal 2006 and $2.7 million in fiscal 2007. Audit fees consist of fees billed for the annual audit of our consolidated financial statements and the statutory financial statements of our subsidiaries.

(b) Audit-Related Fees. Aggregate audit-related fees billed were $4.6 in fiscal 2006 and $2.9 million in fiscal 2007. Audit-related fees consist of fees billed for attestation services that are not required by statue or regulation, fees related to audits and registration statements of subsidiaries in connection with the subsidiary securities filings and consultation concerning financial accounting or that are traditionally performed by the external auditor.

(c) Tax Fees. Aggregate tax fees billed were $15,000 in fiscal 2006 and $47,116 in fiscal 2007. Tax fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations, such as assistance in connection with tax audits and appeals, transfer pricing, and requests for rulings or technical advice from taxing authorities; tax planning services; and expatriate tax compliance, consultation and planning services.

(d) All Other Fees. The aggregate of all other fees was nil in fiscal 2006 and $70,000 in fiscal 2007.

(1) Audit Committee Pre-approval Policies and Procedures

The audit committee of our board of directors is responsible, among other matters, for the oversight of the external auditor subject to the requirements of applicable securities and corporate laws. The audit committee has adopted a policy regarding pre-approval of audit and permissible non-audit services provided by our independent public accounting firm, or the Policy. Under the Policy, proposed services are approved either (i) by general approval, which provides pre-approval by the audit committee without consideration of specific case-by-case services; or (ii) specific pre-approval, which provides the specific pre-approval of the audit committee. The audit committee may delegate either type of pre-approval authority to one or more of its members. The appendices to the Policy set out the audit, audit-related, tax and other services that have received the general pre-approval of the audit committee; these services are subject to annual review by the audit committee. All other audit, audit-related, tax and other services must receive a specific pre-approval from the audit committee.

(2) Percentage of Services Approved by the Audit Committee

During fiscal 2007, all of the fees for services provided to us by Deloitte & Touche LLP described in each of paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(c) of rule 2-01 of Regulation S-X. Fees were approved either by general or specific approval, as described in paragraph (e)(1) above.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

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ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Issuer Purchases of Equity Securities

Period	(a) Total Number of Shares Purchased (1)(2)	(b) Average Price Paid Per Share		(c) Total number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1, 2007 to January 31, 2007	—		—	—	$	32,106,250
February 1, 2007 to February 28, 2007	—		—	—	$	32,106,250
March 1, 2007 to March 31, 2007	40,000	$	8.96	40,000	$	31,748,009
April 1, 2007 to April 30, 2007	738,000	$	9.12	738,000	$	25,016,704
May 1, 2007 to May 31, 2007	575,000	$	8.70	575,000	$	20,016,586
June 1, 2007 to June 30, 2007	51,000	$	8.32	51,000	$	19,592,019
July 1, 2007 to July 31, 2007	1,500	$	8.47	1,500	$	19,579,319
August 1, 2007 to August 31, 2007	141,000	$	8.21	141,000	$	18,420,669
September 1, 2007 to September 30, 2007	996,600	$	7.36	671,050	$	13,483,873
October 1, 2007 to October 31, 2007	—		—	—	$	13,483,873
November 1, 2007 to November 30, 2007	366,000	$	6.31	—	$	13,483,873
December 1, 2007 to December 31, 2007	60,000	$	3.96	—	$	13,483,873
TOTAL	2,969,200		—	2,217,650	$	13,483,873

(1) Unless otherwise specified, all information contained in this Annual Report, including share and per share data, reflects the two-for-one share splits approved by our shareholders as of each of December 6, 1999 and April 28, 2000, respectively, and effective as of the close of trading on the Nasdaq Global Market (“NASDAQ”) on December 13, 1999 and May 8, 2000, respectively.

(2) Such purchases of our Class A common shares by us during our fiscal year ended December 31, 2007 were made pursuant to Rule 10b5-1 plans or programs approved by our board of directors. On November 10, 2005, our board of directors approved a share repurchase program for up to $20.0 million of our shares and we announced such program on that date. In May 2006, our board of directors approved, and we announced on May 2, 2006, the extension of our existing repurchase program until the earlier of April 30, 2007 or the completion of all repurchases thereunder. On July 26, 2006, we announced that our existing share repurchase program was nearing completion and that our board of directors had approved a repurchase program for an addition $20.0 million of our shares, which expired in July 2007. However, on May 25, 2007 we announced that our board of directors approved an increase of $20.0 million to our share repurchase program and we entered into a new plan which was set to expire in May 2008. In May 2008, we entered into a new plan which is set to expire on May 2009. We have also entered into 10b5-1 trading plans to facilitate the repurchase of our common shares during trading blackout periods through pre-arrangements with a broker based upon specified guidelines and parameters set forth in the trading plan.

193

PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statement pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

We have appended our Consolidated Financial Statements as of and for the year ended December 31, 2007 on pages F-1 to F-86 of this Annual Report.

ITEM 19. EXHIBITS

No.	Description
1.1	Amended and Restated Articles of Association and Memorandum of Association of the Company, together with amendments thereto. ^
2(a).1	1999 Employee Stock Option Plan, as amended. *
2(a).2	2004 Employee Share Purchase Plan. ***
2(a).3	Ross Systems, Inc. 1998 Incentive Stock Plan (assumed by CDC Corporation). **
2(a).4	CDC Corporation 2005 Stock Incentive Plan, as amended. ****
2(a).5	CDC Software Corporation 2007 Stock Incentive Plan. yy
2(a).6	CDC Games Corporation 2007 Stock Incentive Plan. yy
2(b).1	Note Purchase Agreement, dated as of November 10, 2006, between CDC Corporation and each of the investors listed therein relating to the issuance and sale of $168 million aggregate principal amount of 3.75% Senior Exchangeable Convertible Notes due 2011. yy
2(b).2	Form of 3.75% Senior Exchangeable Convertible Note due 2011 issued by CDC Corporation. yy
2(b).3	Registration Rights Agreement, dated as of November 10, 2006, among CDC Corporation, CDC Games Corporation and CDC Software Corporation. yy
2(b).4	Promissory Note by and between CDC Games Corporation and China.com Limited, dated as of December 29, 2006. yy
4(a).1	Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 27, 2005. ****
4(a).2	Supplementary Agreement relating to Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 29, 2005. ****
4(a).3	Stock Purchase Agreement, dated as of June 1, 2006, among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana. yy
4(a).4	Addendum No. 1 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of March 13, 2007. yy

194

4(a).5	Addendum No. 2 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of August 30, 2007. ^
4(a).6	Share Purchase Agreement dated as of July 25, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc. yy
4(a).7	Amendment to Share Purchase Agreement dated as of October 5, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc. yy
4(a).8	Amendment to Share Purchase Agreement dated as of November 9, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc. yy
4(a).9	Stock Purchase Agreement, dated as of October 6, 2006, among Ross Systems Inc., Advantage Growth Fund, John Caines, Siobhan Sutcliffe, Mark Sutcliffe, Rob Archer, Robin Wight, Steve Massey, Alistair Norman, Richard Tester, Roy Thomas, John Clement, Richard Craig, Phil Hignett, Colin Downes, Dan Saunders, Robin West, James Wood, James Cutter, Andy Neilson, Sarah Weston and Di Judd related to the acquisition of MVI Holdings Limited. yy
4(a).10	Guaranty Agreement dated as of October 6, 2006 by CDC Corporation. yy
4(a).11	Stock Purchase Agreement by and between CDC Games Corporation and China.com Corp., Limited, dated as of November 11, 2006. yy
4(a).12	Merger Agreement, dated as of December 1, 2006, among China.com Corporation, CDC Mergerco Corporation and Vis.align, Inc. and the Stockholders’ Representative appointed thereby related to the acquisition of Vis.align, Inc. yy
4(a).13	Senior Secured Loan Agreement by CDC Mobile Media Corporation to BBMF Group, Inc. dated as of January 12, 2007. yy
4(a).14	Share Sale and Purchase Agreement dated as of December 17, 2007 by and between CDC Games Corporation and Nikko Antfactory K.K. ^
4(a).15	Share Purchase Agreement dated as of February 16, 2007 among Ross Systems, Inc., 3i plc, The Parkmeade Group plc, James Heavey, Cathal Naughton and Michael Breare related to the acquisition of Respond Group Limited. yy
4(a).16	Merger Agreement dated as of April 16, 2007 by and among CDC Software Inc., CDC Merger Sub, Inc., Saratoga Systems Inc., Mark R. Elconin and Alvin W. Smith. yy
4(a).17	Master Framework Agreement dated as of June 29, 2007 by and among Bonarich Enterprises, Ltd., CDC Corporation and CDC Games Holdings Limited. ^
4(a).18	Asset Purchase Agreement dated as of August 1, 2007 by and among Chinadotcom Strategic, Inc., CDC Software Corporation and Carat Korea Co., Ltd. ^
4(a).19	Share Purchase Agreement dated as of August 1, 2007 by and among Ion Global (BVI) Ltd., CDC Software Corporation and Group Carat (Nederland) BV. ^
4(a).20	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc. ^

195

4(a).21	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc. ^
4(a).22	Merger Agreement dated as of September 4, 2007 by and among CDC Software Corporation, CI Acquisition Corporation, Catalyst International, Inc., Comvest Investment Partners II LLC, CLYS Holdings, LLC, Terrance L. Mealey, Peter Knight, William G. Nelson, John Gorman, Nigel Davies and S. Michael Godshall. ^
4(a).23	Letter Agreement dates as of November 13, 2007 by and among Symphony Technology II-A, L.P. Cayman First Tier and Chinadotcom Capital Limited. ^
4(c).1	Termination and Release Agreement between CDC Corporation and Asia Pacific Online Limited effective July 15, 2005. ****
4(c).2	Option Transfer Agreement between CDC Corporation, Asia Pacific Online Limited and Peter Yip effective July 15, 2005. ****
4(c).3	Amendment No. 1 to Option Transfer Agreement dated as of October 2, 2007 by and between CDC Corporation, Asia Pacific Online Limited and Peter Yip. ^
4(c).4	Termination and Release Agreement by and between CD Corporation and Dr. Raymond Kuo-Fung Ch’ien effective August 30, 2005. ****
4(c).5	Executive Services (CEO) Agreement between CDC Corporation Limited and Asia Pacific Online Limited effective as of April 12, 2006. y
6.	Details of how EPS information is calculated can be found in Note 18 to our Consolidated Financial Statements.
8.	List of principal subsidiaries of the Company. ^
12.1	Certification of Chief Executive Officer required by Rule 13a-14(a). ^
12.2	Certification of Chief Financial Officer required by Rule 13a-14(a). ^
13(a).1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^
13(a).2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^
15(a).1	Consent of Deloitte & Touche LLP. ^
15(a).2	Consent of Deloitte Touche Tohmatsu. ^
15(a).3	Consent of Ernst & Young. ^
15(a).4	Consent of Deloitte Touche Tohmatsu CPA Ltd. relating to Equity Pacific Limited. ^
15(a).5	Audited financial statements of Equity Pacific Limited for the five months ended December 31, 2004 and the full year ended December 31, 2005, and the unaudited financial statements of Equity Pacific Limited for the three months ended March 31, 2006. ^

* Incorporated by reference to Post-Effective Amendment to our registration statement on Form S-8 (Reg. No. 333-11288) filed with the Commission on December 7, 2000.

196

** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-118619) filed with the Commission on August 27, 2004.

*** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-123666) filed with the Commission on March 30, 2005.

**** Incorporated by reference to our annual report on Form 20-F filed with the Commission on June 21, 2006.

y Incorporated by reference to our current report on Form 6-K filed with the Commission on August 10, 2006.

yy Incorporated by reference to our annual report on Form 20-F filed with the Commission on July 2, 2007.

^ Filed herewith.

197

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf on this 30^th day of June, 2008.

CDC CORPORATION
(Registrant)
By:	/s/ Peter Yip
	Peter Yip
	Chief Executive Officer

198

INDEX TO EXHIBITS

No.	Description
1.1	Amended and Restated Articles of Association and Memorandum of Association of the Company, together with amendments thereto. ^
2(a).1	1999 Employee Stock Option Plan, as amended. *
2(a).2	2004 Employee Share Purchase Plan. ***
2(a).3	Ross Systems, Inc. 1998 Incentive Stock Plan (assumed by CDC Corporation). **
2(a).4	CDC Corporation 2005 Stock Incentive Plan, as amended. ****
2(a).5	CDC Software Corporation 2007 Stock Incentive Plan. yy
2(a).6	CDC Games Corporation 2007 Stock Incentive Plan. yy
2(b).1	Note Purchase Agreement, dated as of November 10, 2006, between CDC Corporation and each of the investors listed therein relating to the issuance and sale of $168 million aggregate principal amount of 3.75% Senior Exchangeable Convertible Notes due 2011. yy
2(b).2	Form of 3.75% Senior Exchangeable Convertible Note due 2011 issued by CDC Corporation. yy
2(b).3	Registration Rights Agreement, dated as of November 10, 2006, among CDC Corporation, CDC Games Corporation and CDC Software Corporation. yy
2(b).4	Promissory Note by and between CDC Games Corporation and China.com Limited, dated as of December 29, 2006. yy
4(a).1	Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 27, 2005. ****
4(a).2	Supplementary Agreement relating to Share Purchase Agreement among CDC Mobile Media Corporation, Unitedcrest Investments Limited, Shenzhen KK Technology Limited, CC Mobile Media Corporation, Zheng Hui Lan, Ye Yong Ning, Liang Yan, Ma Zhi Qiang, Zhang Zhi Gang and Palmweb Inc dated June 29, 2005. ****
4(a).3	Stock Purchase Agreement, dated as of June 1, 2006, among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana. yy
4(a).4	Addendum No. 1 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of March 13, 2007. yy
4(a).5	Addendum No. 2 to Stock Purchase Agreement by and among CDC Business Solutions Corporation, DB Professionals, Inc., Shankar Viswanathan and Prabha Ananthanarayana, dated as of August 30, 2007. ^
4(a).6	Share Purchase Agreement dated as of July 25, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc. yy

199

4(a).7	Amendment to Share Purchase Agreement dated as of October 5, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc. yy
4(a).8	Amendment to Share Purchase Agreement dated as of November 9, 2006 by and among CDC Mobile Media Corporation, TimeHeart Science Technology Limited, Beijing TimeHeart Information Technology Limited, Fresh Earn Holdings Limited, Ms. Fang Xiu Qin, Mr. Sun Kun Shan, Mr. Wang Bin, Mr. Sui Hai Gang, Ms. Fang Xiu Qin, Mr. Sun Kun Shan and Palmweb, Inc. yy
4(a).9	Stock Purchase Agreement, dated as of October 6, 2006, among Ross Systems Inc., Advantage Growth Fund, John Caines, Siobhan Sutcliffe, Mark Sutcliffe, Rob Archer, Robin Wight, Steve Massey, Alistair Norman, Richard Tester, Roy Thomas, John Clement, Richard Craig, Phil Hignett, Colin Downes, Dan Saunders, Robin West, James Wood, James Cutter, Andy Neilson, Sarah Weston and Di Judd related to the acquisition of MVI Holdings Limited. yy
4(a).10	Guaranty Agreement dated as of October 6, 2006 by CDC Corporation. yy
4(a).11	Stock Purchase Agreement by and between CDC Games Corporation and China.com Corp., Limited, dated as of November 11, 2006. yy
4(a).12	Merger Agreement, dated as of December 1, 2006, among China.com Corporation, CDC Mergerco Corporation and Vis.align, Inc. and the Stockholders’ Representative appointed thereby related to the acquisition of Vis.align, Inc. yy
4(a).13	Senior Secured Loan Agreement by CDC Mobile Media Corporation to BBMF Group, Inc. dated as of January 12, 2007. yy
4(a).14	Share Sale and Purchase Agreement dated as of December 17, 2007 by and between CDC Games Corporation and Nikko Antfactory K.K. ^
4(a).15	Share Purchase Agreement dated as of February 16, 2007 among Ross Systems, Inc., 3i plc, The Parkmeade Group plc, James Heavey, Cathal Naughton and Michael Breare related to the acquisition of Respond Group Limited. yy
4(a).16	Merger Agreement dated as of April 16, 2007 by and among CDC Software Inc., CDC Merger Sub, Inc., Saratoga Systems Inc., Mark R. Elconin and Alvin W. Smith. yy
4(a).17	Master Framework Agreement dated as of June 29, 2007 by and among Bonarich Enterprises, Ltd., CDC Corporation and CDC Games Holdings Limited. ^
4(a).18	Asset Purchase Agreement dated as of August 1, 2007 by and among Chinadotcom Strategic, Inc., CDC Software Corporation and Carat Korea Co., Ltd. ^
4(a).19	Share Purchase Agreement dated as of August 1, 2007 by and among Ion Global (BVI) Ltd., CDC Software Corporation and Group Carat (Nederland) BV. ^
4(a).20	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc. ^
4(a).21	Asset Purchase Agreement dated as of August 1, 2007 by and among Ion Global (California), Inc., CDC Software Corporation and Molecular, Inc. ^

200

4(a).22	Merger Agreement dated as of September 4, 2007 by and among CDC Software Corporation, CI Acquisition Corporation, Catalyst International, Inc., Comvest Investment Partners II LLC, CLYS Holdings, LLC, Terrance L. Mealey, Peter Knight, William G. Nelson, John Gorman, Nigel Davies and S. Michael Godshall. ^
4(a).23	Letter Agreement dates as of November 13, 2007 by and among Symphony Technology II-A, L.P. Cayman First Tier and Chinadotcom Capital Limited. ^
4(c).1	Termination and Release Agreement between CDC Corporation and Asia Pacific Online Limited effective July 15, 2005. ****
4(c).2	Option Transfer Agreement between CDC Corporation, Asia Pacific Online Limited and Peter Yip effective July 15, 2005. ****
4(c).3	Amendment No. 1 to Option Transfer Agreement dated as of October 2, 2007 by and between CDC Corporation, Asia Pacific Online Limited and Peter Yip. ^
4(c).4	Termination and Release Agreement by and between CD Corporation and Dr. Raymond Kuo-Fung Ch’ien effective August 30, 2005. ****
4(c).5	Executive Services (CEO) Agreement between CDC Corporation Limited and Asia Pacific Online Limited effective as of April 12, 2006. y
6.	Details of how EPS information is calculated can be found in Note 18 to our Consolidated Financial Statements.
8.	List of principal subsidiaries of the Company. ^
12.1	Certification of Chief Executive Officer required by Rule 13a-14(a). ^
12.2	Certification of Chief Financial Officer required by Rule 13a-14(a). ^
13(a).1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^
13(a).2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^
15(a).1	Consent of Deloitte & Touche LLP. ^
15(a).2	Consent of Deloitte Touche Tohmatsu. ^
15(a).3	Consent of Ernst & Young. ^
15(a).4	Consent of Deloitte Touche Tohmatsu CPA Ltd. relating to Equity Pacific Limited. ^
15(a).5	Audited financial statements of Equity Pacific Limited for the five months ended December 31, 2004 and the full year ended December 31, 2005, and the unaudited financial statements of Equity Pacific Limited for the three months ended March 31, 2006. ^

201

* Incorporated by reference to Post-Effective Amendment to our registration statement on Form S-8 (Reg. No. 333-11288) filed with the Commission on December 7, 2000.

** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-118619) filed with the Commission on August 27, 2004.

*** Incorporated by reference to our registration statement on Form S-8 (Reg. No. 333-123666) filed with the Commission on March 30, 2005.

**** Incorporated by reference to our annual report on Form 20-F filed with the Commission on June 21, 2006.

y Incorporated by reference to our current report on Form 6-K filed with the Commission on August 10, 2006.

yy Incorporated by reference to our annual report on Form 20-F filed with the Commission on July 2, 2007.

^ Filed herewith.

202

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Pages
Report of Independent Registered Public Accounting Firm	F-2 – F-6
Consolidated Balance Sheets as of December 31, 2006 and 2007	F-7
Consolidated Statements of Operations for the years ended December 31, 2005, 2006 and 2007	F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007	F-9
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2006 and 2007	F-10 – F-12
Notes to Consolidated Financial Statements	F-13 – F-86

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

CDC Corporation

We have audited CDC Corporation and subsidiaries' (the "Company's") internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on that risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely

F-2

basis. The following material weaknesses have been identified and included in management’s assessment: (1) lack of adequate policies, procedures, documentation and personnel in certain aspects of the financial statement close and reporting Process, (2) inadequate personnel and procedures in the preparation and review of the income tax provision and related deferred tax balances and (3) insufficient personnel with appropriate skills and experience to adequately assess and monitor the accounting, economics, performance and risks related to complex treasury transactions. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2007, of the Company and this report does not affect our report on such consolidated financial statements.

In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2007, of the Company and our report dated June 30, 2008 expressed an unqualified opinion on those financial statements and included explanatory paragraphs regarding the adoption of Statement of Financial Accounting Standards No. 123R, “Share Based Payment” and the adoption of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

June 30, 2008

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

CDC Corporation

We have audited the accompanying consolidated balance sheets of CDC Corporation and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CDC Corporation and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 2 and 19, the Company adopted Statement of Financial Accounting Standards No. 123 (R), “Share Based Payment,” effective January 1, 2006.

As discussed in Notes 2 and 15, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 30, 2008 expressed an adverse opinion on the Company's internal control over financial reporting because of three material weaknesses.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

June 30, 2008

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

CDC Corporation

We have audited the accompanying consolidated statements of operations, cash flows and shareholders’ equity of CDC Corporation and subsidiaries for the year ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the consolidated financial statements of China.com Inc., an 81% owned subsidiary, and its subsidiaries for the period ended December 31, 2005 which statements reflect total revenue constituting 17.7% of the related 2005 consolidated total. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for China.com Inc. and its subsidiaries, is based solely on the report of the other auditors.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations of CDC Corporation and subsidiaries and their cash flows for the year ended December 31, 2005, in conformity with United States generally accepted accounting principles.

As more fully described in Note 2, the Company restated its consolidated financial statements for the year ended December 31, 2005.

/s/ Ernst & Young

Hong Kong

June 20, 2006, except for the restatement described in Note 2, as to which the date is July 2, 2007.

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of China.com Inc.:

We have audited the consolidated statements of operations, cash flows and stockholders’ equity and comprehensive income of China.com and subsidiaries (the “Company”) for the year ended December 31, 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows for the year ended December 31, 2005 of the Company in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE TOUCHE TOHMATSU

Certified Public Accountants

Hong Kong

June 16, 2006

F-6

CDC Corporation

CONSOLIDATED BALANCE SHEETS

(in thousands U.S. dollars, except share and per share data)

	December 31,
	2006			2007
ASSETS
Current assets:
Cash and cash equivalents	$	223,548		$	142,218
Restricted cash		1,996			9,066
Accounts receivable (net of allowance of $5,373 and $8,688 in 2006 and 2007, respectively)		64,437			87,612
Note receivable		25,000			—
Available-for-sale securities		14,401			47,631
Restricted available-for-sale securities		—			30,867
Restricted held-to-maturity securities		30,504			—
Deferred tax assets		5,061			3,423
Prepayments and other current assets		18,525			22,930
Total current assets		383,472			343,747
Property and equipment, net		9,540			19,659
Goodwill		205,050			215,783
Intangible assets, net		104,069			132,605
Available-for-sale securities		112,045			28,526
Investments under cost method		217			12,315
Deferred tax assets		34,689			44,576
Other assets		8,351			6,390
Total assets	$	857,433		$	803,601
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,903		$	28,571
Purchase consideration payables		5,626			4,192
Income tax payable		4,202			2,145
Accrued liabilities		36,787			50,549
Restructuring accruals, current portion		2,411			2,807
Short-term debt		18,991			33,892
Deferred revenue		46,033			67,989
Deferred tax liabilities		1,641			942
Total current liabilities		142,594			191,087
Deferred tax liabilities		16,041			28,496
Convertible notes		167,645			174,905
Restructuring accruals, net of current portion		3,599			482
Other liabilities		419			12,396
Total liabilities		330,298			407,366
Minority interests		72,512			37,411
Contingencies and commitments
Shareholders’ equity:
Preferred shares, $0.001 par value; 5,000,000 shares authorized, no shares issued		—			—
Class A common shares, $0.00025 par value; 800,000,000 shares authorized; 114,092,737 and 117,416,475 shares issued as of December 31, 2006 and 2007, respectively; 106,401,376 and 106,930,800 shares outstanding as of December 31, 2006 and 2007, respectively		28			28
Additional paid-in capital		692,143			713,096
Common stock held in treasury; 7,691,361 and 10,485,675 shares at December 31, 2006 and 2007, respectively		(32,102	)		(54,646	)
Accumulated deficit		(217,290	)		(324,828	)
Accumulated other comprehensive income		11,844			25,174
Total shareholders’ equity		454,623			358,824
Total liabilities and shareholders’ equity	$	857,433		$	803,601

The accompanying notes form an integral part of these consolidated financial statements.

F-7

CDC Corporation

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands U.S. dollars, except share and per share data)

	Years ended December 31,
	2005			2006			2007
Revenue:
CDC Software
Licenses	$	38,541		$	46,260		$	62,044
Maintenance		59,144			63,252			86,585
Consulting Services		61,119			64,825			86,862
Hardware		—			—			2,769
Global Services
Licenses		—			—			3,235
Consulting services		42,686			66,484			103,723
Hardware		—			—			3,819
CDC Games		—			26,780			33,596
China.com		8,995			10,064			11,409
Mobile Services and Applications		34,389			31,863			8,342
Total revenue		244,874			309,528			402,384
Cost of revenue:
CDC Software
Licenses		(12,278	)		(13,417	)		(18,531	)
Maintenance		(9,335	)		(9,161	)		(11,623	)
Consulting Services		(46,457	)		(51,211	)		(66,994	)
Hardware		—			—			(1,678	)
Global Services
Licenses		—			—			(3,143	)
Consulting Services		(27,168	)		(45,943	)		(77,389	)
Hardware		—			—			(3,603	)
CDC Games		—			(10,631	)		(20,108	)
China.com		(3,449	)		(4,095	)		(4,283	)
Mobile Services and Applications		(15,262	)		(13,004	)		(4,757	)
Total cost of revenue		(113,949	)		(147,462	)		(212,109	)
Gross profit		130,925			162,066			190,275
Operating expenses:
Sales and marketing expenses		(47,611	)		(59,313	)		(76,513	)
Research and development expenses		(22,788	)		(19,981	)		(23,836	)
General and administrative expenses		(56,608	)		(65,948	)		(95,733	)
Amortization expenses		(6,084	)		(8,315	)		(12,657	)
Restructuring and other charges		(1,667	)		(4,874	)		(9,056	)
Goodwill impairment		—			—			(71,096	)
Total operating expenses		(134,758	)		(158,431	)		(288,891	)
Operating income (loss)		(3,833	)		3,635			(98,616	)
Other income (expenses):
Interest income		8,156			10,680			13,386
Interest expense		(1,257	)		(3,038	)		(9,086	)
Gain on disposal of available-for-sale securities		525			344			514
Gain on disposal of subsidiaries and cost investments		483			3,087			561
Impairment of available-for-sale securities		—			—			(13,497	)
Gain (loss) on change in fair value of derivatives		—			531			(5,996	)
Share of earnings (losses) in equity investees		(1,172	)		975			—
Total other income (expense)		6,735			12,579			(14,118	)
Income (loss) before income taxes		2,902			16,214			(112,734	)
Income tax expense		(4,957	)		(3,062	)		(10,850	)
Income (loss) before minority interests		(2,055	)		13,152			(123,584	)
Minority interests in (income) loss of consolidated subsidiaries		(1,409	)		(2,312	)		18,551
Income (loss) from continuing operations		(3,464	)		10,840			(105,033	)
Discontinued operations:
Loss from operations of discontinued subsidiaries		(47	)		—			—
Loss on disposal/dissolution of discontinued subsidiaries, net		(3	)		—			—
Net income (loss)	$	(3,514	)	$	10,840		$	(105,033	)
Basic earnings (loss) per share from continuing operations	$	(0.03	)	$	0.10		$	(0.98	)
Diluted earnings (loss) per share from continuing operations	$	(0.03	)	$	0.10		$	(0.98	)
Basic and diluted earnings (loss) per share	$	(0.03	)	$	0.10		$	(0.98	)
Diluted earnings (loss) per share	$	(0.03	)	$	0.10		$	(0.98	)

The accompanying notes form an integral part of these consolidated financial statements.

F-8

CDC Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands U.S. dollars, except share and per share data)

	Years Ended, December 31,
	2005			2006			2007
OPERATING ACTIVITIES:
Net (loss) income	$	(3,514	)	$	10,840		$	(105,033	)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Minority interests in income of consolidated subsidiaries		1,409			2,312			(18,551	)
Loss (gain) on disposal of property and equipment		(1,179	)		137			233
Gain on disposal of available-for-sale securities		(525	)		(344	)		(514	)
Gain on disposal of subsidiaries and cost investments		(483	)		(3,087	)		(561	)
Bad debt expense		1,450			2,890			5,695
Amortization of intangible assets in cost of revenue		7,154			9,687			17,041
Amortization of intangible assets in operating expenses		6,084			8,315			12,657
Depreciation		3,866			4,385			6,233
Stock compensation expenses		1,421			7,700			8,451
Share of (income) losses in equity investees		1,172			(975	)		—
Impairment of available-for-sale securities		—			—			13,497
Unrealized (gain) loss on investment securities		—			—			—
Deferred provision for income taxes		3,698			(1,082	)		5,500
Goodwill impairment		—			—			71,096
Restructuring and other charges		1,667			4,874			9,954
Interest (income) expense		(390	)		273			1,264
Fair market value adjustment of derivative instruments		—			(531	)		5,996
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(6,474	)		(9,292	)		(14,188	)
Deposits, prepayments and other receivables		1,210			(6,353	)		(1,825	)
Other assets		(1,500	)		306			(6,408	)
Accounts payable		(1,375	)		2,732			(5,313	)
Accrued liabilities		(5,345	)		1,571			(703	)
Deferred revenue		3,822			4,347			4,661
Income tax payable		(561	)		1,567			(1,801	)
Other liabilities		341			(943	)		1,903
Net cash provided by operating activities		11,948			39,329			9,284
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired		(15,537	)		(33,428	)		(89,466	)
Purchases of property and equipment		(3,730	)		(4,403	)		(12,515	)
Purchases of cost investments		(3,500	)		—			(16,023	)
Purchases of available-for-sale securities		—			(43,067	)		(7,037	)
Capitalized software		(7,802	)		(13,067	)		(9,948	)
Purchases of games licenses		—			(420	)		(10,079	)
Proceeds from disposal of available-for-sale securities and cost investments		31,728			43,473			44,859
Proceeds from disposal of property and equipment		4,315			—			1,273
Proceeds from disposal of subsidiaries		1,140			—			7,017
Decrease (increase) in restricted cash		2,000			(110	)		(7,070	)
Net cash provided by (used in) investing activities		8,614			(51,022	)		(98,989	)
FINANCING ACTIVITIES:
Issuance of share capital, net of offering costs		1,052			8,512			12,178
Proceeds from bank loans		5,075			—			33,792
Repayment of bank loans		(42,480	)		(45,987	)		(18,700	)
Proceeds from sale of convertible notes		—			168,000			—
Debt issuance costs		—			(3,460	)		—
Proceeds of purchase note agreements		—			38,700			—
Purchases of treasury stock		—			(28,070	)		(22,544	)
Net cash provided by (used in) financing activities		(36,353	)		137,695			4,726
Effect of exchange differences on cash		(696	)		3,827			3,649
Net increase (decrease) in cash and cash equivalents		(16,487	)		129,829			(81,330	)
Cash and cash equivalents at beginning of year		110,206			93,719			223,548
Cash and cash equivalents at end of year	$	93,719		$	223,548		$	142,218
Interest paid	$	955		$	592		$	6,504
Income taxes paid	$	695		$	1,988		$	5,268
Non-cash activities:
Class A common shares and stock options issued as consideration for the acquisition of subsidiaries	$	54		$	741		$	921

The accompanying notes form an integral part of these consolidated financial statements.

F-9

CDC Corporation

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands U.S. dollars, except share and per share data)

	Number of shares (’000)	Common shares		Additional paid-in capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total shareholders’ equity			Comprehensive income (loss)
Balance at December 31, 2004	110,893	$	28	$	673,476	$	(4,067	)	$	(224,616	)	$	5,155		$	449,976		$	—
Exercise of employee stock options	282		—		583		—			—			—			583			—
Employee stock purchase plan	178		—		469		—			—			—			469			—
Issuance of shares for acquisitions	12		—		54		—			—			—			54			—
Reissuance of treasury stock for non-cash transactions	—		—		—		35			—			—			35			—
Stock compensation expenses on options granted	—		—		1,421		—			—			—			1,421			—
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			(2,534	)		(2,534	)		(2,534	)
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			217			217			217
Foreign currency translation adjustments	—		—		—		—			—			(355	)		(355	)		(355	)
Less: reclassification adjustment for losses, net of gains and income taxes included in net loss	—		—		—		—			—			146			146			146
Net loss for the year	—		—		—		—			(3,514	)		—			(3,514	)		(3,514	)
Comprehensive loss	—		—		—		—			—			—					$	(6,040	)
Balance at December 31, 2005	111,365	$	28	$	676,003	$	(4,032	)	$	(228,130	)	$	2,629		$	446,498

The accompanying notes form an integral part of these consolidated financial statements.

F-10

CDC Corporation

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands U.S. dollars, except share and per share data)

	Number of shares (’000)	Common shares		Additional paid-in capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total shareholders’ equity			Comprehensive income (loss)
Balance at December 31, 2005	111,365	$	28	$	676,003	$	(4,032	)	$	(228,130	)	$	2,629		$	446,498		$	—
Exercise of employee stock options	2,401		—		7,963		—			—			—			7,963			—
Employee stock purchase plan	161		—		549		—			—			—			549			—
Issuance of shares for acquisitions	166		—		741		—			—			—			741			—
Purchase of treasury stock	—		—		—		(28,070	)		—			—			(28,070	)		—
Stock compensation expenses on options granted	—		—		6,887		—			—			—			6,887			—
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			681			681			681
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			11			11			11
Foreign currency translation adjustments	—		—		—		—			—			8,528			8,528			8,528
Less: reclassification adjustment for losses, net of gains and income taxes included in net loss	—		—		—		—			—			(5	)		(5	)		(5	)
Net income for the year	—		—		—		—			10,840			—			10,840			10,840
Comprehensive income	—		—		—		—			—			—					$	20,055
Balance at December 31, 2006	114,093	$	28	$	692,143	$	(32,102	)	$	(217,290	)	$	11,844		$	454,623

The accompanying notes form an integral part of these consolidated financial statements.

F-11

CDC Corporation

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands U.S. dollars, except share and per share data)

	Number of shares (’000)	Common shares		Additional paid-in capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total shareholders’ equity			Comprehensive income (loss)
Balance at December 31, 2006	114,093	$	28	$	692,143	$	(32,102	)	$	(217,290	)	$	11,844		$	454,623		$	—
Exercise of employee stock options	2,926		—		11,121		—			—			—			11,121			—
Employee stock purchase plan	192		—		1,057		—			—			—			1,057			—
Issuance of shares for acquisitions	205		—		921		—			—			—			921			—
Purchase of treasury stock	—		—		—		(22,544	)		—			—			(22,544	)		—
Stock compensation expenses on options granted	—		—		7,854		—			—			—			7,854			—
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			2,215			2,215			2,215
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities	—		—		—		—			—			(270	)		(270	)		(270	)
Foreign currency translation adjustments	—		—		—		—			—			11,835			11,835			11,835
Less: reclassification adjustment for losses, net of gains and income taxes included in net loss	—		—		—		—			—			(450	)		(450	)		(450	)
Cumulative effect adjustment due to adoption of FIN 48	—		—		—		—			(2,505	)		—			(2,505	)		—
Net loss for the year	—		—		—		—			(105,033	)					(105,033	)		(105,033	)
Comprehensive income	—		—		—		—			—			—			—		$	(91,703	)
Balance at December 31, 2007	117,416	$	28	$	713,096	$	(54,646	)	$	(324,828	)	$	25,174		$	358,824

The accompanying notes form an integral part of these consolidated financial statements.

F-12

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

1. ORGANIZATION AND BUSINESS OPERATIONS

CDC Corporation (together with its subsidiaries, the “Company” or “CDC”), with facilities in the People’s Republic of China (“PRC”), North America, Europe and Australia, is a global enterprise software and new media company. The Company was incorporated in the Cayman Islands in June 1997 as a limited liability company.

The Company offers products and services to customers in Hong Kong, Taiwan and the PRC (the “Greater China”) and other parts of Asia, Australia, New Zealand, North America, South America, the United Kingdom and the rest of Europe. The Company has the following operating segments:

• Software. The Company offers a broad range of software solutions for mid-sized enterprises. The software suite includes Enterprise Resource Planning (“ERP”), Customer Relationship Management (“CRM”), Supply Chain Management (“SCM”), Order Management Systems (“OMS”), Human Resources and Payroll Management (“HRM”) and Business Intelligence (“BI”) products.

• Global Services. The Company’s global services offering includes information technology services, eBusiness consulting, web development and outsourcing in Hong Kong, Australia, and the United States of America (the “U.S.”), and a marketing database and marketing support service offered principally in Australia and New Zealand. The Company’s global services companies provide program management, outsourcing services, application development and ongoing support services using a wide range of technologies.

• CDC Games. The Company’s online games business is principally engaged in the development and operation of online games in the PRC.

• China.com. The Company’s internet and media business encompasses a range of businesses, including a portal network, and a Singapore-based travel trade publisher and trade exhibition organizer.

• Mobile Services and Applications (“MVAS”). The Company’s mobile services and applications business provides news and mobile applications services targeting the consumer market in China. It offers wireless services including Short Message Service (“SMS”), Interactive Voice Response (“IVR”), Multimedia Message Service (“MMS”) and Wireless Application Protocol (“WAP”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements include the accounts of the Company and its majority-owned or controlled subsidiaries that are not considered variable interest entities and all variable interest entities for which the Company is the primary beneficiary (Note 14), after eliminations of all intercompany accounts, transactions and profits.

(b) Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets

F-13

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.

(c) Cash and Cash Equivalents

The Company considers all cash held in banks and investments with an original maturity of three months or less when purchased to be cash equivalents. Except for the restricted cash disclosed in Note 5, none of the Company’s cash and cash equivalents are restricted as to withdrawal or use.

(d) Property and Equipment and Depreciation

Leasehold improvements, furniture and fixtures, office equipment, computer equipment and motor vehicles are stated at cost less accumulated depreciation. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. The estimated useful lives of the property and equipment are as follows:

Leasehold improvements	Over the lesser of the lease term or the estimated useful life
Furniture and fixtures	1 to 10 years
Office equipment	3 to 5 years
Computer equipment	1 to 3 years
Motor vehicles	3 to 5 years

(e) Software Development Costs

The Company capitalizes computer software product development costs incurred in developing a product once technological feasibility has been established, and capitalization of product software development costs stops once the product is available for general release to customers. The Company evaluates realizability of the capitalized amounts based on expected revenue from the product over the remaining product life. Where future revenue streams are not expected to cover remaining unamortized amounts, the Company expenses the remaining capitalized amounts. The amortization of such costs is computed as the greater of the amount calculated based on (i) the ratio of current product revenue to projected current and future product revenue or (ii) the straight-line basis over the expected economic life of the product (not to exceed five years). Software costs related to the development of new products incurred prior to establishing technological feasibility or after general release are expensed as incurred. When technological feasibility of the underlying software is not established until substantially all product development is completed, including the development of a working model, the Company expenses the costs of such development because the impact of capitalizing such costs would not be material.

(f) Goodwill and Intangible Assets

Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired. Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), requires companies to test goodwill for impairment on an annual basis or an interim basis if an event occurs that might reduce the fair value of a reporting unit below its carrying value. SFAS 142 also requires that an identifiable intangible asset that is determined to have an indefinite useful economic life should not be amortized, but instead tested separately for impairment using a fair value based approach. All other intangible assets are amortized over their estimated useful lives.

F-14

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The Company’s intangible assets represent trademarks and trade names, uniform resource locators (“URLs”), software applications and programs, customer base and contracts, and business licenses and partnership agreements. Definite-lived intangible assets are carried at cost less accumulated amortization. Amortization is computed using the greater of the straight-line method over the estimated useful life of the respective asset or the undiscounted cash flows method. The estimated useful lives of these intangible assets are as follows:

Trademarks	Indefinite
Trade names	3 to 5 years
URLs	20 years
Software applications and programs	3 to 7 years
Customer base and contracts	1 to 10 years
Business licenses and partnership agreements	1 to 7 years

The Company evaluates the long-lived assets of identifiable business activities for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Other than the impairment of the intangible assets related to the MVAS and Games segments (Note 4), the Company did not record any impairment for the year ended December 31, 2007.

The Company tests goodwill and intangible assets with indefinite useful lives for impairment utilizing a combination of valuation techniques including the expected present value of future cash flows approach. The Company performed its annual goodwill and indefinite lived intangible assets test on December 31 as required by SFAS 142 and determined that there was no impairment for the years ended December 31, 2005 and 2006. Other than the impairment of the goodwill related to the MVAS segment of $71,096 (Note 9), the Company did not record any impairment for the year ended December 31, 2007.

(g) Investments

Debt and equity investments designated as available-for-sale securities are stated at fair value. Unrealized holding gains or losses, net of tax, on available-for-sale securities are reported in accumulated other comprehensive income (loss) and as a separate component of shareholders’ equity. Realized gains and losses and any declines in fair value judged to be other-than-temporary (“OTT”) on available-for-sale securities are included in gain (loss) on disposal of investments and impairment of investments, respectively, in the Company’s consolidated statements of operations. Gains or losses on the sale of investments and amounts reclassified from accumulated other comprehensive income (loss) to the consolidated statements of operations are computed based upon specific identification. Interest on securities classified as available-for-sale securities is included in interest income. See Note 7 for a further discussion of the Company’s OTT impairment on its collateralized debt obligations (“CDOs”).

Debt investments where the Company has the positive intent and ability to hold the securities to maturity are designated as held-to-maturity securities and are stated at amortized cost.

When determining whether an impairment of investments exists or a decline in the value of an available-for-sale or held-to-maturity security is OTT, the Company evaluates evidence to support a realizable value in excess of the current market price for the securities. Such information may include the investment’s financial performance (including such factors as earnings trends, dividend payments, asset quality and specific events), the near term prospects of the investment, the current and expected financial condition of the investment’s issuer, and the Company’s investment intent.

The Company’s investments in equity investees for which its ownership exceeds 20% or for which the Company owns less than 20% but has the ability to exercise significant influence, but which are not majority-owned, are accounted for using the equity method. Under the equity method,

F-15

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

the Company’s proportionate share of each equity investee’s net income or loss and the amortization of any identifiable intangible assets arising from the investment is included in share of income and losses in equity investees in the accompanying consolidated statements of operations.

All other investments for which the Company does not have the ability to exercise significant influence (generally, when the Company has an investment of less than 20% ownership and no representation on the company’s Board of Directors) and for which there is not a readily determinable fair value, are accounted for using the cost method. Dividends and other distributions of earnings from investees, if any, are included in income when declared. The Company periodically evaluates the carrying value of its investments accounted for under the cost method of accounting and any impairment is included in the Company’s consolidated statement of operations.

(h) Impairment of Long-lived Assets

Long-lived assets (other than goodwill and indefinite lived intangible assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset (other than goodwill and indefinite lived intangible assets) exceeds the sum of the undiscounted cash flows expected to result from the asset’s use and eventual disposition. An impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the asset. As discussed in Note 4, the Company recognized impairment of $4,213 related to CDC Games license fee assets during the year ended December 31, 2007.

(i) Foreign Currency Translation

The financial statements of the Company’s foreign operations have been translated into the United States dollar (“U.S. dollar”) from their local functional currencies in accordance with SFAS No. 52, “Foreign Currency Translation” (“SFAS 52”). Under SFAS 52, all assets and liabilities are translated at year end exchange rates. Income statement items are translated at an average exchange rate for the year. Translation adjustments are not included in determining net income, but are accumulated and reported as a component of shareholders’ equity as accumulated other comprehensive income (loss). Realized and unrealized gains and losses, which result from foreign currency transactions, are included in determining net income (loss), except for intercompany foreign currency transactions that are of a long term investment nature which are reported as translation adjustments. The Company considers itself to be permanently reinvested with respect to its investment in its foreign subsidiaries. Accordingly, no realized and unrealized gains and losses from foreign currency translation of investments in foreign subsidiaries are included in the Company’s consolidated income statements for any year presented.

During the years ended December 31, 2005, 2006 and 2007, $380, Nil and Nil, respectively, were reclassified from cumulative foreign currency translation adjustment and included in the consolidated statement of operations as a result of the sale or liquidation of an investment in a foreign operation.

(j) Advertising Expenses

Advertising expenses are charged to expenses when incurred and are included in general and administrative expenses in the accompanying consolidated statement of operations. For the years ended December 31, 2005, 2006 and 2007, advertising expenses totaled $5,050 , $10,573 and $6,573 , respectively.

F-16

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(k) Shipping and Handling

Shipping and handling costs are included in cost of revenue in the accompanying consolidated statements of operations for all periods presented. Shipping and handling costs are not separately billed to customers.

(l) Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. If an acceptance period is required, revenue is recognized upon the earlier of customer acceptance or the expiration of the acceptance period. In some circumstances, the Company recognizes revenue on arrangements that contain certain acceptance provisions when it has historical experience that the acceptance provision is perfunctory. The Company’s agreements with its customers, resellers and distributors do not contain product return rights. If the fee is not fixed or determinable due to the existence of extended payment terms, revenue is recognized periodically as payments become due, provided all other conditions for revenue recognition are met. Discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period in which the related revenue is recorded. Such provisions are calculated after considering relevant historical data.

The specific literature that the Company follows in connection with its revenue recognition policy includes the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin 104, “Revenue Recognition” (“SAB 104”), the American Institute of Certified Public Accountants Statement of Position (“SOP”) 97-2, “Software Revenue Recognition” (“SOP 97-2”), as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions,” Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) 00-21, “Revenue Arrangements with Multiple Deliverables,” EITF 00-3, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” and in certain instances EITF 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”) and SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”).

In addition to these basic criteria, there are specific revenue recognition policies for each major stream of revenue by reportable segment.

Software

Revenue from the sale of software products often includes a combination of software licenses, consulting and integration services, and the provision of training and maintenance services.

Consulting and integration services consist of programming, installation and implementation services. Vendor Specific Objective Evidence (“VSOE”) of fair value for each of the above noted elements are determined as follows:

Software. The Company does not sell software or software licenses to its customers on a stand-alone basis; therefore, allocation of fees to the software component of multiple element arrangements is determined using the residual method. According to this method, the Company measures the amount of the arrangement fee allocated to the delivered elements based on the difference between the arrangement fee and the VSOE of fair value of the undelivered elements. The amount allocated to the software license is calculated by subtracting the VSOE of fair value for maintenance, consulting and integration services, and training services from the total arrangement fee in accordance with paragraph 12 of SOP 97-2. For those agreements that provide for significant services or custom development that are essential to the software’s functionality, the software

F-17

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

license and contracted services are recognized under the percentage of completion method as prescribed by the provisions of Accounting Research Bulletin (“ARB”) No. 45, “Long-Term Construction-Type Contracts,” and SOP 81-1.

When software licenses incorporating third-party software products are sold or sold with third-party products that complement the software, the Company recognizes the gross amount of sales of third-party products as revenue in accordance with EITF 99-19.

In addition, the Company offers its customers hosting services for some of its products. Under these subscription-based contracts, revenue is recognized ratably over the contract period commencing, when the product has been installed. Revenue from hosting services is included in licenses line items in the accompanying consolidated financial statements.

Consulting, Integration Services and Training. Consulting and integration services include programming, installation and implementation of the software products. VSOE of fair value for programming, consulting and integration services and for training services, respectively, is determined based on transactions where such services are rendered on a stand-alone basis to customers.

Historically, a substantial majority of the Company’s stand-alone programming, consulting and integration services and stand-alone training services are priced within a narrow range of the median value of the stand-alone sales. Variation in pricing for such services is due to differences in transaction volume and type of arrangement (beta site versus established sites). VSOE of fair value for consulting, integration and training services is established by region by an analysis of stand-alone sales of services over the preceding one year period. In a multiple-element arrangement, if the stated rates for such services fall outside of the established VSOE of fair value, then revenue from the delivered elements is deferred accordingly and recognized as the services are delivered, assuming all other criteria for revenue recognition have been met.

Many of the Company’s software arrangements include consulting implementation services sold separately under consulting engagement contracts. Consulting revenue from these arrangements are accounted for separately from new software license revenue because the arrangements qualify as service transactions as defined in SOP 97-2. The more significant factors considered in determining whether the revenue should be accounted for separately include the nature of services (i.e., consideration of whether the services are essential to the functionality of the licensed product), degree of risk, availability of services from other vendors, timing of payments and impact of milestones or acceptance criteria on the realizability of the software license fee. Revenue for consulting services is recognized as the services are performed. If there is a significant uncertainty about the project completion or receipt of payment for the consulting services, revenue is deferred until the uncertainty is sufficiently resolved. Contracts with fixed or “not to exceed” fees are recognized on a proportional performance basis.

If an arrangement does not qualify for separate accounting of the software license and consulting transactions, then new software license revenue is recognized together with the consulting services based on contract accounting using either the percentage-of-completion or completed-contract method. Contract accounting is applied to any arrangements: (1) that include milestones or customer-specific acceptance criteria that may affect collection of the software license fees; (2) where services include significant modification or customization of the software; (3) where significant consulting services are provided for in the software license contract without additional charge or are substantially discounted; or (4) where the software license payment is tied to the performance of consulting services. This revenue is classified together with license revenue and was not significant in any year presented.

F-18

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Maintenance. VSOE of fair value for maintenance services is determined based on the contractual renewal rate. The maintenance renewal rates are always priced based on a percentage of the software license fee. Maintenance renewal rates as percentage of license fee is set at a fixed rate for each geographical area in which the Company operates. Maintenance renewal rates may be different for the same basic product sold in different geographical areas due to different market variables such as competitors’ pricing and distribution channels. Substantially all maintenance renewals are priced at a standard percentage of software license fees and therefore the Company determined that it has established a VSOE of fair value for maintenance. The Company’s policy and business practice is for customers to renew their maintenance services at the stated rate indicated in the contract. Revenue related to maintenance is deferred and recognized ratably over the terms of the maintenance agreements, which are normally one year.

Arrangements with Value-added Resellers (“VARs”) and Distributors. The Company enters into software license arrangements with certain established VARs in which the VARs agree to sell the Company’s software to end-users. In the vast majority of these arrangements, the VARs are obligated to pay the Company only as and if sales are made to the end-users. The fee received is calculated on a stipulated percentage of the individual sales earned by the VARs which is stated in the sales contract. Pursuant to SOP 97-2, the fee relating to VARs transactions is not fixed or determinable until the software is sold by the VARs to the end users. Consequently, the Company does not recognize any revenue for VARs transactions until all of the criteria specified under paragraph 8 of SOP 97-2 are met; this point coincides with the sell-through to the end-users because at that point, the Company has persuasive evidence of an arrangement (a signed contract with VARs), the fee is fixed or determinable, delivery has occurred, and collection is reasonably assured. VARs and distributors do not have rights of return, price protections, rotation rights, or other features that would preclude revenue recognition. The Company does not typically earn any portion of fees for services provided by the distributor to the end-user. The Company earns maintenance fees based upon an agreed-upon percentage of the maintenance fees that the distributor earns from the end-user.

VARs have a sole discretion and responsibility to determine and negotiate the sales price of the Company’s software with the end-users. VARs are also responsible for billing and collecting from the end-users and assume all credit risks.

Global Services

The Company provides design and development services which encompass eBusiness consulting, development of mobile phone interfaces and web development services, and the modification, re-configuration, and testing of customers’ information systems to enhance customers’ internal financial reporting systems to customer specifications. These projects are priced on a fixed fee basis. Customers’ needs and specifications are documented in the statement of work which is attached to the agreement. For such arrangements, the Company is able to make reasonable estimates based on the Company’s historical experience with similar transactions, and with the total costs, fees and progress to completion. The vast majority of these agreements do not include customer acceptance provisions. The Company recognizes revenue for these projects using the percentage of completion method in accordance with SOP 81-1. For arrangements containing customer-specific acceptance clauses, the Company accounts for revenue based on the completed contract method by deferring the recognition of revenue until it obtains formal acceptance due to the unique nature of customer acceptance terms which require that the functionality of the product passes a predetermined acceptance test as designed by the customer.

Revenue from time and materials outsourcing contracts is recognized as the services are delivered, assuming all other basic criteria for revenue recognition have been met.

F-19

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The Company provides database and marketing support services, including list rental, database development and supply, data analysis and call center services in Australia and New Zealand. In these single element arrangements, the Company maintains the databases as a source of marketing intelligence on medium and large companies and organizations in Australia and New Zealand. Direct marketers and other customers can use this data to develop and execute marketing campaigns, measure market penetration, and analyze marketing opportunities. Revenue from the Company’s advertising and marketing services is recognized upon the delivery of a specified customer list and other data from the Company’s databases to its customers. The delivery is in the form of a flat file of data which is delivered to the customer by email. These services are priced based on a pricelist. The price is determined based on the number of contacts and the amount of data supplied for each contact. The delivery of the customer list to the customer constitutes the contract delivery. The Company does not recognize revenue from these types of arrangements until all criteria in SAB 104 have been met, which coincides with the delivery of the customer list to the customer because at that point, the Company has persuasive evidence of the arrangement, the fee is fixed and determinable, delivery has occurred and collection is reasonably assured. The completed performance method is appropriate because the delivery of the data is of such significance to the customer that substantial performance has not taken place until the data is delivered.

Advertising and marketing consulting services revenue for fixed price contracts are recognized using the proportional performance method based on hours incurred. Revenue from time and materials outsourcing contracts are recognized as the services are delivered, assuming all other basic criteria for revenue recognition have been met.

Revenue from Internet web site maintenance agreements is deferred and recognized ratably over the terms of the related agreements, which are usually for periods of six months or one year.

Hardware revenue is recognized upon shipment by the hardware vendor and title has transferred to the customer.

CDC Games

CDC Games revenue is principally derived from the provision of online game services in the PRC. The Company operates its Massively Multiplayer Online Role-Playing Games (“MMORPGs”) under two models. The first revenue model is the traditional subscription based pay-to-play, where users purchase pre-paid cards (the “PP-Cards”) to play for a fixed number of hours. The second revenue model is free-to-play, under which players are able to access the games free of charge but may choose to purchase in-game merchandise or premium features to enhance their game playing experience. Such purchases can only be made through the use of PP-Cards.

All PP-Cards are sold to distributors and retailers across the country, from whom CDC Games collects payment on a prepaid basis. The distributors then resell the cards to end users and other retail points. CDC Games offered sales discounts primarily ranging from 13% - 15% to distributors or retailers. The sales discount represents the difference between the price at which the PP-Cards are sold and the face value of the PP-Cards.

End users are required to activate their PP-Cards by using access codes and passwords to exchange the value of these cards into game points, which are then deposited into their personal accounts. Points are consumed for online game services by trading them either for a pre-specified length of game playing time or in-game merchandise or premium features sold at online game stores.

All prepaid fees received by CDC Games from distributors are initially recognized as deferred revenue and revenue is recognized when the registered points are consumed for the Company’s online game services, i.e., when game playing time occurs or in-game merchandise or premium features are delivered, or when the end customers are no longer entitled to access the online game services after the expiration of the PP-Cards. Distributors are permitted to return unsold prepaid cards under certain conditions, including termination of game and disqualification of distributor status. Returns of PP-Cards during 2006 and 2007 were not material.

F-20

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

China.com

Revenue from internet and media mainly represents revenue from advertising, which is recognized on a straight-line basis over the period in which the advertisement is displayed, and when collection of the resulting receivable is probable, provided that no significant obligations of the Company remain. Advertising service fees from direct mailings are recognized when each advertisement is sent to a target audience.

MVAS

MVAS revenue is recognized when services are provided. The Company records revenue on a monthly basis based upon confirmations from the network operators. At the end of each reporting period, where an operator fails to provide the Company with a monthly statement confirming the amount of charges billed to its mobile phone users for that month, the Company uses information generated from its own internal system and historical financial data to make estimates of the billing reconciliation rate and collectible mobile services and applications fees, and revenue is accrued accordingly.

(m) Deferred Revenue

Deferred revenue represents cash received for software, business services, advertising and marketing services and online games in advance of services being rendered. The Company reports deferred revenue as a liability on the balance sheet when there is a contractual obligation at the balance sheet date to provide services or software product to the customer but the services or software have not yet been completed or the product has not yet been delivered, and thus no recognition of revenue has taken place.

(n) Income Taxes

Income taxes are determined under the liability method as required by SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). Income tax expense is based on pre-tax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, are not more likely than not to be realized.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under the interpretation, the Company shall recognize the financial statement effects of a tax position when it is more likely than not, based upon the technical merits, that the position will be sustained upon examination. Conversely, the Company shall derecognize a previously recognized tax position in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination. A tax position that meets the more likely than not recognition threshold shall initially and subsequently be measured as the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with a taxing authority. The Company also recognizes interest expense by applying a rate of interest to the difference between the tax position recognized in accordance with FIN 48 and the amount previously taken or expected to be taken in a tax return. The Company classifies interest expense and related penalties, if any, with respect to its uncertain tax positions in the provision for income taxes.

F-21

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(o) Stock Compensation Expenses

On January 1, 2006, the Company and its subsidiary China.com adopted SFAS No. 123(R), “Share Based Payment” (“SFAS 123(R)”). Prior to January 1, 2006, the Company accounted for share-based employee compensation arrangements under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations, and complied with the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under APB 25, share compensation expense was recognized by utilizing the accelerated expense attribution method over the vesting period of the share options based on the difference, if any, between the fair value of the underlying the Company’s shares at the date of grant and the exercise price of the share options. During 2007, the Company approved its subsidiaries CDC Software and CDC Games, 2007 Stock Incentive Plan. Upon creation of these plans, both CDC Software and CDC Games adopted SFAS 123(R).

Prior to the adoption of SFAS 123(R), cash flows resulting from the tax benefit related to equity-based compensation were required to be presented in the operating cash flows, along with other tax cash flows, in accordance with the provisions of EITF 00-15, “Classification in the Statement of Cash Flows of the Income Tax Benefit Received by a Company upon Exercise of a Nonqualified Employee Stock Option” (“EITF 00-15”). SFAS 123(R) superseded EITF 00-15, amended SFAS No. 95, “Statement of Cash Flows” (“SFAS 95”), and requires tax benefits relating to excess equity-based compensation deductions to be prospectively presented in the statement of cash flows as financing cash inflows.

The Company adopted SFAS 123(R) using the modified prospective method. SFAS 123(R) requires measurement of compensation cost for all share-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The recognized expense is net of expected forfeitures, and the restatement of prior periods is not required.

The fair value of restricted shares is determined based on the number of shares granted and the quoted market price of the Company’s common shares. SFAS 123(R) did not change the accounting guidance for share-based payment transactions with parties other than employees as originally issued by EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”). The fair value of options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures under SFAS 123, as amended by SFAS No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure” (“SFAS 148”). On March 29, 2005, the SEC published Staff Accounting Bulletin No. 107 (“SAB 107”), which provides the Staff’s views on a variety of matters related to share-based payments. SAB 107 requires that share-based compensation be classified in the same expense line items as cash compensation.

Equity-based compensation expense recognized under SFAS 123(R) in the consolidated statements of operations for the years ended December 31, 2006 and 2007 was $6,887 and $8,451 , respectively. The estimated fair value of the Company’s equity-based awards, less expected forfeitures, is amortized over the awards’ vesting period on a straight-line basis.

Prior to its adoption of SFAS 123(R), the Company accounted for equity-based compensation under the provisions and related interpretations of SFAS 148 and APB 25. Accordingly, the Company was not required to record compensation expense when stock options were granted to its employees as long as the exercise price was not less than the fair market value of the stock at the grant date. Also, the Company was not required to record compensation expense when the Company issued common stock under its Employee Stock Purchase Plan as long as the purchase price was not less than 85% of the fair market value of the Company’s common stock on the grant date.

F-22

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Had compensation cost for the Company’s and China.com Inc.’s share-based compensation plans been determined based on the fair value at the grant dates for awards under those plans in accordance with the provisions of SFAS 123(R), the Company’s net loss and net loss per share for the year ended December 31, 2005, would have been as follows:

	Year ended December 31, 2005
Net loss:
As reported	$	(3,514	)
Add: Stock compensation expense included in net loss		1,421
Deduct: Stock compensation expense determined under fair value method		(11,594	)
Pro forma net loss	$	(13,687	)
Basic loss per share:
As reported	$	(0.03	)
Pro forma	$	(0.12	)
Diluted loss per share:
As reported	$	(0.03	)
Pro forma	$	(0.12	)

For the purpose of the pro forma disclosures above, the estimated fair value of the options is amortized to expense over the options’ vesting period.

As further discussed in Note 19, on December 29, 2005, the Company accelerated the vesting of approximately 1.7 million unvested share options with exercise prices equal to or greater than $3.50 per share. The closing price of the Company’s common shares on December 28, 2005, the last trading day before the acceleration, was $3.14 per share. The acceleration was effective as of December 29, 2005. The options had a range of exercise prices of $3.79 to $7.38 and a weighted average exercise price of $4.32. The purpose of the acceleration was to enable the Company to avoid recognizing compensation expense associated with these options upon the adoption of SFAS 123(R) in January 2006. The Company also believed that because the options that were accelerated had exercise prices in excess of the current market value of it’s common stock, the options had limited economic value and were not fully achieving their original objective of employee retention and incentive compensation. Included in the computation of pro forma net loss and net loss per share for the period ended December 31, 2005, is $4,433 in share compensation expense related to the accelerated options.

F-23

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(p) Earnings (Loss) Per Share

The Company computes earnings (loss) per share in accordance with SFAS No. 128, “Earnings Per Share” (“SFAS 128”). The Company’s convertible notes (Note 11) meet the definition of a participating security in accordance with EITF 03-6 “Participating Securities and the Two-Class Method under SFAS No. 128”. Therefore, the convertible notes are included in basic earnings per share using the two-class stock method and in diluted earnings per share using the more dilutive of the if-converted method or two-class method. Under the provisions of SFAS 128, basic earnings or loss per share is computed by dividing the net income or loss available to common shareholders for the year by the weighted average number of common shares outstanding during the year. Diluted earnings or loss per share is computed by dividing the net income or loss available to common shareholders for the year, adjusted for any impact to net income or loss by dilutive common equivalent shares, by the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares, composed of incremental common shares issuable upon the exercise of stock options, are included in diluted earnings or loss per share to the extent that such shares are dilutive.

(q) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are carried at their original amount less an estimate made for uncollectible amounts. The Company does not charge interest on receivables.

(r) Comprehensive Income (Loss)

Comprehensive income (loss) includes net earnings or loss as well as additional other comprehensive income (loss) items. The Company’s other comprehensive income (loss) consists of unrealized gains and losses on available-for-sale securities, unrealized gains and losses on held-to-maturity securities and foreign currency translations, all recorded net of tax.

(s) Gain on Issuance of Shares by Subsidiaries

When a subsidiary sells its shares to unrelated parties at a price in excess of its book value, the Company’s net investment in that subsidiary increases. If at that time the subsidiary is not a newly-formed, non-operating entity, nor a research and development, start-up or development stage company, nor is there question as to the subsidiary’s ability to continue in existence, the Company records the increase as a non-operating gain in the Company’s consolidated statement of operations. Otherwise, the increase is reflected in the Company’s consolidated statement of shareholders’ equity.

(t) Retirement Costs

Retirement costs relating to defined benefit plans are determined based on assumptions concerning the future events that will determine the amount and timing of the benefit payments. Contributions relating to defined contribution plans are made based on a percentage of the employees’ salaries and are included in the Company’s consolidated statement of operations as they become payable.

(u) Business Restructuring Charges and Related Expenses

The Company accounts for exit or disposal activities in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”) and SFAS No. 112, “Employers’ Accounting for Postemployment Benefits” (“SFAS 112”). In accordance with SFAS 146, a business restructuring is defined as an exit activity that includes but is not limited to a program that is planned and controlled by management, and materially changes either the scope of a business or the manner in which that business is conducted. Business restructuring charges include

F-24

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other costs associated with consolidating or closing of facilities. SFAS 112 prescribes the accounting for the estimated cost of benefits provided by an employer to former or inactive employees after employment but before retirement.

A liability is recognized and measured at its fair value for one-time termination benefits once the plan of termination is communicated to employees and it meets all of the following criteria: (i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated, their job classifications or functions, locations and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement, and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. Contract termination costs include costs to terminate a contract or costs that will continue to be incurred under the contract without benefit to the Company. A liability is recognized and measured at its fair value when the Company either terminates the contract or ceases using the rights conveyed by the contract. A liability is recognized and measured at its fair value for other associated costs in the period in which the liability is incurred.

(v) Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments – an Amendment of FASB Statements No. 133 and 140” (“SFAS 155”). It allows financial instruments that have embedded derivatives that otherwise would require bifurcation from the host to be accounted for as a whole, if the holder irrevocably elects to account for the whole instrument on a fair value basis. Subsequent changes in the fair value of the instrument would be recognized in earnings. The standard also clarifies which interest-only strips and principal-only strips are not subject to the requirement of SFAS 133; establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a Replacement of FASB Statement No. 125” (“SFAS 140”) to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued by the Company after January 1, 2007. SFAS 155 did not have an effect on the company’s financial position or results of operations for the year ended December 31, 2007.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 defines fair value, expands disclosures about fair value measurements, establishes a framework for measuring fair value in generally accepted accounting principles, and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. The Company is required to adopt SFAS 157 effective January 1, 2008 on a prospective basis. In February, 2008, the FASB issued Financial Statement of Position No. 157-2, “Partial Deferral of the Effective Date of Statement 157” (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS 157, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. Management believes this standard will not have a material impact on its consolidated financial statements.

In September 2006, the SEC issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS 158 requires the recognition of a plan’s overfunded or underfunded status as an asset or liability in the consolidated balance sheet and the recognition of changes in that funded status in the year in which the changes occur through comprehensive income. The Company settled its defined benefit plan obligations during 2006, therefore, SFAS 158 did not have an effect on the Company’s financial position, cash flows or results of operations for the year ended December 31, 2006 or 2007.

F-25

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Management believes this standard will not have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 141R requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to the acquisition such as contingencies and research and development. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. Consolidated net income should include the net income for both the parent and the noncontrolling interest with disclosure of both amounts on the consolidated statement of income. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. The effective date for both Statements is the beginning of fiscal year 2009. The Company has currently not determined the potential effects on its consolidated financial statements.

In April 2007, the FASB issued FSP FIN No. 39-1, which amended FIN No. 39, Offsetting of Amounts Related to Certain Contracts — an interpretation of APB Opinion No. 10 and FASB Statement No. 105 (“FIN No. 39”), to indicate that the following fair value amounts could be offset against each other if certain conditions of FIN No. 39 are otherwise met: (a) those recognized for derivative instruments executed with the same counterparty under a master netting arrangement and (b) those recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments. In addition, a reporting entity is not precluded from offsetting the derivative instruments if it determines that the amount recognized upon payment or receipt of cash collateral is not a fair value amount. FSP FIN No. 39-1 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the effects of this statement on its consolidated financial position and results of operations for 2008.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). This statement applies to the accounting for noncontrolling interests (previously referred to as minority interest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires noncontrolling interests to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. The effective date for SFAS 160 is the beginning of fiscal year 2009. The Company has currently not determined the potential effects on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). This statement is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact of adopting SFAS 161 on its consolidated financial statements.

F-26

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In April 2008, the FASB issued FASB Staff Position No. 142-3, "Determining the Useful Life of Intangible Assets" (“FSP 142-3”). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the effect the implementation will have on its consolidated financial statements.

3. BUSINESS COMBINATIONS

(a) During 2007, the Company made the following acquisitions:

(i) Respond Group Ltd. (“Respond”)

In February 2007, the Company acquired a 100% equity interest in Respond through the acquisition of its entire issued share capital. In accordance with SFAS No. 141, “Business Combinations” (“SFAS 141”), this acquisition has been accounted for under the purchase method of accounting, and the results of Respond’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Respond is a provider of enterprise class complaints, feedback and customer service solutions.

Under the terms of the share purchase agreement, the Company paid $14,743 at closing, subject to various adjustments. In addition, the Company agreed to pay up to a maximum of $14,000 of additional consideration based upon 2007, 2008 and 2009 revenue. Revenue must exceed $12,000 during each annual period for any additional consideration to be payable for that period. Any additional consideration will be paid in the form of cash. The additional compensation payments are subject to holdback in the event of breaches of representations and warranties, and various other adjustments. Management has determined that these contingent payments are not probable; therefore, no accrual has been recorded as of December 31, 2007.

F-27

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Respond has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $14,743, including direct expenses related to the acquisition, was as follows:

				Useful Life
Current assets	$	3,819
Property and equipment, net		304
Goodwill		11,634
Trade name		430		5 years
Developed technologies		2,080		7 years
Customer base		2,180		8 years
Noncompete agreements		30		3 years
Total assets acquired		20,477
Current liabilities		(5,734	)
Total liabilities assumed		(5,734	)
Net assets acquired	$	14,743

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the Software segment, and such goodwill is not deductible for tax purposes.

(ii) Saratoga Systems Inc. (“Saratoga”)

In April 2007, the Company acquired a 100% equity interest in Saratoga through merger. In accordance with SFAS 141, this acquisition has been accounted for under the purchase method of accounting, and the results of Saratoga’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Saratoga is a provider of enterprise CRM and wireless CRM applications.

Under the terms of the agreement, the Company agreed to pay not more than $35,000 in cash in connection with the merger, with $30,000 paid at closing and $5,000 placed into escrow for an 18-month period and subject to holdback in the event of breaches of representations and warranties and various other adjustments.

The Company is continuing its plan of integration of certain activities at Saratoga. These activities are accounted for in accordance with EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination” (“EITF 95-3”). These costs primarily include the closure of facilities and employee terminations in the United States, United Kingdom and Sweden. Such costs have been recognized as liabilities assumed in the acquisition because the Company had begun to assess and formulate a plan to integrate these activities at the time of the acquisition of Saratoga. During 2007, the Company recorded a liability of $1,730 as a result of severance costs and relocation costs related to the acquisition with a corresponding adjustment to goodwill. At December 31, 2007, the Company had $398 remaining in accrued restructuring charges in the accompanying consolidated balance sheet related to this integration.

F-28

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Saratoga has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $34,846, including direct expenses related to the acquisition, was as follows:

				Useful Life
Current assets	$	7,908
Property and equipment, net		200
Other assets		318
Goodwill		26,634
Trade name		640		5 years
Developed technologies		2,560		6 years
Customer base		11,740		8 years
Total assets acquired		50,000
Current liabilities		(15,080	)
Long term liabilities		(74	)
Total liabilities assumed		(15,154	)
Net assets acquired	$	34,846

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the Software segment, and such goodwill is not deductible for tax purposes.

(iii) Guangzhou Optic Communications Co., Ltd (“Optic”)

In July 2007, the Company acquired a 100% equity interest in Optic through the acquisition of its entire issued share capital. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting, and the results of Optic’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Optic is an online games publisher in China.

F-29

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Optic has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $13,214 , including direct expenses related to the acquisition was as follows:

				Useful Life
Current assets		3,903
Property and equipment, net		3,597
Goodwill		13,051
Distribution network		660		1 year
Developed technologies		117		0.5 year
Customer base		412		1 year
License agreements		3,608		2 -5 years
Total assets acquired		25,348
Current liabilities		(8,110	)
FIN 48 liability		(3,701	)
Deferred tax liability related to intangible assets		(323	)
Total liabilities assumed		(12,134	)
Net assets acquired	$	13,214

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the CDC Games segment, and such goodwill is not deductible for tax purposes.

(iv) Catalyst International, Inc. (“Catalyst”)

In September 2007, the Company acquired a 100% equity interest in Catalyst through merger. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting, and the results of Catalyst’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Catalyst is a provider of enterprise supply chain software and hardware solutions.

Under the terms of the agreement, the Company agreed to pay not more than $29,500 in cash in connection with the merger, with $25,000 paid at closing and $4,500 placed in escrow for a 24-month period and subject to holdback in the event of breaches of representations and warranties and various other adjustments.

The Company is continuing its plan of integration of certain activities at Catalyst. These activities are accounted for in accordance with EITF 95-3. These costs primarily include the closure of facilities and employee terminations in the United States and United Kingdom. Such costs have been recognized as liabilities assumed in the acquisition because the Company had begun to assess and formulate a plan to integrate these activities at the time of the acquisition of Catalyst. During 2007, the Company recorded a liability of $704 as a result of severance costs and relocation costs related to the acquisition with a corresponding adjustment to goodwill. At December 31, 2007, the Company had $149 in accrued restructuring charges in the accompanying consolidated balance sheet related to this integration.

F-30

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The purchase price for Catalyst has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $29,600, including direct expenses related to the acquisition was as follows:

				Useful Life
Current assets	$	8,523
Property and equipment, net		351
Goodwill		16,118
Trade name		1,230		5 -10 years
Developed technologies		2,110		6 years
Customer base		11,520		10 years
Total assets acquired		39,852
Current liabilities		(10,163	)
Long term liabilities		(89	)
Total liabilities assumed		(10,252	)
Net assets acquired	$	29,600

Due to the synergies expected with the Company’s existing businesses and competition encountered during the bid process, the purchase price resulted in the recognition of goodwill. $9,797 of the goodwill was assigned to the Software segment and $6,321 of the goodwill was assigned to the Global Services segment. None of the goodwill is deductible for tax purposes.

(v) Industri-Matematik International Corp. (“IMI”)

In September 2003, the Company acquired a 51% equity interest in Cayman First Tier (“CFT”), an investment holding company organized in the Cayman Islands which owns a 100% equity interest in IMI for $25,000 in cash. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting and the results of IMI’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. IMI is a provider of supply chain management solutions in North America and Europe. The remaining 49% equity interest of CFT was held by Symphony Technology Group (“Symphony”), a private equity firm focused on enterprise software and services, which previously owned 100% of IMI.

In November 2003, CFT loaned $25,000 to Symphony (“Symphony Note”) to provide Symphony with additional capital to fund future Symphony investments. The loan was secured by Symphony’s 49% holding in IMI (through CFT). Principal and interest on the Symphony Note was due and payable in full in November 2007.

In November 2007, the Company, CFT and Symphony entered into a letter agreement whereby all amounts due and payable to CFT pursuant to the Symphony Note were deemed discharged and paid in full in exchange for the transfer by Symphony to CFT of all of Symphony’s rights, title, and interest in Symphony’s 49% interest in CFT. As of the date of the transfer, there was approximately $28,000 outstanding under the Symphony Note ($25,000 in principal and $3,000 in accrued interest).

F-31

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The Company has determined that the value of the 49% equity interest in CFT exceeded the carrying value of the Symphony Note. No impairment charge was recorded, and the Company’s interest in the Symphony Note of $14,282 was considered purchase price consideration for the 49% minority interest in CFT and was accounted for in accordance with SFAS No. 141.

The purchase price for IMI has been allocated to the assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as of the date of acquisition. Final allocations will be performed when estimates are finalized. The Company expects no significant changes in fair value pending the completion of the fair value analysis by management. The preliminary allocation of the purchase price of $14,282, including direct expenses related to the acquisition was as follows:

				Useful Life
Goodwill		11,177
Capitalized software		1,475		4 years
Customer base		4,621		4 years
Trade name		446		5 years
Total assets acquired		17,719
Deferred revenue		(1,785	)
Long term liabilities		(1,652	)
Total liabilities assumed		(3,437	)
Net assets acquired	$	14,282

Due to the synergies expected with the Company’s existing businesses, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the Software segment, and such goodwill is not deductible for tax purposes.

The purchase price allocations for each of the preceding acquisitions have not been finalized because the Company has not yet completed the analysis of acquired deferred tax assets and liabilities.

(vi) Pro Forma Effect of Respond, Saratoga, Optic and Catalyst Acquisitions

The following unaudited pro forma consolidated information reflects the Company’s consolidated results of operations for the years ended December 31, 2006 and 2007, as if the acquisitions of Respond, Saratoga, Optic and Catalyst had occurred on January 1, 2006 and 2007. These pro forma results have been prepared for informational purposes only and do not purport to be indicative of what the Company’s consolidated results of operations would have been had the acquisitions of these subsidiaries actually taken place on January 1, 2006 and 2007, and may not be indicative of future results of operations.

F-32

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	Year ended December 31,
	2006			2007
Revenue	$	385,721		$	443,476
Net loss from continuing operations	$	(1,397	)	$	(108,971	)
Net loss per common share - basic and diluted	$	(0.01	)	$	(1.03	)

(b) During 2007, the Company acquired the following individually insignificant entities for a total cost of $934, which was paid in cash. In accordance with SFAS 141, these acquisitions have been accounted for under the purchase method of accounting, and the results of each respective acquisition’s operations have been included in the Company’s consolidated financial statements since the date of acquisition.

(i) Vectra Corporation (“Vectra”)

In May 2007, a subsidiary of the Company completed the acquisition of a majority interest in Vectra, a provider of information security consulting services, managed services and enterprise security solutions in Australia. Under the terms of a share purchase agreement, the Company paid approximately $106 in cash at closing for such majority interest in Vectra.

(ii) PlanTec Limited (“PlanTec”)

In July 2007, a subsidiary of the Company completed the acquisition of 100% of the equity in PlanTec, a provider of information technology services to a broad range of industries including health, retail, telecommunications, waste management, transportation, state and federal governments in Australia. Under the terms of the purchase agreement, the Company paid approximately $557 in cash at closing, with additional consideration payable of up to $1,200 based upon 2008 and 2009 financial performance.

(iii) Snapdragon Consulting Pty. Ltd. (“Snapdragon”)

In October 2007, a subsidiary of the Company completed the acquisition of 100% of the equity in Snapdragon, an information service provider focused on Microsoft CRM based in Australia. Under the terms of the share purchase agreement, the Company paid approximately $271 at closing. In addition, the Company agreed to pay additional consideration payable in 2008 and 2009 based upon consolidated earnings of Snapdragon before interest income and interest expenses and income tax, but after amortization and depreciation. If Snapdragon achieves its forecast results, the total additional consideration payable would be approximately $1,400.

(iv) Acquisition of Franchise Partners

In May 2007, the Company acquired 19% of the equity in Business T G. Spain, a reseller of ERP, CRM & SCM products. Under the terms of the share purchase agreement, the Company paid $431 at closing. The Company accounts for this investment under the cost method of accounting.

In August 2007, the Company acquired 10% of the equity in CMT Argentina, a reseller of CRM and c360 products. Under the terms of the share purchase agreement, the Company paid $84 at closing. The Company accounts for this investment under the cost method of accounting.

F-33

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In November 2007, the Company acquired 19% of the equity in CDC CRM Solutions India, a reseller of CRM products. Under the terms of the agreement, the Company paid $2 at closing. CDC CRM Solutions India is a start-up entity, and the Company is the sole source of funding. Accordingly, the results of CDC CRM Solutions India’s operations have been included in the Company’s consolidated financial statements since the date of acquisition.

Goodwill recognized in conjunction with these individually insignificant acquisitions amounted to $171 and was assigned to the Global Services segment and such goodwill is not deductible for tax purposes.

In conjunction with these individually insignificant acquisitions, the Company acquired $1,057 of intangible assets, which has been classified as customer base and has a weighted-average useful life of 3 years.

(c) In 2006, the Company made the following significant acquisitions:

(i) Equity Pacific (the “17game Group”)

In August 2004, China.com Inc. entered into an acquisition agreement to acquire an 11.11% equity interest in the 17game Group. In November 2004, China.com Inc., through the conversion of certain convertible loans to the 17game Group, further increased its interest in 17game Group to 36.5%. In August 2005, China.com Inc. acquired an additional 11.5% interest in 17game Group through the purchase of shares from other shareholders and subscription of new shares, increasing its interest in 17game Group to 48%. These acquisitions resulted in a total consideration of $6,618 and were accounted for using the equity method.

The remaining 52% of 17game Group was acquired on March 17, 2006 for an aggregate total consideration of $18,000 with approximately $4,800 being paid in cash and $13,000 being paid in restricted China.com Inc. shares with the restrictions lapsing over a period of two years with 25% lapsing on the first six (6) months anniversary of closing and 12.5% lapsing on each subsequent three (3) month anniversaries of closing.

The purchase price of $24,618 for 17game Group has been allocated to the assets acquired and liabilities assumed based on management’s estimate of their respective fair values as of the date of the acquisition. Due to the synergies expected with the Company’s existing businesses, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the CDC Games segment, and such goodwill is not deductible for tax purposes.

(ii) DB Professionals, Inc. (“DBPI”)

On July 7, 2006, the Company acquired a 100% equity interest in DBPI through the acquisition of its entire issued share capital. In accordance with SFAS No. 141, this acquisition has been accounted for under the purchase method of accounting, and the results of DBPI’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. DBPI’s core business is outsourced information technology support and consulting services. The acquisition of DBPI extended the Company’s business services operations on the west coast of the United States.

The Company acquired the business of DBPI for a cash payment of $8,850 and the Company agreed to an additional cash payment of $1,400, payable on December 31, 2007,

F-34

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

and subject to an adjustment onwards for any liability arising prior to the closing date. In addition, the Company also agreed to pay additional cash consideration of $1,400, payable April 30, 2008, based on a specified financial target, subject to an upward or downward adjustment. The contingent cash payment is also subject to adjustment in the event of breaches of representations and warranties. In March 2007, the Company entered into an addendum to its share purchase agreement pursuant to which, among other things, it accelerated the payment of the second cash installment payable to the sellers and paid $815 as an additional cash consideration to the sellers. Furthermore, in August 2007, the Company entered into a second addendum to the share purchase agreement pursuant to which it accelerated the payment of the third cash installment, amended such amount to $1,250 and released the sellers from any liability after November 30, 2007. Under this addendum, the Company paid $625 on execution and paid the remaining amounts in three equal installments of $208. In accordance with EITF 95-08 “Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination” (“EITF 95-08”), the Company has accounted for these additional contingent payments as adjustments to the purchase price and has recorded these payments as additional goodwill in the Company’s consolidated balance sheet as of December 31, 2007.

The goodwill was assigned to the Global Services segment, and such goodwill is deductible for tax purposes.

(iii) TimeHeart Science Technology Limited (the “TimeHeart Group”)

On November 28, 2006, China.com Inc. acquired a 100% equity interest in the TimeHeart Group through the acquisition of its entire issued share capital. In accordance with SFAS 141, this acquisition has been accounted for under the purchase method of accounting and the results of the TimeHeart Group’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. TimeHeart Group’s core business is value-added telecom services. The acquisition of the TimeHeart Group complements the Company’s current mobile services and applications platform and provides the Company with the opportunity to further expand its market share.

The components of the purchase price were: (i) cash consideration of $2,113; (ii) 27,320,490 restricted shares of China.com Inc. valued at $1,605 at the commitment date; (iii) 10% of the issued share capital of CDC Mobile Media Corporation, a subsidiary of the Company, valued at $1,794 at the date of acquisition; and (iv) contingent consideration based on a formula set out in the agreement, which would vary based on the performance of the TimeHeart Group in the fourth quarter of 2006 and in the year 2007. The contingent consideration was to be in the form of restricted shares of China.com Inc., equivalent to a maximum amount of $2,080. As of December 31, 2007, the criteria for this contingent consideration were not met and, accordingly, no adjustment for the contingent payment has been recorded in the consolidated financial statements.

The purchase price of $5,512 for the TimeHeart Group has been allocated to the assets acquired and liabilities assumed based on management’s estimate of their respective fair values as of the date of the acquisition. Due to the synergies expected with the Company’s existing businesses, the purchase price resulted in the recognition of goodwill. The goodwill was assigned to the MVAS segment, and such goodwill is not deductible for tax purposes.

(iv) Vis.align, Inc. (“Vis.align”)

On December 1, 2006, the Company acquired a 100% equity interest in Vis.align through merger. In accordance with SFAS 141, this acquisition has been accounted for

F-35

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

under the purchase method of accounting and the results of Vis.align’s operations have been included in the Company’s consolidated financial statements since the date of acquisition. Vis.align’s core business is providing worldwide IT support and managed services. The acquisition of Vis.align expands the Company’s services portfolio, generates cross-selling opportunities and offers customers additional end-to-end enterprise solutions and services.

The Company acquired the business of Vis.align for a cash payment of approximately $4,650. In addition to the fixed cash payment, a contingent payment of up to $7,520 is payable, partly in cash and partly in Class A common shares of the Parent, based upon 2007 and 2008 revenue. Revenue of Vis.align must exceed $20,000 during each annual period for any additional consideration to be payable for that period. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as adjustments to the purchase price and has accrued Nil at December 31, 2006 and 2007.

The goodwill was initially assigned to the Software segment and such goodwill is not deductible for tax purposes.

(d) During 2006, the Company acquired the following individually insignificant entities for a total cost of $11,550 which was paid primarily in cash. In accordance with SFAS 141, these acquisitions have been accounted for under the purchase method of accounting, and the results of each respective acquisition’s operations have been included in the Company’s consolidated financial statements since the date of acquisition.

(i) Horizon IT Outsourcing Business (“Horizon”)

In February 2006, Software Galeria Inc., the Company’s 51% owned subsidiary (“SGI”), acquired the IT consulting services business of Horizon, which offers outsourced information technology professional services in the U.S. and Canada, utilizing India-based resources. The acquisition enabled the Company to enhance the Global Services segment through growth of the outsourced information technology professional services line of business. Under the terms of the agreement, the Company paid $608 in cash at closing and paid an additional $608 of cash consideration in installments during 2006. The Company also agreed to pay additional cash consideration of $1,000 in 2007 and 2008, if earnings before interest, taxes, depreciation and amortization (“EBITDA”) generated from the purchased business were at least $1,350 in each year 2006 and 2007. The additional consideration payments are subject to upward and downward adjustment, dollar-for-dollar, in the event 2006 EBITDA and 2007 EBITDA is less than or greater than the targeted EBITDA amounts. The additional consideration payments are also subject to adjustment in the event of breaches of representations and warranties. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as compensation because in accordance with the purchase agreement the payment is automatically forfeited if employment terminates and it was probable that certain performance criteria were going to be met. The Company has accrued $1,400 and $717 at December 31, 2006 and 2007, respectively, related to these additional consideration payments.

In addition, the Company agreed to issue to the sellers up to a 20% equity interest in the entity formed to acquire the assets purchased from Horizon in the event the EBITDA generated from the purchased business exceeds specified targets during each of 2006, 2007 and 2008. No equity has been issued to the sellers. The sellers also have the right to put their equity interest back to the Company between April 2009 and April 2011 at a predetermined and fixed cash consideration. The fair value of this put was determined to be a nominal amount.

F-36

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(ii) c360 Solutions Incorporated (“c360”)

In April 2006, the Company acquired 100% of the shares in c360, a global provider of CRM add-on products, industry-specific CRM solutions, and CRM development tools for Microsoft Dynamics CRM. The acquisition enabled the Company to expand globally through channel sales partners, and complements its market strategy to target mid-to-large sized organizations. Under the terms of the agreement, the Company paid $1,250 of cash and issued 50,000 of its unregistered Class A common shares at closing. The 50,000 shares were valued as of the commitment date at $225. In addition, the Company paid $1,641 of additional cash consideration during the year ended December 31, 2007, and agreed to issue to the sellers an additional 350,000 of its unregistered Class A common shares, to be issued in 50,000 share increments every three months through the twenty-one month anniversary of closing. The 350,000 shares were valued as of the commitment date at $1,572. An additional 200,000 unregistered Class A common shares of the Company may be earned by the seller based upon certain performance targets through 2009. In accordance with EITF 95-08, the Company has accounted for these additional contingent shares as compensation and has accrued $153 and $830 at December 31, 2006 and 2007, respectively.

Through February 29, 2008, the full 350,000 unregistered Class A common shares of the Company had been issued. In addition, the Company has agreed to issue up to an aggregate of 200,000 additional unregistered Class A common shares between the twenty-four and thirty-three month anniversary of closing in the event c360 achieves certain revenue targets. Approximately $475 of the purchase price is subject to adjustment for breaches of representations and warranties.

(iii) OST International, Inc. (“OSTI”)

In June 2006, the Company acquired OSTI. OSTI is a preferred third party vendor of consulting and outsourced IT services to many Fortune 500 companies, which expanded the Company’s business offerings to the Midwest region of the United States. Under the terms of the agreement, the Company paid $3,000 in cash at closing. A cash payment in the amount of $280 was made on March 31, 2007, for the net tangible assets of OSTI. In addition, the Company agreed to issue to the selling shareholder $330 worth of its unregistered Class A common shares prior to June 15, 2008, and an additional $220 worth of its unregistered Class A common shares prior to June 15, 2009. The Company also agreed to pay additional cash consideration in the amounts of $300 and $400 in the event 2007 and 2008 EBITDA for OSTI is $1,350 and $1,450, respectively. The additional consideration payments are subject to upward and downward adjustment, dollar-for-dollar, in the event 2007 and 2008 EBITDA are less than or greater than the targeted EBITDA amounts. The additional consideration payments are also subject to adjustment in the event of breaches of representations and warranties. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as adjustments to the purchase price and has accrued Nil and $550 at December 31, 2006 and 2007, respectively.

(iv) MVI Technology (“MVI”)

In October 2006, the Company acquired MVI. MVI is a developer of real-time performance management solutions specifically designed for the food and beverage and consumer products industries that enable manufacturers to merge automated shop floor data, quality process control and manufacturing performance dashboards. Under the terms of the agreement, the Company paid approximately $5,273 of cash at closing. In addition, the Company agreed to pay up to a maximum of $12,000 of additional consideration based upon the revenue of MVI between months 1 through 12, 13 through 24 and 25 through 36 following the closing. Revenue must exceed $6,000 during each 12-month period for any

F-37

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

additional consideration to be payable for that period. Any additional consideration will be paid in the form of cash. The additional consideration payments are subject to adjustment in the event of breaches of representations and warranties, and various other adjustments. In accordance with EITF 95-08, the Company has accounted for these additional contingent payments as compensation and has accrued $164 and $672 at December 31, 2006 and 2007, respectively.

Goodwill recognized in conjunction with these individually insignificant acquisitions amounted to $4,098 and was assigned $2,520 to the Software segment and $1,578 to the Global Services segment, respectively; $1,578 of such goodwill is deductible for tax purposes.

(e) There were no acquisitions made during 2005.

(f) In 2005, 2006 and 2007, the Company paid $2,059, $752 and Nil, respectively, in additional earn-out considerations related to the acquisitions that were made before January 1, 2005. The Company will not be required to pay any additional earn-out consideration related to pre-January 1, 2005 acquisitions.

4. RESTRUCTURING AND OTHER CHARGES

The following table sets forth the components of restructuring and other charges recorded in the consolidated statements of operations:

	Year ended December 31,
	2005		2006		2007
Restructuring charges	$	1,667	$	1,974	$	931
MVAS impairment		—		—		2,398
CDC Games license impairment		—		—		4,213
Legal settlements		—		2,900		1,370
Gain on sale of ION Global		—		—		(6,745	)
Impairment of cost investments and other assets		—		—		6,889
Total restructuring and other charges, net	$	1,667	$	4,874	$	9,056

Restructuring Charges

For the year ended December 31, 2005, the Company incurred and charged to expense $3,055 in restructuring costs, principally at the Company’s subsidiaries, Ross Systems, Inc. (“Ross”), Pivotal Corporation (“Pivotal”) and IMI. In 2005, the restructuring liability at Pivotal was reduced by $1,354 due to a change in estimate relating to lease facility closure costs.

For the year ended December 31, 2006, the Company incurred and charged to expense $2,943 in restructuring costs, principally at the Company’s subsidiaries, Praxa Limited (“Praxa”) and IMI. At IMI, restructuring costs were $2,288, comprised of $732 related to employee termination costs and $1,556 for closure of offices. At Praxa, restructuring costs were $323, comprised of $132 related to employee termination costs and $191 in other costs. In 2006, the restructuring liability at IMI was reduced by $711 due to a change in estimate relating to workforce reduction, and the restructuring liability at Pivotal was reduced by $353 due to a change in estimate relating to a lease termination.

F-38

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

For the year ended December 31, 2007, the Company incurred and charged to expense $3,995 in restructuring costs, principally at the Company’s subsidiaries, IMI, Ross, Pivotal and Praxa. At IMI, restructuring costs were $2,130 , comprised of $2,096 related to employee termination costs and $34 for closure of offices. At Ross, restructuring costs were $666, comprised entirely of employee termination costs. At Pivotal, restructuring costs were $856, comprised of $306 related to employee termination costs and $550 related to legal fees. At Praxa, restructuring costs were $157, related to employee termination costs. The Company recorded adjustments to the restructuring liability of $3,064, which is primarily comprised of a $2,933 adjustment at Pivotal due to a change in estimate relating to a lease termination. During 2007, in connection with the Company’s acquisition of Saratoga and Catalyst, the restructuring liability was increased by $1,730 and $704, respectively, due to lease facility closure costs and workforce reduction costs.

At December 31, 2006 and 2007, the Company had a total of $6,010 and $3,289 , respectively, in accruals relating to the business restructuring activities. Pivotal, Ross and IMI are included in the Software segment. Praxa is included in the Global Services segment.

The changes in the accrued liability balance associated with the exiting costs for the year ended December 31, 2006, are as follows:

	Workforce Reduction			Lease Termination			Other Exit Costs			Total
Balance at December 31, 2005	$	1,878		$	5,190		$	286		$	7,354
Expensed in 2006		1,183			1,556			204			2,943
Adjustments to income		(711	)		(173	)		(85	)		(969	)
Amounts paid		(2,115	)		(965	)		(238	)		(3,318	)
Balance at December 31, 2006	$	235		$	5,608		$	167		$	6,010
Current	$	235		$	2,009		$	167		$	2,411
Non-current		—			3,599			—			3,599
	$	235		$	5,608		$	167		$	6,010

F-39

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The changes in the accrued liability balance associated with the exiting costs for the year ended December 31, 2007, are as follows:

	Workforce Reduction			Lease Termination			Other Exit Costs		Total
Balance at December 31, 2006	$	235		$	5,608		$	167	$	6,010
Expensed in 2007		3,371			74			550		3,995
Adjustments related to acquired subsidiaries		1,141			1,293			—		2,434
Adjustments to income		(164	)		(2,933	)		33		(3,064	)
Amounts paid		(3,773	)		(2,313	)		—		(6,086	)
Balance at December 31, 2007	$	810		$	1,729		$	750	$	3,289
Current	$	810		$	1,247		$	750	$	2,807
Non-current		—			482			—		482
	$	810		$	1,729		$	750	$	3,289

MVAS Impairment

See Note 9 for further discussion of the status of the MVAS segment and the Company’s goodwill impairment charge of $71,096.

In accordance with the Company’s policy on testing long-lived assets for impairment (Note 2(h)), the Company had a triggering event that required testing the intangible assets of the MVAS business for impairment. The Company performed its impairment test and determined that the intangible assets were impaired because the Company did not have sufficient discounted cash flows to support the remaining intangible assets due to the fact that it had made the decision to exit this business in 2008. Therefore, the Company wrote off all the remaining intangible assets that related to this segment, which equaled $2,398.

CDC Games Impairment

The Company’s business model in the CDC Games segment is to make investments in a diverse set of online computer game licenses. During 2006 and 2007 the Company entered into many license arrangements with numerous game developers for the right to produce the online computer games in specific countries and/or geographical regions. Not all of these games are successfully launched due to various factors: 1) development problems; 2) poor beta test results; 3) other games have better potential to become successful; and 4) limited capital resources. During 2007, the Company performed an assessment of the recoverability of the license fee assets and determined that they would not generate future cash flows from several licenses and, therefore, it impaired $4,213 of these license fees.

Legal Settlements

The Company and its subsidiaries are parties to other litigation and claims incident to the ordinary course of business. Periodically, the Company settles these disputes with the various counterparties. During the years ended December 31, 2005, 2006 and 2007, the Company recorded Nil, $2,900 and $1,370 in legal settlement costs.

F-40

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Gain on Sale of ION Global

In August 2007, the Company entered into four separate agreements to sell the principal assets and subsidiaries that comprised its Ion Global business for $9,000. Subsequent to the date of sale, the Company received an additional $665 due to a net asset adjustment. In total, these transactions resulted in a pretax gain of approximately $6,745 . Under the terms of these agreements, the Company agreed to sell (i) the assets related to the internet consulting services and website design and development of Ion Global (California), Inc.; (ii) substantially all of the assets of Ion Global Limited; (iii) all of the issued and outstanding shares of Ion Global Korea Ltd. held by Ion Global (BVI) Ltd.; and (iv) the “Ion Global” trademark. Ion Global was included within the Global Services segment and the goodwill associated with this transaction was allocated on a historical basis as Ion Global was not integrated into the Company.

The Company has concluded that the financial position, results of operations and cash flows from these businesses are immaterial to the overall results of the Company and therefore have not been reported as discontinued operations in the accompanying consolidated statements of operations for the year ended December 31, 2007.

Impairment of Cost Investments and Other Assets

	Year ended December 31,
	2005		2006		2007
CDC Games cost investments	$	—	$	—	$	4,337
Corporate other assets		—		—		2,552
	$	—	$	—	$	6,889

As discussed above, CDC Games’ strategy is to make several investments in game licenses. In addition, the Company made some cost investments in online computer game development companies. During 2007 and early 2008, these game developers lost their access to the credit markets, thus raising questions as to their ability to continue as a going concern. Therefore, the Company recorded a charge of $4,337 to write-off its investment in these companies.

The Company has made cost investments in several companies during its history. In 2007, one of these companies filed bankruptcy and the Company was not able to recover its $2,403 investment. The Company also wrote off other assets of $149.

5. RESTRICTED CASH

The Company had $1,996 and $9,066 of restricted cash at December 31, 2006 and 2007, respectively.

At December 31, 2006 and 2007, $1,996 and $454, respectively, of restricted cash served as collateral for an irrevocable standby letter of credit that provides financial assurance that the Company will fulfill its obligations with respect to the operating lease agreement at Pivotal Corporation, an affiliate of the Company. The letter of credit is renewed annually. The cash is held in custody by the issuing bank and is restricted as to withdrawal or use.

At December 31, 2007 an additional $3,612 of restricted cash was held in various escrow accounts as collateral for pending litigation settlements and an additional $5,000 served as collateral for the Company’s line of credit agreement with a financial institution (Note 11).

F-41

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

6. ACCOUNTS RECEIVABLE

	As of December 31,
	2006			2007
Accounts receivable:
Amounts billed	$	62,781		$	91,219
Unbilled		7,029			5,081
		69,810			96,300
Allowance for doubtful accounts		(5,373	)		(8,688	)
Net	$	64,437		$	87,612

	Year ended December 31,
	2005			2006			2007
Allowance for doubtful accounts:
Balance at beginning of year	$	4,011		$	4,112		$	5,373
Additions		1,450			2,890			5,695
Write-offs, net of recoveries		(1,349	)		(1,629	)		(2,380	)
Balance at end of year	$	4,112		$	5,373		$	8,688

Unbilled receivables represent the recognized sales value of performance relating to the Software and Global Services segments, and these amounts had not been billed and were not billable to the customers at the balance sheet dates. The balances will be billed upon the fulfillment of certain conditions agreed between the parties.

7. INVESTMENTS

Available-for-sale securities consist of the following:

	December 31, 2006
	Estimated Fair Value		Gains in Accumulated Other Comprehensive Income		Losses in Accumulated Other Comprehensive Income
Current:
U.S. government securities	$	10,869	$	—	$	(187	)
Total debt securities		10,869		—		(187	)
Common stock		3,532		1		(936	)
Total equity securities		3,532		1		(936	)
Total current available-for-sale securities		14,401		1		(1,123	)
Noncurrent:
U.S. government securities		73,036		—		(1,946	)
CDOs		39,009		—		(692	)
Total debt securities		112,045		—		(2,638	)
Total noncurrent available-for-sale securities		112,045		—		(2,638	)
Total available-for-sale securities	$	126,446	$	1	$	(3,761	)

F-42

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	December 31, 2007
	Estimated Fair Value		Gains in Accumulated Other Comprehensive Income		Losses in Accumulated Other Comprehensive Income
Current:
U.S. government securities	$	74,595	$	—	$	(324	)
Less: restricted securities pledged for banking facilities		30,867		—		(116	)
Total debt securities		43,728		—		(208	)
Common stock		3,903		192		(385	)
Total equity securities		3,903		192		(385	)
Total current available-for-sale securities		47,631		192		(593	)
Noncurrent:
CDOs		23,736		111		—
Private equity securities		4,790		—		—
Total noncurrent available-for-sale securities		28,526		111		—
Total available-for-sale securities	$	76,157	$	303	$	(593	)

Included in the total available-for-sale debt securities as of December 31, 2006 and 2007, were debt securities with a market value of Nil and $30,867, respectively, which were pledged as compensating balances in connection with the credit lines granted to the Company as further discussed in Note 11.

The gross realized gains on sales of available-for-sale securities totaled $584, $392 and $516 in 2005, 2006 and 2007, respectively. The gross realized losses on sales of available-for-sale securities totaled $59, $224 and $2 in 2005, 2006 and 2007, respectively.

In 2006, the Company acquired an equity interest in preference shares in two CDOs coupled with a U.S. treasury strip for an aggregate nominal amount of $38,700. These investments are subject to variability as there is no stated coupon rate and the equity interest in these investments is subject to changes in returns on the collateralized debt backing the interest. The principal amount in these investments is backed by U.S. treasury strips and domestic corporate debt with S&P ratings ranging from “BBB” to “CC”.

The Company currently intends to hold the CDO investments as long-term investments, not to be traded in the near term. As the aforementioned investments are not publicly traded and have no active market, fair value as of December 31, 2006 and 2007, was determined by the respective brokers and validated by management based on expected cash flow returns discounted by rates consistent with rates of return offered on comparable investments with comparable risks. In addition at December 31, 2007, management based the fair value on binding quotes received from third parties for these investments. These valuations represent management’s best estimate of fair value of these investments at December 31, 2006 and 2007, and may or may not represent the ultimate value of these investments.

At December 31, 2006 and 2007, the Company evaluated the length of time and extent to which the fair market value of certain of its securities had been less than their cost, as well as the financial condition and performance of the issuer and the Company’s intention and ability to hold such securities to recovery or maturity. The Company records an impairment loss on securities for which the decrease in fair value of the securities was determined to be OTT. At December 31, 2006 and 2007, Nil and $13,497 respectively, of the Company’s CDOs were determined to have an OTT impairment.

F-43

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In conjunction with the purchase of the CDOs, the Company pledged certain held-to-maturity U.S. agency bonds as collateral under multiple note purchase agreements (Note 11). The pledged U.S. agency bonds are being used to repay the debt when such U.S. agency bonds mature. The total amounts of securities pledged at December 31, 2006 and 2007, were $30,504 and Nil, respectively, and the securities were classified as restricted investments.

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2006 and 2007.

	December 31, 2006
	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
U.S. Treasury obligations	$	—	$	—	$	114,423	$	2,372	$	114,423	$	2,372
CDOs		39,009		692		—		—		39,009		692
Marketable equity securities		3,047		61		—		—		3,047		61
Total	$	42,056	$	753	$	114,423	$	2,372	$	156,479	$	3,125

	December 31, 2007
	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair value		Unrealized loss		Fair value		Unrealized loss		Fair value		Unrealized loss
U.S. Treasury obligations	$	—	$	—	$	64,595	$	388	$	64,595	$	388
Marketable equity securities		179		53		948		333		1,127		386
Total	$	179	$	53	$	65,543	$	721	$	65,722	$	774

The unrealized losses on the Company’s investments in U.S. Treasury obligations were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be OTT impaired at December 31, 2006 and 2007.

The Company’s investments in marketable equity securities consist primarily of investments in common stock. The Company has evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. Based on that evaluation and the Company’s ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider these investments to be OTT impaired at December 31, 2006 and 2007.

The Company did not have any securities classified as held-to-maturity at December 31, 2007. The following table summarizes the Company’s held-to-maturity securities pledged as collateral under multiple note purchase agreements (Note 11) as of December 31, 2006:

	December 31, 2006
	Net Carrying Amount		Unrecognized Holding Gains		Unrecognized Holding Losses			Estimated Fair Value
Current:
Restricted U.S. government securities	$	30,504	$	—	$	(341	)	$	30,163

F-44

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

For the years ended December 31, 2005, 2006 and 2007, the Company did not record any gross realized gains or gross realized losses on sales of held-to-maturity securities.

At December 31, 2006 and 2007, all available-for-sale securities were carried at market value and all held-to-maturity securities were carried at amortized cost. Temporary unrealized gains and losses at December 31, 2006 and 2007, related to the available-for-sale securities were reported in accumulated other comprehensive income (loss).

All available-for-sale and held-to-maturity debt securities held by the Company have maturity terms ranging from one to five years. At December 31, 2006 and 2007, the Company’s debt securities had maturity dates falling due as follows:

	December 31, 2006		December 31, 2007
Maturity date:
Available-for-sale
One year or less	$	10,869	$	74,595
Within one year to five years		73,036		—
Total available-for-sale	$	83,905	$	74,595
Held-to-maturity
One year or less	$	30,504	$	—
Total held-to-maturity	$	30,504	$	—

8. PROPERTY AND EQUIPMENT

	December 31, 2006			December 31, 2007
Leasehold improvements	$	2,160		$	2,962
Furniture and fixtures		761			557
Office equipment		1,303			960
Computer equipment		28,869			31,398
Motor vehicles		151			266
		33,244			36,143
Less: Accumulated depreciation		(23,704	)		(16,484	)
Property and Equipment, net	$	9,540		$	19,659

Depreciation expense was $3,866, $4,385 and $6,233 for the years ended December 31, 2005, 2006 and 2007, respectively.

At December 31, 2004, the Company classified a building and the related land with a carrying amount of $2,992 as held for sale. Such assets were stated at carrying value, which was less than fair value less cost to sell. The land and building were sold in 2005, resulting in a gain of $1,181.

F-45

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

9. GOODWILL

The changes in the carrying amounts of goodwill for the years ended December 31, 2006 and 2007 are as follows:

	Software			Global Services			CDC Games		China.com			MVAS			Total
Balance as of December 31, 2005	$	107,182		$	21,153		$	—	$	5,435		$	66,893		$	200,663
Goodwill acquired during the year		4,358			5,863			14,765		—			2,246			27,232
Subsequent realization of tax benefit from acquired companies		(27,362	)		(1,006	)		—		—			(451	)		(28,819	)
Foreign currency adjustment		2,886			493			—		183			2,412			5,974
Balance as of December 31, 2006		87,064			26,503			14,765		5,618			71,100			205,050
Goodwill acquired during the year		56,700			6,492			13,051								76,243
Purchase price adjustments		—			3,429			—		—			—			3,429
Disposal of ION Global		—			(1,295	)		—		—			—			(1,295	)
Reallocation of goodwill		(1,838	)		1,838			—		—			—			—
Subsequent realization of tax benefit from acquired companies		1,591			(233	)		—		—			—			1,358
FIN 48 adjustments		(1,844	)		—			—		—			—			(1,844	)
Goodwill impairment recorded during the year		—			—			—		—			(71,096	)		(71,096	)
Foreign currency adjustment		1,577			1,024			1,504		(163	)		(4	)		3,938
Balance as of December 31, 2007	$	143,250		$	37,758		$	29,320	$	5,455		$	—		$	215,783

The regulatory environment for the MVAS industry in China changed in mid-2006 and the Company believes that market conditions will continue to be challenging for the entire MVAS sector in the future. Since the onset of the regulatory changes, the Company has significantly reduced headcount and the marketing promotion expenses incurred for the MVAS business. In 2007, the Company worked hard to explore various strategies to achieve long term growth. These strategies included: 1) continue to move further upstream into the content provider segment of the business, 2) continue to launch popular mobile games and 3) develop mobile applications for enterprises and government offices in China.

However, as the regulatory environment for the MVAS industry continues to be difficult and the Company sees no reasonable instance where its MVAS business may turn profitable in the foreseeable future, in February 2008, the Company announced that it was in the process of reducing the MVAS workforce and intended to scale down its emphasis on this business. Later in 2008, the Company made the determination that it was winding down the operations of the MVAS business and would discontinue this segment.

At December 31, 2007, the Company performed its annual impairment test and determined that all of the goodwill associated with the Company’s MVAS segment was impaired because the discounted cash flows from this segment were negative. The Company wrote off all of the goodwill that was assigned to this segment.

In 2007 the Company recorded net purchase price adjustments of $3,429 related to 2006 acquisitions. Most notably, goodwill from the DBPI acquisition was adjusted $1,989 based on a renegotiated purchase price, which resulted from an amendment to the original purchase agreement. Also, a $987 adjustment was made to the fair market values of assets and liabilities of Vis.align subsequent to recording the initial purchase accounting entries.

In 2007 the Company reallocated the goodwill from the acquisition of Vis.align from the Software segment to the Global Services segment. Vis.align was originally acquired in December of 2006 and the goodwill was assigned to the Software segment. However, during the integration process, management determined that Vis.align’s product and service offerings were more closely aligned with the Global Services segment, therefore 100% of the goodwill recognized in conjunction with this acquisition was reallocated from the Software segment to the Global Services segment. All prior periods have been adjusted to reflect this reorganization.

F-46

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

10. INTANGIBLE ASSETS

The following table summarizes the Company’s amortized intangible assets as of December 31:

	2006							2007
	Gross carrying amount		Accumulated amortization			Net		Gross carrying amount		Accumulated amortization			Net
Capitalized software:
Capitalized software	$	20,897	$	(4,512	)	$	16,385	$	28,910	$	(8,865	)	$	20,045
Acquired technologies		40,160		(16,214	)		23,946		47,422		(24,046	)		23,376
Total capitalized software		61,057		(20,726	)		40,331		76,332		(32,911	)		43,421
Other intangible assets:
Customer base and contracts		47,593		(17,413	)		30,180		78,323		(26,725	)		51,598
Business licenses and partnership agreements		18,137		(6,092	)		12,045		32,420		(17,485	)		14,935
URLs		16,950		(4,238	)		12,712		16,950		(5,182	)		11,768
Trade names		1,020		(160	)		860		3,698		(764	)		2,934
Total other intangible assets		83,700		(27,903	)		55,797		131,391		(50,156	)		81,235
Total intangible assets	$	144,757	$	(48,629	)	$	96,128	$	207,723	$	(83,067	)	$	124,656

These intangible assets are amortized using the greater of the straight-line method over the estimated useful life of the respective asset or the undiscounted cash flows method. The Company had trademarks not subject to amortization with carrying values of $7,941 and $7,949 as of December 31, 2006 and 2007, respectively. Refer to Note 4 for information on the impairment of CDC Games license fee assets.

The following table summarizes the actual amortization expense and the estimated amortization expense for each of the past three years and each of the following five years based on the current amount of capitalized software and other intangible assets subject to amortization:

	Cost of Revenue				Operating Expenses		Total
Year ended December 31:	Capitalized Software		Acquired Technologies		Other Intangible Assets
Actual:
2005	$	1,049	$	6,105	$	6,084	$	13,238
2006	$	3,347	$	6,340	$	8,315	$	18,002
2007	$	5,802	$	11,239	$	12,657	$	29,698
Estimated:
2008	$	9,077	$	7,096	$	16,017	$	32,190
2009	$	8,563	$	5,589	$	12,823	$	26,975
2010	$	2,375	$	4,857	$	9,747	$	16,979
2011	$	19	$	3,545	$	5,918	$	9,482
2012 and thereafter	$	11	$	2,289	$	36,730	$	39,030

F-47

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

11. FINANCING ARRANGEMENTS

Financing arrangements at December 31, 2006 and 2007, were as follows:

	December 31,
	2006			2007
Proceeds from issuance of convertible notes	$	168,000		$	168,000
Discount on debt		(6,141	)		(4,877	)
Fair value of compound derivative at the end of the year		5,786			11,782
Convertible notes	$	167,645		$	174,905
Credit line agreements	$	—		$	33,355
Financing agreements		18,700			—
Other financing arrangements		291			537
Total short term debt	$	18,991		$	33,892

(a) Convertible Notes

In November 2006, the Company issued $168,000 aggregate principal amount of 3.75% senior exchangeable, unsecured convertible notes due 2011 to a total of 12 institutional accredited investors in a private placement exempt from registration under the Securities Act.

Conversion Option. Under the terms of the notes, the holders have the right to exchange such notes into common shares of the Company or upon a qualifying initial public offering (“IPO”), common shares of two wholly-owned subsidiaries of the Company based on a predetermined exchange price and when the IPO is consummated.

The aggregate number of common shares of the Company’s common stock that the Company may deliver to the holders in connection with exchanges of the notes is capped at a maximum of 19.99% of the number of shares of the Company’s common stock outstanding as of the issue date of the note.

The aggregate number of common shares of each subsidiary that the Company is required to deliver to holders in connection with exchanges of the notes is capped at a maximum of 33.33% of the number of shares of each subsidiary’s common stock outstanding as of the time of the exchange.

Upon the occurrence of an IPO of either subsidiary and if the holders of the notes decide to convert the notes into the respective subsidiary’s shares, the Company has agreed to satisfy the conversion option by delivering the existing shares of its investment into the subsidiary.

The investors have agreed to a lock-up period of up to 180 days following the date of an IPO prospectus during which the investors will refrain from selling any of each subsidiary’s respective common shares.

Contingent Written Put Option 1. If a qualified IPO (defined as gross proceeds before underwriting discounts, commissions and fees, to the Company and any of its selling shareholders are at least $100,000, provided that the total gross proceeds to all selling shareholders is not in excess of 30% of the total proceeds from the IPO) by either of the two wholly-owned subsidiaries of the Company has not occurred within the first three years of issuance of the notes, the holder has the right to force the Company to repurchase all or any portion of an outstanding note in cash for an amount equal to the sum of (i) the principal of the note, (ii) all accrued and unpaid interest and (iii) any additional amounts. The accrued and unpaid interest amount will be based on an interest

F-48

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

premium of 12.5% applied retroactively as of the issue date. The additional amounts refers to the event in which the taxing jurisdiction of the U.S., Cayman Islands or the PRC were to require the Company to withhold or deduct a tax from any of the payments it is contractually obligated to make to the holder under the terms of the note agreement. The Company is required to bifurcate this put option pursuant to SFAS 133.

Contingent Written Put Option 2. If the Company or either of the two wholly-owned subsidiaries undergoes a change of control (defined as (i) a person or group obtaining 50% or more of the total voting power of all classes of capital stock, (ii) current members of the Board of Directors cease to constitute a majority of that board or (iii) consolidation into or merger with another entity or disposition of substantially all of the Company’s or the two wholly-owned subsidiaries assets, the holder has the right to force the Company to repurchase all or any portion of the outstanding note in cash for an amount equal to the sum of (i) the principal of the note, (ii) all accrued and unpaid interest, (iii) any additional amounts and (iv) a premium of 5% of the principal. The accrued and unpaid interest amount will be based on an interest premium of 12.5% applied retroactively as of the issue date. The additional amounts refers to the event in which the taxing jurisdiction of the U.S., Cayman Islands or the PRC were to require the Company to withhold or deduct a tax from any of the payments it is contractually obligated to make to the holder under the terms of the note agreement. The Company is required to bifurcate this put option pursuant to SFAS 133.

Contingent Written Put Option 3. If the Company sustains an event of default (defined as (i) failure to pay when due any principal and/or interest due on the note, (ii) default or breach in the performance of any material covenants in the note agreement or failure to timely file with the SEC all reports required to be filed pursuant to the Securities Exchange Act of 1934, as amended, (iii) default or breach in the performance of any of the material covenants in the registration rights agreement or payment of any liquidated damages under such agreement as and when due, (iv) bankruptcy, insolvency or the appointment of receivership of the Company or any of its material subsidiaries, (v) court decree that it is illegal for the Company or either of the two wholly-owned subsidiaries to comply with any of its material obligations under the note agreement and related agreements, (vi) any default of indebtedness of the Company or any of its subsidiaries that individually or in the aggregate exceeds $5,000 and such default results in the redemption or acceleration of such indebtedness, or (vii) judgment against the Company or any of its material subsidiaries for payment of money in excess of $5,000, which is not discharged within 60 days), the holder has the right to force the Company to repurchase all or any portion of the outstanding note in cash for an amount equal to the sum of (i) the principal of the note, (ii) all accrued and unpaid interest, and (iii) any additional amounts. The accrued and unpaid interest amount will be based on the lower of 18% or the highest rate permitted by applicable law, applied retroactively as of the issue date. The additional amounts refers to the event in which the taxing jurisdiction of the U.S., Cayman Islands or the PRC were to require the Company to withhold or deduct a tax from any of the payments it is contractually obligated to make to the holder under the terms of the note agreement.

Contingent Payment 1. If a qualified IPO has not occurred by the maturity of the notes and assuming the notes are still outstanding at that time, the interest rate on a note will increase from 3.75% to 12.5%, applied retroactively to the principal of the note as of the issue date. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

Contingent Payment 2. If a qualified IPO has occurred prior to the maturity of the notes and assuming the notes are still outstanding at maturity, the interest rate on a note will increase from 3.75% to 7.5%, applied retroactively to the principal of the note as of the issue date. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

F-49

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Contingent Payment 3. If an event of default has occurred and continues for 45 days, the interest rate on a note will increase from 3.75% to the lower of 18% or the highest rate permitted by applicable law and will be in effect from the date of the event of default to the earlier of (i) the date the event of default is cured or (ii) the date on which the put price with respect to Contingent Written Put Option 3 is fully paid. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

Contingent Payment 4. The Company has entered into a registration rights agreement with respect to each of the common shares deliverable upon an exchange of the notes. Under the terms of the registration rights agreement, the Company and the two wholly-owned subsidiaries of the Company have agreed to file a registration statement covering the resale of the respective common shares within 45 days after the consummation of the IPO, and to use its reasonable best efforts to have such registration statement become effective no later than the later of 60 days following the filing date or the date on which the lock-up period expires. The Company has agreed to maintain the effectiveness of the registration statement until the later of such time as all of the respective common shares which may be delivered upon exchange may be re-sold pursuant to Rule 144(k) or May 13, 2012. In the event of any of the following: (i) the registration statement is not declared effective by the applicable deadlines; (ii) after the registration statement has been declared effective, sales cannot be made by a holder under the registration statement (except for limited exceptions related to allowed delays or suspensions described below); or (iii) an amendment to the registration statement required to be filed is not filed by the required date, the Company has agreed to pay the holders an amount of cash equal to 0.5% of the aggregate principal amount of notes then held by such holder, and for each month thereafter in which the default exists, an amount of cash equal to 1%, subject to a cap for each individual default of 6%, of the aggregate principal amount of the notes outstanding.

The Company is permitted to suspend without penalty the availability of the registration statement as a result of delaying the disclosure of material, nonpublic information concerning the Company for a maximum of 20 consecutive days and no more than 60 days in any period of 365 days.

The registration rights agreement represents a contingent obligation of the Company to make future payments under a registration payment arrangement. The Company accounts for the registration rights agreement in accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS 5”) and FASB Interpretation No.14, “Reasonable Estimation of the Amount of a Loss”. At December 31, 2006 and 2007, the Company did not accrue for contingent obligation related to the registration rights agreement because of the remote likelihood that it will incur a loss under the registration rights agreement.

Contingent Payment 5. If any of the taxing jurisdictions of the U.S., Cayman Islands or the PRC were to compel the Company to withhold or deduct a tax with respect to any amounts to be paid by the Company under the note, the Company is obligated to pay such additional amounts on behalf of the note holders. The Company is required to bifurcate this contingent payment right pursuant to SFAS 133.

Dividends Participation Right. The holder of a note participates in any distributions of cash or other assets that the Company or either of the two wholly-owned subsidiaries makes to the holders of the Company or the two wholly-owned subsidiaries’ common stock, respectively. Specifically, upon declaration/payment of any such dividends, the holder can elect to either (i) receive the same amount and type of consideration as the underlying common shareholders on an as-converted basis into which the note is convertible based on the applicable conversion price then in effect or (ii) reduce the conversion price then in effect by multiplying it by a ratio that is designed to maintain the value of the conversion option.

F-50

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

In November 2006, the net proceeds of the $168,000 were allocated as follows: $161,683 to the convertible notes and $6,317 to the compound embedded derivatives liability. The initial discount on the convertible notes is being amortized as interest expense in the accompanying consolidated statements of operations over the five-year term using the effective interest method.

In accordance with SFAS 133, the Company aggregated and accounted for the embedded derivatives as one compound derivative. The compound embedded derivative is comprised of the following: Contingent Written Put Options 1 & 2, Contingent Payments 1-3 and 5. The Company used a binomial option pricing model to calculate the fair value of the Contingent Written Put Options 1 & 2 and the Contingent Payments 1 & 2. The Company valued the Contingent Payment 3 & 5 using a discounted present value approach. The Company values the embedded derivatives at each subsequent reporting period and records the change in value of the derivatives in its own line item in the accompanying consolidated statements of operations.

Details of the compound derivative for the years ended December 31, 2006 and 2007 are as follows:

	Year ended December 31,
	2006			2007
Fair value of compound derivative at the beginning of the year	$	6,317		$	5,786
(Gain) loss on change in fair value of derivatives		(531	)		5,996
Fair value of compound derivative at the end of the year	$	5,786		$	11,782

The Company recorded debt issuance costs of $3,460 in conjunction with the issuance of the convertible notes, which are included in prepayments and other current assets and other assets on the accompanying balance sheets. The debt issuance costs are being amortized over 5 years on a straight-lined basis. The amortization expense is recorded in interest expense on the accompanying statements of operations.

The estimated fair value of the Convertible Notes at December 31, 2006 and 2007 was $167,645 and $158,406, respectively.

(b) Financing Agreements

In 2006 in connection with the purchase of certain CDO investments (Note 7), the Company and China.com Inc. entered into separate and independent financing agreements with two financial institutions, collectively referred to as the “Bank”, in the aggregate nominal amount of $38,700. The Company entered into a credit facility agreement with the Bank pursuant to which the Bank agreed to pay the Company the aggregate amount of $38,700 for payment of the purchase price of the collateralized debt obligations. The Company pledged certain held-to-maturity U.S. agency bonds as collateral for payments due under the financing agreements. These pledged securities all had maturity dates within 12 months and interest rates ranging from 2.58% to 3.2%. As these securities matured, a portion of the loan was settled with the cash proceeds. At December 31, 2006, the aggregate balance of the financing agreements was $18,700, and the total amount of securities pledged at December 31, 2006, was $30,504, all of which was classified as a restricted investment. The weighted average interest rate on these agreements during 2006 and at December 31, 2006, was 5.6%. During 2007, the balance of $18,700 was paid and no pledged securities remained at December 31, 2007. The weighted average interest rate on these agreements during 2007 was 5.6%.

F-51

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(c) Credit Line Agreements

Under the line of credit arrangement with a financial institution, the Company may borrow up to $100,000 on such terms as the Company and the financial institution mutually agree upon. Interest is payable at the end of each interest period and is calculated using the London Inter-Bank Offered Rate (“LIBOR”) for the applicable interest rate period plus 0.2% per annum (4.42% at December 31, 2007). Except for loans of $10,000 that were repaid in 2006, this arrangement does not have a termination date but is reviewed annually for renewal. At December 31, 2006 and 2007, the Company had Nil and $30,000 outstanding, respectively, and the unused portion of the credit line was $100,000 and $70,000, respectively.

The Company utilized a margin facility to draw a revolving line of credit, with balances outstanding of Nil and $1,872 at December 31, 2006 and 2007, respectively. Interest is payable based upon LIBOR for the applicable interest rate period plus 0.75% per annum (4.97% at December 31, 2007). To secure the line of credit, the Company pledged some of the Company’s available-for-sale securities, which are recorded as restricted available-for-sale securities on the Company’s balance sheet.

A subsidiary of the Company had a line of credit with a financial institution in which the subsidiary may borrow up to $6,500. The loan had an outstanding balance of Nil and $905 as of December 31, 2006 and 2007, respectively and the unused portion of the credit line was $6,500 and $5,595 at December 31, 2006 and 2007, respectively. Accrued unpaid interest is payable monthly based upon LIBOR for the applicable interest rate period plus 2.20% per annum (6.42% at December 31, 2007). The loan is secured by the assets of the subsidiary.

Under the line of credit arrangement between a financial institution and subsidiary of the Company, the financial institution allows the subsidiary to borrow up to 80% of the subsidiary’s accounts receivable balance. There was an outstanding balance of Nil and $579 as of December 31, 2006 and 2007, respectively. Interest is variable and was 11.2% at December 31, 2007.

During 2006, the Company discontinued a $250,000 line of credit agreement with a financial institution. This line of credit consisted of a repurchase agreement pursuant to which the Company sold certain debt securities to the financial institution at a discounted price, and the financial institution agreed to sell the same debt securities back to the Company at the same price at the termination of the agreement. Throughout the term of the agreement the financial institution paid to the Company any income associated with the debt securities, and the Company paid to the financial institution interest calculated using LIBOR plus 0.2% per annum. Loans of $16,249 were repaid in 2006 prior to the line of credit being discontinued.

In connection with the credit lines granted to the Company, the Company maintained compensating balances of $1,996 and $5,454, in restricted cash at December 31, 2006 and 2007, respectively, available-for-sale debt securities of Nil and $30,867 at December 31, 2006 and 2007, respectively, and held-to-maturity debt securities with a net book value of $30,504 and Nil at December 31, 2006 and 2007, respectively.

The maturities of long-term debt for the five years subsequent to December 31, 2007, are as follows: 2008 - Nil; 2009 - Nil; 2010 - Nil; 2011 - $168,000; and 2012 - Nil.

The weighted average interest rates on short-term borrowings during the year were 3.6% in 2005, 4.6% in 2006 and 5.5% in 2007. The weighted average interest rates on short-term borrowings at December 31, 2006 and 2007, were 4.5% and 5.1% per annum, respectively.

As of December 31. 2007, the Company was in compliance with all of its debt covenants. During 2008, the Company determined that it violated certain terms of its Convertible Notes. See Note 23 for further details.

F-52

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) are as follows:

	Unrealized gains (losses) on available- for-sale securities			Foreign currency translation adjustments		Total
Balance at December 31, 2005	$	(2,588	)	$	5,217	$	2,629
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		681			—		681
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		11			—		11
Foreign currency translation adjustments		—			8,528		8,528
Realized losses, net of gains and income taxes included in net loss		(5	)		—		(5	)
Balance at December 31, 2006	$	(1,901	)	$	13,745	$	11,844
Unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		2,215			—		2,215
Minority interests’ share of unrealized losses, net of unrealized gains and income taxes on available-for-sale securities		(270	)		—		(270	)
Foreign currency translation adjustments		—			11,835		11,835
Realized losses, net of gains and income taxes included in net loss		(450	)		—		(450	)
Balance at December 31, 2007	$	(406	)	$	25,580	$	25,174

13. RELATED PARTY TRANSACTIONS

The Company had the following material transactions with related parties during the years ended December 31, 2005, 2006 and 2007.

(a) BBMF Group Inc. In January 2007, the Company entered into a senior secured loan agreement with BBMF Group Inc. pursuant to which it provided a $3,000 loan to BBMF, for working capital purposes and to accelerate the business expansion of the BBMF group of companies. In January 2008 all principal amounts outstanding together with interest accrued thereon was converted into common shares of BBMF Group Inc. In addition, in December 2007, CDC Games entered into a purchase agreement with an existing shareholder of BBMF Inc. to purchase 346,800 shares of BBMF, Inc. for aggregate consideration of $6,800. Under the purchase agreement, CDC Games transferred $6,800 to an escrow account in December 2007. The share purchase was completed by CDC Games in January 2008 and is included as a component of “Investments under cost method” in the Company’s consolidated balance sheets. Effective January 2008, the Company will account for this investment under the equity method. Subsequent to CDC’s investment, BBMF, Inc. distributed all of the shares of BBMF Group, Inc. held by it to its shareholders on a pro rata basis and BBMF, Inc. Currently, CDC Games directly owns approximately 20.8% of BBMF Group, Inc.

BBMF Group Inc. is owned 16.03% by Outerspace Investments Limited, an entity in which Ms. Nicola Chu is the ultimate beneficial owner. Ms. Chu is the spouse of Mr. Peter Yip, the chief executive officer of CDC Corporation. In addition, Mr. Antony Ip serves as the chairman and a director of BBMF. Antony Ip is the son of Peter Yip. In addition, Mr. Ip serves as a director of CDC Games.

F-53

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

(b) Golden Tripod Limited (“Golden Tripod”). For the years ended December 31, 2005, 2006 and 2007, the Company paid management fees of $77, $77 and $45, respectively, to Golden Tripod, an entity affiliated with Xinhua, one of the Company’s shareholders, for the provision of general management services to the Company, including consultancy fees provided by Golden Tripod.

(c) Dr. Raymond Ch’ien (“Dr. Ch’ien”). Effective August 30, 2005, Dr. Ch’ien resigned from his position as the Company’s Chief Executive Officer and Executive Chairman but continues to serve on the Board of Directors as its Chairman. In connection with his resignation, the Company entered into an agreement with Dr. Ch’ien which governs the terms and conditions of his resignation. Among other things, the agreement provides for the following:

• The Company agreed to give Dr. Ch’ien until December 31, 2005, in which to exercise 300,000 options that were granted to Dr. Ch’ien on May 11, 2004, at an exercise price of $7.77 pursuant to his executive services agreements and that had vested as of August 30, 2005. All of such options were cancelled on December 31, 2005;

• The Company agreed that 879,167 options granted to Dr. Ch’ien that had vested as of August 30, 2005, with exercise prices ranging from $2.6860 to $6.8125 per share shall not expire as long as Dr. Ch’ien remains on the Board of Directors, or until the relevant option termination date. As of May 31, 2008, Dr. Ch’ien had exercised 377,500 of such options and an additional 546,667 options remain outstanding;

• The Company agreed to grant, and did grant to Dr. Ch’ien, on January 1, 2006, 45,000 options under the 1999 Stock Option Plan. The exercise price of these options is $3.22, and such options vest in 3 equal semi-annual installments over an 18-month period from the date of grant; and

The Company agreed to continue to maintain a health insurance policy for Dr. Ch’ien, his spouse and immediate family with terms and conditions similar to that available to the Company’s other Hong Kong-based executives for as long as Dr. Ch’ien remains on the Board of Directors.

(d) Asia Pacific Online Limited (“APOL”). APOL is a Cayman Islands company that is 50% owned by the spouse of Peter Yip and 50% owned by a trust set up for the benefit of Mr. Yip’s children.

Effective April 12, 2006, the Company entered into an agreement with APOL, pursuant to which APOL would provide the services of Mr. Peter Yip as the Company’s Chief Executive Officer and Vice Chairman. The agreement has an initial term of three years, and is automatically renewable for successive terms of one year each.

In consideration of providing the services of Mr. Yip, the Company agreed to pay APOL cash remuneration of $.001 per annum; grant APOL options to purchase 2.4 million shares of the Company’s Class A common stock at an exercise price of $3.99 per share, which shall vest quarterly over a three-year period, the “Quarterly Vest Options”; and grant of options to purchase up to 2,399,999 of the Company’s Class A common stock at an exercise price of $3.99 per share, which shall vest in installments upon the achievement of specified milestones, which include the following, the “Contingent Options”:

• a public listing of the Company’s software related business;

F-54

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

• a listing of China.com Inc. outside of Hong Kong or moving China.com Inc.’s listing to the main board of the Hong Kong Stock Exchange;

• a public listing of the Company’s online games business;

• a public listing of any other business acquired by the Company after the date of this agreement or the acquisition of at least 20% of a company listed on a recognized stock exchange; and

• a public listing of any other business of the Company.

The consideration paid to APOL will be reviewed at the end of the initial term.

If the agreement with APOL is terminated for any reason other than cause, Mr. Yip’s death or by APOL by giving six (6) months advance notice, the Quarterly Vest Options accelerate and fully vest. In addition, in the event that Mr. Yip’s death or disability is tangibly related to the performance of the duties by Mr. Yip for the Company, then the Quarterly Vest Options shall accelerate and fully vest.

In the event a change of control of the Company occurs and the agreement is terminated for a reason other than cause, Mr. Yip’s death or by APOL giving six (6) months advance notice of termination, then the Quarterly Vest Options and the Contingent Options shall accelerate and fully vest. In addition, in the event a change of control of the Company occurs, and Mr. Yip remains in good standing with us or the Company’s successor through the first anniversary of such change in control, then the Quarterly Vest Options and the Contingent Options shall accelerate and fully vest. A change of control shall be deemed to occur in the event any person, other than the Company or APOL, becomes the owner of 20% or more of the combined voting power of the Company’s outstanding securities.

Under the terms of the agreement, the Company also agreed to reimburse APOL for Mr. Yip’s reasonable expenses incurred in the performance of his duties related to travel and entertaining, including duties performed on behalf of us, in accordance with the the Company’s internal policies.

In addition, as long as APOL holds at least 5% of the Company’s shares, APOL will be entitled to nominate one director to the Board of Directors, subject to the shareholders electing such nominee as a director at the next general meeting of shareholders. APOL and Mr. Yip have also agreed to a non-competition period of twelve (12) months after the termination of the agreement. In addition, the Company has agreed to reimburse all medical expenses incurred by Mr. Yip and his immediate family during the 36 months prior to the agreement.

As of December 31, 2007, APOL is the owner of 11,987,253 Class A common shares of the Company and had outstanding options to purchase additional 5,744,999 Class A common shares of the Company, of which 1,879,996 options were exercisable at December 31, 2007. Included in APOL’s outstanding option total were 600,000 Class A common shares of the Company, which were originally issued on March 25, 2004, with an exercise price of $8.25 per share, but were cancelled on January 3, 2006, and were replaced by a new grant with an exercise price of $3.22 per share. In addition, as of December 31, 2007, Mr. Yip held exercisable options to purchase 90,000 Class A common shares of the Company. Mr. Yip’s spouse also owns 4,496,396 Class A common shares of the Company.

(e) Harry Edelson lawsuit against the Company. In connection with Harry Edelson, a former director of the Company, lawsuit against the Company, the Company is paying the costs of outside counsel retained to represent Dr. Raymond Ch’ien and Peter Yip in this matter (Note 21). For the years ended December 31, 2005, 2006 and 2007, the Company paid $53, Nil and Nil, respectively, for such fees.

F-55

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

14. VARIABLE INTEREST ENTITIES

The MVAS and Internet content services are subject to foreign ownership restrictions in the PRC. To comply with the PRC laws and regulations that prohibit or restrict foreign ownership of telecommunications and other information services within the PRC, the Company provides substantially all of its MVAS and Internet portal services through its variable interest entities (“VIEs”). These VIEs are owned by certain employees of the Company who are PRC citizens (the “Nominees”). The Company funds the capital invested in these companies via interest-free loans to these PRC employees. These loans are eliminated in consolidation along with the capital of the VIEs. As of December 31, 2006 and 2007, the total amounts of interest-free loans to the Nominees were approximately $8,236 and $13,911, respectively. The Company has not pledged any assets as collateral for the obligations of any of the VIEs, and the creditors of the VIEs do not have recourse to the general credit of the Company.

The Company has entered into various contractual arrangements with the Nominees. Such contractual arrangements establish and facilitate the Company’s control over the operations of each of these VIEs. Under these contractual arrangements, each of the Nominees declares and undertakes that he or she holds equity interests in the relevant VIEs in trust for the Company. Each of these Nominees also undertakes to transfer his or her ownership in these entities to designees of the Company at any time for the amount of loans outstanding. These Nominees are also required to execute proxies to the designated representatives of the Company at the request of the Company to enable such representatives to attend and vote at shareholders’ meetings of these VIEs. Through these contractual arrangements, the Company is able to cause the individuals designated by it to be appointed as the directors and senior management of each of the VIEs.

The Company has also entered into exclusive technical service agreements with the VIEs under which the Company provides technical and other services to the VIEs in exchange for substantially all the net income of the VIEs. The technical services provided by the Company to the VIEs, as the case may be, relate to, among others, technologies in respect of MVAS and Internet content services, application software for network servers, system solutions, technical training and content development and design.

The following is a summary of the VIEs of the Company at December 31, 2007. All have been consolidated by the Company in accordance with FIN 46(R), because the Company is the primary beneficiary. The entities mentioned below have been organized under the laws of the PRC with Chinese names and do not have official English names.

(a) Beijing Newpalm Technology Co., Ltd. Beijing Newpalm Co., Ltd. (“Beijing Newpalm”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. Beijing Newpalm is owned by two PRC employees of the Company who own 50% each. The registered capital of Beijing Newpalm is $1,282.

(b) Beijing Wisecom Technology Co., Ltd. Beijing Wisecom Co., Ltd. (“Beijing Wisecom”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. Beijing Wisecom is 50% owned by the chief operation officer of China.com Inc., and the remaining 50% is owned by a PRC employee of the Company. The registered capital of Beijing Wisecom is $1,282.

(c) Beijing China.com Technology Services Co., Ltd. Beijing China.com Technology Services Co., Ltd. (“Beijing China.com”) is a PRC company which operates the portal “www.China.com”

F-56

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

under its Internet content company license and sells the online advertising space to advertisers or their agents. Beijing China.com is 40% owned by the chief operating officer of China.com Inc., and the remaining 60% is owned by two PRC employees of the Company who own 40% and 20%, respectively. The registered capital of Beijing China.com Inc. is $1,282.

(d) Beijing He He Technology Co., Ltd. Beijing He He Technology Co., Ltd. (“Beijing He He”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. Beijing He He is owned by two PRC employees of the Company who own 50% each. The registered capital of Beijing He He is $1,282.

(e) Shenzhen KK Technology Ltd. Shenzhen KK Technology Ltd. (“SZ KK”) is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. SZ KK is owned by two PRC employees of the Company who own 50% each. The registered capital of SZ KK is $1,282.

(f) Beijing TimeHeart Information Technology Ltd. Beijing TimeHeart Information Technology Ltd. ("TimeHeart") is a PRC company which provides MVAS services in Mainland China via third-party network operators under its telecommunications value-added services license. TimeHeart is owned by two PRC employees of the Company who own 50% each. The registered capital of TimeHeart is $2,116.

(g) Beijing Straight Show Technology Co., Ltd. Beijing Straight Show Technology Co., Ltd. ("Straight Show") is a PRC company which provides online media publishing services in Mainland China. Straight Show is owned by two PRC employees of the Company who own 50% each. The registered capital of Straight Show is $128.

(h) Beijing Hulian Jingwei Technology Development Co., Ltd. Beijing Hulian Jingwei Technology Development Co., Ltd. ("Hulian Jingwei") is a PRC company which provides online game publishing services in Mainland China. Hulian Jingwei is owned by two PRC employees of the Company who own 70% and 30%, respectively. The registered capital of Hulian Jingwei is $128.

(i) Beijing Dianzong Advertising Media Co., Ltd. (formerly know as Beijing Xianda Hulian Technology Development Co., Ltd.) Beijing Dianzong Advertising Media Co., Ltd. ("Dianzong") is a PRC company which provides online game publishing services in Mainland China. Dianzong is owned by two PRC employees of the Company who own 50% each. The registered capital of Dianzong is $1,282.

(j) Guangzhou Optic Communications Ltd. Guangzhou Optic Communications Ltd. ("Guangzhou Optic") is a PRC company which provides online game publishing services in Mainland China. Guangzhou Optic is owned by three PRC employees of the Company who own 34%, 33% and 33% each, respectively. The registered capital of Guangzhou Optic is $3,972.

F-57

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

15. INCOME TAXES

Under the current tax laws of the Cayman Islands, the Company and its subsidiaries are not subject to tax on income or capital gains, and no Cayman Islands withholding tax is imposed upon payments of dividends by the Company to its shareholders. The subsidiaries in all geographical regions are governed by the respective local income tax laws with statutory tax rates ranging from 0% to 40%.

Significant components of the provision for income taxes are as follows:

	Year ended December 31,
	2005			2006			2007
Current tax expense allocated to:
Continuing operations	$	1,259		$	4,144		$	5,350
Discontinued operations		—			—			—
		1,259			4,144			5,350
Deferred tax expense (benefit) allocated to:
Realization of tax benefits of acquired entities reflected as a reduction of goodwill		3,828			5,857			396
Operations		(130	)		(6,939	)		5,104
Continuing operations		3,698			(1,082	)		5,500
Total income tax expense	$	4,957		$	3,062		$	10,850
	Year ended December 31,
	2005			2006			2007
International:
Current	$	741		$	2,774		$	4,385
Deferred		1,871			3,744			5,086
U.S.:
Current		518			1,370			965
Deferred		1,827			(4,826	)		414
Total income tax expense	$	4,957		$	3,062		$	10,850

Income before provision for income taxes consists of the following:

	Year ended December 31,
	2005			2006			2007
International	$	(1,900	)	$	20,292		$	(111,541	)
U.S.		4,802			(4,078	)		(1,193	)
Income (loss) before income taxes	$	2,902		$	16,214		$	(112,734	)

F-58

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Deferred tax liabilities and assets consist of the following:

	As of December 31,
	2006			2007
Deferred tax assets:
Short-term
Deferred revenue		3,652			3,660
Accruals and reserves		4,968			4,011
Other		3,949			668
Valuation allowance		(7,508	)		(4,916	)
Net short-term deferred tax assets		5,061			3,423
Long-term
Net operating loss carryforwards		77,727			81,573
Net capital loss carryforwards		3,902			5,347
Book and tax base differences on assets		2,172			2,533
Alternative minimum tax credit		385			66
Investment Tax Credit		—			2,761
Research and development		1,963			2,723
Deferred compensation		1			—
Other		—			7,342
Valuation allowance		(51,461	)		(57,769	)
Net long-term deferred tax assets		34,689			44,576
Total net deferred tax assets		39,750			47,999
Deferred tax liabilities:
Short-term
Other	$	(1,641	)	$	(942	)
Total short-term deferred tax liabilities		(1,641	)		(942	)
Long-term
Acquired intangible assets		(10,700	)		(19,798	)
Capitalized software		(1,477	)		(3,280	)
Indefinite lived assets		(2,764	)		(2,427	)
Other		(1,100	)		(2,991	)
Total long-term deferred tax liabilities		(16,041	)		(28,496	)
Total deferred tax liabilities		(17,682	)		(29,438	)
Net deferred tax asset	$	22,068		$	18,561

F-59

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The reconciliation of income taxes computed at the respective statutory tax rates, which ranged from 0% to 40% for each of the years ended December 31, 2005, 2006 and 2007, to the effective income tax provision recorded is as follows:

	Year ended December 31,
	2005			2006			2007
Income tax expense computed at the respective statutory rates	$	2,679		$	5,038		$	(13,712	)
Changes in tax rates		875			94			2,287
Tax holiday concession		(2,551	)		(5,052	)		(1,745	)
Impact of foreign earnings		—			—			3,704
Non-deductible items		2,594			3,288			16,715
Prior year true-up		—			(34	)		286
Other		—			129			(1,177	)
Non-taxable items		(1,938	)		—			—
Capital loss		—			—			(1,288	)
Credits		—			—			(1,569	)
Change in acquisition goodwill affecting provision for income taxes		—			—			243
Change in valuation allowance affecting provision for income taxes		3,298			(401	)		7,106
Total income tax expense from continuing operations	$	4,957		$	3,062		$	10,850
Total income tax expense (benefit) from discontinued operations	$	—		$	—		$	—

The Company considers itself to be permanently reinvested with respect to its investment in its foreign subsidiaries. Accordingly, no deferred income tax liability related to its foreign subsidiaries’ unremitted earnings have been included in the Company's provision for income taxes. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to income taxes and withholding taxes payable in various non-Cayman jurisdictions, which could potentially be offset by foreign tax credits. Determination of the amount of unrecognized deferred income tax liability is not practicable because of the complexities associated with the hypothetical calculation.

Due to its history of losses, the Company does not believe that sufficient objective and positive evidence currently exists to conclude that the recoverability of certain of its deferred tax assets is more likely than not. Consequently, the Company has provided valuation allowances of $58,969 and $62,685 as of December 31, 2006 and 2007, respectively, to cover its net deferred tax assets. The valuation allowance for deferred tax assets has increased by $3,716 in 2007.

At December 31, 2007, the Company had world wide net operating loss carryforwards of approximately $299,496 for income tax purposes, $126,181 of which will expire from 2008 to 2028 and $173,315 of which can be carried forward indefinitely. In the U.S., the Company had federal and state net operating loss carryovers of $69,956 of which $60,060 are subject to significant limitation provisions. The Company also had a U.S. net capital loss carryover of $10,279 which will expire in 2008 and are subject to significant limitation provisions. The limitation provisions which are imposed by the U.S. Internal Revenue Service significantly restrict the Company’s ability to realize the benefits of these U.S. carryovers.

Effective January 1, 2007, the Company adopted FIN 48 which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under the

F-60

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

interpretation, the Company shall recognize the financial statement effects of a tax position when it is more likely than not, based upon the technical merits, that the position will be sustained upon examination. Conversely, the Company shall derecognize a previously recognized tax position in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination. A tax position that meets the more likely than not recognition threshold shall initially and subsequently be measured as the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with a taxing authority. The Company also recognizes interest expense by applying a rate of interest to the difference between the tax position recognized in accordance with FIN 48 and the amount previously taken or expected to be taken in a tax return. The Company classifies interest expense and related penalties, if any, with respect to its uncertain tax positions in the provision for income taxes.

Upon adoption of FIN 48, $2,505 was recorded as an adjustment to opening retained earnings.

For the year ended December 31, 2007 the Company recognized $1,530 of additional interest and penalties related to its unrecognized income tax benefits in its income tax provision. As of December 31, 2007 the Company’s cumulative FIN 48 accrual includes $1,950 in interest and penalties.

The following table describes the tax years that remain subject to examination by major tax jurisdictions:

Tax Jurisdictions	Open Years
United States	1995 - 2007
Non – United States	1999 -2007

The following table summarizes the changes to the gross amounts of unrecognized tax benefits during the year ended December 31, 2007.

	2007
Balance as of January 1,	$	7,406
Increases related to prior year tax positions		890
Decreases related to prior year tax positions		(3,450	)
Increases related to current year tax positions		4,103
Settlements		—
Lapse of statute of limitations		—
Foreign currency impact		151
Balance as of December 31,	$	9,100

These liabilities are primarily included as a component of long-term “Other liabilities” in the Company’s consolidated balance sheets because the Company generally does not anticipate that settlement of the liabilities will require payment of cash within the next twelve months. As of December 31, 2007, $4,300 of unrecognized tax benefits, if recognized in future periods, would impact our effective tax rate.

The Company operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited or subject to review by both domestic and foreign tax authorities.

It is expected that the amount of unrecognized tax benefits will change for various reasons in the next 12 months; however, the Company does not expect that change to have a significant impact on its financial position or results of operations.

F-61

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Newpalm (China) Information Technology Company Limited (“Newpalm”), a subsidiary of Palmweb Inc. established in the PRC, is governed by the Income Tax Laws of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws (the “PRC Income Tax Laws”). Pursuant to the PRC Income Tax Laws, Newpalm is subject to corporate income tax at a rate of 33% (30% state income tax plus 3% local income tax). Under the PRC Income Tax Laws, foreign investment enterprises satisfying certain criteria receive preferential tax treatment. Because Newpalm has obtained the status of “manufacturing enterprise”, it is entitled to a reduced corporate income tax rate of 15%. During the year ended December 31, 2005, Newpalm received a confirmation from the relevant tax authorities that it would be fully exempt from PRC corporate income tax for the 2004 fiscal year and is entitled to a 50% tax reduction from 2005 to 2007 fiscal years. The tax concessions were $1,479 and $199 for the years ended December 31, 2006 and 2007, respectively, and the per share effects were approximately Nil and Nil for the years ended December 31, 2006 and 2007, respectively.

Beijing He He established in the PRC, is governed by the PRC Income Tax Laws. Under the PRC Income Tax Laws, enterprises satisfying certain criteria receive preferential tax treatment. Because Beijing He He has obtained the status of “new high technology enterprise” and is registered and operating in the Beijing Zhongguancun Science Park, it is entitled to a reduced corporate income tax rate of 15% upon expiry of its tax holiday period. Beijing He He was granted a “tax holiday” for exemption of PRC corporate income tax for three years starting from 2003 and is entitled to a 50% tax reduction, subject to official approval from the relevant PRC tax authority, for three consecutive years starting from 2006. The tax concession was $90 and $54 for the years ended December 31, 2006 and 2007, respectively, and the per share effect was approximately Nil and Nil for the years ended December 31, 2006 and 2007.

Pivotal Bangalore Software Development Private Limited (“Pivotal India”), a subsidiary of Pivotal Corporation established in India, is subject to Indian corporate income tax at a rate of 35%. Upon fulfilling certain criteria, Pivotal India is entitled to certain Indian corporate income tax exemptions due to its status as a “100% Software Export Oriented Unit” located in the Bangalore Software Technology Park. Management believes that the necessary criteria for tax exemption have been met for the full year of 2006 and 2007 and accordingly, no provision for Indian corporate income tax has been made for the years. The tax concessions were $289 and $356 for the years ended December 31, 2006 and 2007, respectively, and the per share effect was Nil and Nil for the years ended December 31, 2006 and 2007. The corporate income tax exemption is available until March 31, 2010. Management believes that Pivotal India will fulfill the necessary criteria for tax exemption in future periods. The effect of the future tax exemptions will be recognized when the fulfillment of such criteria is ascertained.

16. BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per share for the years ended December 31, 2005, 2006, and 2007, are calculated using the two-class stock method, which is an earnings allocation formula that determines earnings (loss) per share for each class of common stock and participating security according to participation rights in undistributed earnings. Basic earnings (loss) per share are calculated by dividing net earnings available to common stockholders by weighted-average common shares outstanding during the period. Diluted earnings (loss) per common share are calculated by dividing net earnings available to common stockholders by weighted-average common shares outstanding during the period plus dilutive potential common shares. Dilutive potential common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options are used to repurchase common stock at market value. The amount of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities.

F-62

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table sets forth the computation of basic and diluted earnings (loss) per share:

	2005						2006						2007
	Basic			Diluted			Basic			Diluted			Basic			Diluted
Numerator for basic and diluted earnings (loss) per share:
CDC Corporation net income (loss)	$	(3,514	)	$	(3,514	)	$	10,840		$	10,840		$	(105,033	)	$	(105,033	)
Net adjustments(a)		50			46			—			(9	)		—			—
Adjusted earnings (loss) available from continuing operations		(3,464	)		(3,468	)		10,840			10,831			(105,033	)		(105,033	)
Amount allocated to convertible noteholders		—			—			(223	)		(225	)		—			—
Net earnings (loss) available to common stockholders from continuing operations		(3,464	)		(3,468	)		10,617			10,606			(105,033	)		(105,033	)
Earnings (loss) available from discontinued operations		(50	)		(50	)		—			—			—			—
Net earnings (loss) available to common stockholders for per-share calculation	$	(3,514	)	$	(3,518	)	$	10,617		$	10,606		$	(105,033	)	$	(105,033	)
Denominator for basic and diluted earnings (loss) per share:
Weighted average number of shares after adjusting for share splits		111,085,657			111,085,657			107,950,544			107,950,544			107,160,474			107,160,474
Employee compensation related shares, including stock options(b)		—			—			—			1,128,848			—			—
Total weighted average number of shares		111,085,657			111,085,657			107,950,544			109,079,392			107,160,474			107,160,474
Per share amounts:
Earnings (loss) from continuing operations	$	(0.03	)	$	(0.03	)	$	0.10		$	0.10		$	(0.98	)	$	(0.98	)
Earnings (loss) from discontinued operations		(0.00	)		(0.00	)		—			—			—			—
Net earnings (loss) per share	$	(0.03	)	$	(0.03	)	$	0.10		$	0.10		$	(0.98	)	$	(0.98	)

(a) Includes the basic and dilutive effects of subsidiary-issued stock-based awards.

(b) The computation of diluted earnings (loss) per share did not assume the conversion of the Company’s stock options for 2005 and 2007 because their inclusion would have been antidilutive.

Income has been allocated to the common stock and convertible notes based on their respective rights to share in dividends. 2,263,642 and 16,200,579 weighted average shares related to the convertible notes were not included in the 2006 and 2007 diluted earnings per share calculations, respectively, because to do so would have been antidilutive.

Earnings-per-share amounts are computed independently for earnings (loss) from continuing operations, earnings (loss) from discontinued operations and net earnings (loss). As a result, the sum of per-share amounts from continuing operations and discontinued operations may not equal the per-share amounts for net earnings.

During the years ended December 31, 2006 and 2007, the Company agreed to issue 343,617 and 162,936, respectively, Class A common shares in future years as additional purchase consideration for acquired subsidiaries. All of these shares have been included in the Company’s weighted average basic and diluted earnings per share calculation for the years ended December 31, 2006 and 2007.

17. CONCENTRATION OF RISKS

The Company is exposed to market risk from changes in foreign currency exchange rates and to a lesser extent, interest rates which could affect its future results of operations and financial condition. The Company manages the exposure to these risks through its operating and financing activities.

F-63

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Risks Related to CDO Investments (Note 6)

The equity portion of the Company’s investment in CDOs represents preference shares in the residual value of the underlying securities in the CDO. The underlying securities in the CDO are debt obligations of varying quality and risk. The preference shares are subject to the following types of risk:

Illiquidity and Market Value Volatility Risk

There can be no assurance of a liquid secondary market for our CDO investments. Our investment in preference shares could be particularly exposed to both liquidity and market value volatility risk if a CDO is required to liquidate assets and is forced to accept sales prices less than those paid for the assets or less than what the collateral manager may consider to be their fair value. The collateral consists primarily of securities not registered under the Securities Act of 1933 and should be considered illiquid. As a result, should a default or event of default occur under the CDO Indenture which would permit or require liquidation of the collateral, there is no assurance that a ready market will exist for the collateral, and the proceeds of such sale may not be sufficient to repay the preference shares in full.

Prepayment Risk

The amount and frequency of payments of amounts due to the holders of preference shares in a CDO investment will depend on, among other things, the level of LIBOR, treasury yields and spreads, returns with respect to eligible investments, the extent to which portfolio collateral becomes defaulted portfolio collateral and scheduled payments of principal or retirement prior to the stated maturity of the underlying collateral through mandatory or optional redemption, sale, maturity or other liquidation or disposition. In addition, the redemption (upon a mandatory redemption) or other payment of principal of the underlying collateral, which will depend in part on the foregoing factors, will result in reduced leverage and may affect the yield to holders of the preference shares.

Default and Yield Risk

Preference shares in a CDO investment typically bear the risk of loss or other shortfalls prior to any classes of securities which are senior to them, and as a consequence are extremely sensitive to the delinquency and loss performance of the underlying assets. Any such losses and other shortfalls with respect to the collateral will be borne first by the holders of the preference shares and then by the holders of the most junior class of notes then outstanding. Further, the rate at which principal payments will be received on the securities will be dependent on the rate of principal payments (including prepayments) on the underlying assets and may fluctuate significantly over time. Such fluctuations will affect the yield to the issuer, as holder of such securities. The entities housing these CDO investments are VIEs. However, as the Company’s ownership in each does not constitute a primary beneficiary interest, the Company has not consolidated either entity.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, investments, accounts receivable, notes receivable and other receivables. The maximum amount of loss would be $124,773 if the counterparties for non-government sponsored entity security investments, accounts receivable, notes receivable and other receivables failed to perform.

The Company maintains cash and cash equivalents and investments with various financial institutions in the countries in which it operates. The Company has its policy to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company’s investment strategy. The Company does not require collateral on these financial instruments.

Concentration of credit risk with respect to accounts receivable is limited due to the large number of entities comprising the Company’s customer base. The Company generally does not require collateral for accounts receivable.

F-64

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Concentration of Business Risk

Revenue has been derived from a number of clients that use the Company’s services. The top 10 customers accounted for 18%, 15% and 11% of the Company’s revenue for the years ended December 31, 2005, 2006 and 2007, respectively.

Dependence on Mobile Telecommunication Operators

The Company offers mobile services and applications to customers primarily through the two mobile network operators in the PRC, China Mobile Communications Corporation and China United Telecommunications Corporation, which serve most of the PRC’s mobile subscribers. Such dominant market position limits the Company’s negotiating leverage with these network operators. If the Company’s various contracts with either network operator are terminated or adversely altered, it may be impossible to find appropriate replacement operators with the requisite licenses and permits, infrastructure and customer base to offer the services, and the business would be significantly impaired. For the year ended December 31, 2007, the Company derived 2.1% of its total revenue from mobile services and applications business, a substantial portion of which was derived using the networks of the mobile network operators.

Current Vulnerability due to Certain Concentrations

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. The PRC government has been pursuing economic reform policies for the past 20 years. However, the PRC government may discontinue or alter such policies especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. Additionally, the PRC government’s pursuit of economic reforms may not be consistent or effective.

The PRC has recently enacted new laws and regulations governing Internet access and the provision of online business, economic and financial information. Current or proposed laws aimed at limiting the use of online services to transmit certain materials could, depending upon their interpretation and application, result in significant potential liability to the Company, as well as additional costs and technological challenges in order to comply with any statutory or regulatory requirements imposed by such legislation. Additional legislation and regulations that may be enacted by the PRC government could have an adverse effect on the Company’s business, financial condition and results of operations.

The Renminbi (“RMB”) is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China. However, the unification of the exchange rates does not imply the convertibility of RMB into U.S. dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. At December 31, 2006 and 2007, the Company had RMB-denominated currency holdings amounting to $25,981 and $14,339, respectively.

F-65

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

18. SHARE CAPITAL

Pursuant to its articles of association, the Company is authorized to issue up to 800,000,000 shares of Class A common shares and up to 5,000,000 shares of preferred shares. The holder of each Class A Common Share is entitled to one vote on all matters upon which the Class A Common Share is entitled to vote. The Board of Directors is authorized, without further action by the shareholders, to issue preferred shares in one or more series and to fix the designations, powers, preference, privileges and relative participatory, optional or special rights and the qualifications, limitation or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of common shares. At December 31, 2006 and 2007, there are no preferred shares outstanding.

The following table sets forth the number and price range of shares issued during the years ended December 31, 2005, 2006 and 2007, from the exercise of stock options granted to employees, and the number and price range of shares repurchased and retired during the years ended December 31, 2005, 2006 and 2007:

	Year ended December 31, 2005		Year ended December 31, 2006		Year ended December 31, 2007
Class A common shares issued for exercise of stock options		281,523		2,400,796		2,926,391
Range of purchase prices per share	$	0.43 to $3.49	$	0.43 to $8.34	$	0.43 to $8.93
Class A common shares issued for exercise of employee stock purchase plan		177,873		161,232		191,649
Range of purchase prices per share	$	2.58 to $2.67	$	4.49 to $9.07	$	7.33 to $9.04
Class A common shares repurchased		—		6,088,624		2,794,314
Range of repurchase prices per share		—	$	3.91 to $5.67	$	3.96 to $9.58

During the year ended December 31, 2005, 12,423 Class A common shares of the Company were issued at $4.35 per share for the acquisition of Ross.

During the year ended December 31, 2006, 15,710 Class A common shares of the Company were issued at prices ranging from $4.14 to $5.73 per share in connection with the acquisition of Ross.

During the year ended December 31, 2006, 150,000 Class A common shares of the Company were issued at prices ranging from $3.95 to $6.15 per share for the acquisition of c360.

During the year ended December 31, 2006, the Company agreed to issue 343,617 Class A common shares during future years as additional purchase consideration for acquired subsidiaries.

F-66

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

19. STOCK-BASED COMPENSATION PLANS

CDC Corporation

2005 Stock Incentive Plan

On November 4, 2005, the Company’s shareholders approved the 2005 Stock Incentive Plan (the “2005 Plan”). The purpose of the 2005 Plan is to make available incentives, including alternatives to stock options, that will assist the Company to attract and retain key employees and to encourage them to increase their efforts to promote the business of the Company and its subsidiaries. These incentives include stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash. During 2007, options for the purchase of an additional 10 million shares were approved by the shareholders of the Company, which increased the options available for grants for the purchase of shares to 30 million.

Subject to adjustments under certain conditions, the maximum aggregate number of Class A Common Shares (“Shares”) which may be issued pursuant to all awards under the 2005 Plan is the aggregate number of Shares available for future grants and Shares subject to awards which expire or are cancelled or forfeited under the 1999 Stock Option Plan (the “1999 Plan”). As of December 31, 2007, of the 30 million Shares reserved for grant under the 1999 Plan, 10,674,176 Shares remain available for future grant, and there are 12,822,678 Shares to be issued upon the exercise of outstanding options under the 1999 Plan. The 2005 Plan is administered by a committee of the Board of Directors, which will determine, at its discretion, the number of shares subject to each option granted and the related exercise price and option period.

1999 Plan

The Company’s 1999 Plan was replaced by the 2005 Plan described above. Upon adoption of the 1999 Plan, 12 million Shares were reserved for issuance to employees of, consultants and advisors to the Company and its subsidiaries. During 2000, options for the purchase of an additional 8 million Shares were made available, which increased the options available for grants for the purchase of Shares to 20 million. Options granted under the 1999 Plan vest ratably over a period of 1 to 4 years, and have terms of 10 years.

On December 29, 2005, the Company’s Compensation Committee approved the acceleration of vesting of certain unvested and “out of the money” stock options with exercise prices equal to or greater than $3.50 per share which were previously awarded to employees, including executive officers and directors, under the 1999 Plan. The acceleration was effective as of December 29, 2005. Options to purchase approximately 1.7 million shares of common stock, or 37 % of the Company’s outstanding unvested options, were subject to the acceleration. The options had a range of exercise prices of $3.79 to $7.38 and a weighted average exercise price of $4.32. The purpose of the acceleration was to enable the Company to avoid recognizing compensation expense associated with these options upon the adoption of SFAS 123(R) in January 2006. The Company also believed that because the options that were accelerated had exercise prices in excess of the current market value of the Company’s common stock, the options had limited economic value and were not fully achieving their original objective of employee retention and incentive compensation.

F-67

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table summarizes information concerning outstanding options and stock appreciation rights at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.43-$0.95	29,103	6.64	$	0.44	$	129
$1.06-$1.98	26,173	6.26	$	1.70		83
$2.05-$2.99	746,475	6.10	$	2.84		1,513
$3.02-$3.80	2,546,346	7.57	$	3.27		4,085
$3.95-$5.00	6,829,843	8.10	$	4.18		4,747
$5.06-$9.94	2,379,276	7.96	$	6.73		—
$10.66-$19.19	69,122	6.21	$	12.41		—
$21.62-$29.92	165,940	2.39	$	24.34		—
$32.13-$48.41	15,200	2.19	$	39.02		—
$58.56-$68.81	15,200	2.32	$	59.12		—
December 31, 2007 outstanding	12,822,678				$	10,557

The following table summarizes information concerning exercisable options and stock appreciation rights at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.43-$0.95	28,982	6.64	$	0.44	$	128
$1.06-$1.98	25,629	6.26	$	1.69		81
$2.05-$2.99	625,111	5.80	$	2.83		1,278
$3.02-$3.80	1,500,774	7.29	$	3.29		2,365
$3.95-$5.00	2,896,511	7.76	$	4.41		1,328
$5.06-$9.94	1,044,762	6.26	$	6.30		—
$10.66-$19.19	29,122	2.32	$	15.24		—
$21.62-$29.92	165,940	2.39	$	24.34		—
$32.13-$48.41	15,200	2.19	$	39.02		—
$58.56-$68.81	15,200	2.32	$	59.12		—
December 31, 2007 exercisable	6,347,231				$	5,180

F-68

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table summarizes information concerning options and stock appreciation rights expected to vest at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.43-$0.95	87	6.65	$	0.43	$	—
$1.06-$1.98	392	6.65	$	1.84		1
$2.05-$2.99	87,382	7.66	$	2.93		169
$3.02-$3.80	827,712	7.96	$	3.22		1,362
$3.95-$5.00	3,839,999	8.33	$	4.00		3,348
$5.06-$9.94	960,850	9.28	$	7.06		—
$10.66-$19.19	28,800	9.04	$	10.36		—
$21.62-$29.92	—	—		—		—
$32.13-$48.41	—	—		—		—
$58.56-$68.81	—	—		—		—
December 31, 2007 expected to vest	5,745,222				$	4,880

A summary of the Company’s stock option and stock appreciation rights activities and related information for the years ended December 31, 2005, 2006 and 2007, is as follows:

	2005
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		12,531,297		$	5.60
Granted		2,629,500		$	3.03
Forfeited		(3,212,136	)	$	6.12
Exercised		(281,523	)	$	1.33
Outstanding at the end of the year		11,667,138		$	4.98
Exercisable at the end of the year		9,523,610
Weighted-average grant-date fair value of options granted during the year	$	1.67
Intrinsic value of options exercised during the year	$	363

F-69

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	2006
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		11,667,138		$	4.98
Granted		9,252,999		$	4.15
Forfeited		(2,597,132	)	$	7.15
Exercised		(2,492,673	)	$	3.18
Outstanding at the end of the year		15,830,332		$	5.19
Exercisable at the end of the year		7,247,170		$	5.11
Weighted-average grant-date fair value of options granted during the year	$	2.51
Intrinsic value of options exercised during the year	$	7,934

	2007
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		15,830,332		$	5.19
Granted		1,466,892		$	6.17
Forfeited		(1,471,598	)	$	5.82
Exercised		(3,002,948	)	$	4.01
Outstanding at the end of the year		12,822,678		$	5.06
Exercisable at the end of the year		6,347,231		$	4.79
Weighted-average grant-date fair value of options granted during the year	$	3.14
Intrinsic value of options exercised during the year	$	14,361

The Company accounts for stock appreciation rights in accordance with SFAS 123(R). Stock appreciation rights are settled in shares and have similar characteristics as stock options. The Company issued no stock appreciation rights in 2005, and it issued 2,878,000 and 1,466,892 in 2006 and 2007, respectively. Included in the number of options are 2,789,002 stock appreciation rights outstanding at December 31, 2007.

Compensation expense charged to operations during the years ended December 31, 2006 and 2007, relating to stock options and stock appreciation rights was $3,902 and $5,426, respectively. As of December 31, 2007, the Company had unrecognized compensation expense of $8,383 before taxes, related to stock option awards and stock appreciation rights. The unrecognized compensation expense is expected to be recognized over a total weighted average period of 1.0 years.

The fair value of options that vested during the years ended December 31, 2005, 2006 and 2007, was not significantly different than the amount of stock compensation expense that was charged to operations during the years ended December 31, 2006 and 2007, or that would have been charged to operations during the year ended December 31, 2005 under SFAS 123(R) as disclosed within Note 2. Net cash proceeds from the exercise of stock options during the years ended December 31, 2005, 2006 and 2007, were $1,052, $8,512 and $11,121, respectively.

F-70

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Management estimated the fair value of stock option awards on the date of grant or modification using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected share price volatility and average expected term. The main inputs into the model are estimated by management based on historical performance and management’s expectations of future results on the date of grant or modification. The fair value of each option grant was estimated at the date of grant or modification using the following weighted average assumptions:

	Year ended December 31,
	2005		2006		2007
Range of U.S. risk-free interest rates	4.12% to 4.76	%	4.50% to 4.76	%	3.58% to 5.04	%
Weighted expected life of options	5 years		6 years		5 years
Range of volatility	58% to 69	%	55% to 58	%	61% to 62	%
Dividend yield	Nil		Nil		Nil

2004 Employee Share Purchase Plan

During 2004, the Company established and implemented an employee share purchase plan, which qualified as a non-compensatory plan under Section 423 of the U.S. Internal Revenue Code. The plan allows qualified employees to purchase Class A common shares during the relevant six-month plan period. Qualifying employees are allowed to purchase up to 1,000 Class A common shares for each plan period. The maximum number of Class A common shares, issuable under the plan is 2,000,000, and a maximum of 300,000 shares will be available for issuance during each plan period. Compensation expense charged to operations during the years ended December 31, 2006 and 2007, relating to the employee share purchase plan was $324 and $454.

China.com Inc.

The Company’s China.com Inc. subsidiary is registered on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (“GEM”) and maintains certain stock-based compensation plans in addition to those maintained by the Company. China.com Inc. adopted a pre-IPO share option plan (the “Pre-IPO Plan”) and post-IPO share option plan (the “Post-IPO Plan”) on February 25, 2000, which will remain in force for 10 years. On April 30, 2002, China.com Inc. adopted a 2002 share option plan (the “2002 Plan”) which has an option life of 10 years. The Pre-IPO Plan and the Post-IPO Plan were operated for the purpose of recognizing the contributions of certain directors, employees, consultants and advisors of China.com Inc. and employees of the Company to the growth of China.com Inc. and/or the listing of shares of China.com Inc. on the GEM, while the 2002 Plan was operated for providing incentives and rewards to eligible participants who contribute to the success of China.com Inc.’s operations. Eligible participants of the Pre- IPO Plan and the Post-IPO Plan include China.com Inc.’s directors, consultants and advisors of China.com Inc., and employees of China.com Inc. The eligible participants of the 2002 Plan include China.com Inc.’s directors, full-time and part-time employees, advisors, consultants, vendors and suppliers of China.com Inc. and employees of the Company (as defined in the 2002 Plan).

The maximum number of shares which can be granted under the Pre-IPO Plan and the Post-IPO Plan must not exceed 10% of the issued share capital of China.com Inc. as at the date of listing of the shares on the GEM. For the 2002 Plan, the maximum number of shares which can be granted must not exceed 10% of the issued shares of China.com Inc. at the date of approval of such plan. At December 31, 2007, the number of shares issuable under the Pre-IPO Plan, the Post-IPO Plan and the 2002 Plan was 11,980,000, 1,279,012 and 340,899,322, respectively, which represented

F-71

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

approximately 8.08% in aggregate of China.com Inc.’s shares in issue at that date. Pursuant to the Pre-IPO Plan and the Post-IPO Plan (the “Plans”), no participant shall be granted an option which, if accepted and exercised in full, would result in such participant’s maximum entitlement exceeding 25% of the aggregate number of shares of China.com Inc. subject to the Plans. The maximum number of shares issuable as share options to each eligible participant in the 2002 Plan in any 12-month period up to and including the date of the grant to such participant shall not exceed 1% of the issued share capital of China.com Inc. from time to time. Any further grant of options in excess of this 1% limit must be subject to shareholders’ approval with that participant and associates abstaining from voting.

Share options granted to a director, chief executive, management shareholder or substantial shareholder of China.com Inc., or to any of their associates, are subject to approval in advance by the independent non-executive directors. In addition, any share options granted to a substantial shareholder or an independent non-executive director of China.com Inc., or to any of their associates, in excess of 0.1% of the shares of China.com Inc. in issue at any time or with an aggregate value (based on the closing price of China.com Inc.’s shares at the date of the grant) in excess of $641, within any 12-month period, are subject to shareholders’ approval in advance in a general meeting.

The offer of a grant of share options under the Plans must be accepted within 14 days from the date of the offer, upon payment of a nominal consideration of $.0001 in total by the grantee. For the 2002 Plan, the offer of a grant of share options must be accepted within 7 days from the date of the offer upon payment of a nominal consideration of $.0001 in total by the grantee. The exercise period of the share options granted is determinable by the directors. However, for the Plans, each of the grantees of the options is not allowed to exercise in aggregate in excess of 25%, 50% and 75% of shares comprised in the options granted within the first, second and third years from one year after the date of grant of options, respectively. All option shares must be exercised within 10 years from the date of grant of options.

The exercise price for the Pre-IPO Plan is determined by the final Hong Kong dollar price per share at which the shares are subscribed pursuant to the placing of 640,000,000 shares by China.com Inc. to professional and institutional investors and other persons made on the terms of the prospectus issued by China.com Inc. on 28th February, 2000 ($0.24 per share).

The exercise prices of the Post-IPO Plan and the 2002 Plan share options are determinable by the directors, but may not be less than the higher of (i) the closing price of China.com Inc.’s shares on the Stock Exchange on the date of grant of the share options; (ii) the average Stock Exchange closing price of China.com Inc.’s shares for the five trading days immediately preceding the date of the grant of the share options; and (iii) the nominal value of the share.

The share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

At December 31, 2007, the remaining life of the Plans is two years and two months, and the remaining life of the 2002 Plan is four years and four months.

F-72

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

The following table summarizes information concerning outstanding options at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.022-$0.026	32,290	5.15	$	0.02	$	1
$0.037-$0.044	228,392	3.51	$	0.04		2
$0.065-$0.092	341,917,652	8.33	$	0.06		—
$0.24	11,980,000	2.18	$	0.24		—
December 31, 2007 outstanding	354,158,334				$	3

The following table summarizes information concerning exercisable options at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.022-$0.026	32,290	5.15	$	0.02	$	1
$0.037-$0.044	228,392	3.51	$	0.04		2
$0.065-$0.092	114,252,343	8.00	$	0.06		—
$0.24	11,980,000	2.18	$	0.24		—
December 31, 2007 exercisable	126,493,025				$	3

The following table summarizes information concerning options expected to vest at December 31, 2007.

Exercise price range	Shares	Weighted- average remaining contractual life (in years)	Weighted- average exercise price per share		Aggregate Intrinsic Value
$0.022-$0.026	—	—		—	$	—
$0.037-$0.044	—	—		—		—
$0.065-$0.092	207,175,431	8.49	$	0.06		—
$0.24	—	—		—		—
December 31, 2007 expected to vest	207,175,431				$	—

F-73

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

A summary of China.com Inc.’s stock option activities and related information for the years ended December 31, 2005, 2006 and 2007, is as follows:

	2005
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		183,321,129		$	0.16
Granted		86,666,667		$	0.07
Forfeited		(16,068,534	)	$	0.18
Exercised		(26,579,592	)	$	0.04
Outstanding at the end of the year		227,339,670		$	0.14
Exercisable at the end of the year		114,609,023
Weighted-average grant-date fair value of options granted during the year	$	0.05
Intrinsic value of options exercised during the year	$	709

	2006
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		227,339,670		$	0.14
Granted		316,056,507		$	0.06
Forfeited		(181,091,442	)	$	0.14
Exercised		(38,748	)	$	0.03
Outstanding at the end of the year		362,265,987		$	0.07
Exercisable at the end of the year		50,336,575
Weighted-average grant-date fair value of options granted during the year	$	0.04
Intrinsic value of options exercised during the year	$	2

F-74

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	2007
	Options Outstanding			Weighted- average exercise price
Outstanding at the beginning of the year		362,265,987		$	0.07
Granted		3,950,000		$	0.06
Forfeited		(9,075,355	)	$	0.07
Exercised		(2,982,298	)	$	0.06
Outstanding at the end of the year		354,158,334		$	0.07
Exercisable at the end of the year		126,493,025		$	0.08
Weighted-average grant-date fair value of options granted during the year	$	0.05
Intrinsic value of options exercised during the year	$	55

Compensation expense charged to operations during the year ended December 31, 2006 and 2007, relating to stock options was $3,474 and $2,568. As of December 31, 2007, China.com Inc. had unrecognized compensation expense of $1,131 before taxes, related to stock option awards. The unrecognized compensation expense is expected to be recognized over a total weighted average period of 0.8 years.

The fair value of options that vested during the years ended December 31, 2005, 2006 and 2007, was not significantly different than the amount of stock compensation expense that was charged to operations during the years ended December 31, 2006 and 2007, or that would have been charged to operations during the year ended December 31, 2005, under SFAS 123(R) as disclosed within Note 2. Net cash proceeds from the exercise of stock options during the years ended December 31, 2005, 2006 and 2007, were $1,143, $1 and $180, respectively.

Management estimated the fair value of stock option awards on the date of grant or modification using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected share price volatility and average expected term. The main inputs into the model are estimated by management based on historical performance and management’s expectations of future results on the date of grant or modification. The fair value of each option grant was estimated at the date of grant or modification using the following weighted average assumptions:

	Year ended December 31,
	2005		2006		2007
Risk-free rate	3.53% to 4.24	%	4.00% to 4.69	%	2.93% to 4.08	%
Weighted expected life of options	5 years		5 years		5 years
Range of volatility	68% to 73	%	70% to 73	%	67	%
Dividend yield	Nil		Nil		Nil

CDC Software Corporation (“CDC Software”)

During 2007, the Company approved the 2007 CDC Software Stock Incentive Plan (“2007 Software Plan”). The purpose of the 2007 Software Plan is to make available incentives that will assist CDC Software in attracting and retaining key employees and to encourage them to increase

F-75

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

their efforts to promote the business of CDC Software and the business of its subsidiaries. These incentives include stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash. The 2007 Software Plan is administered by the compensation committee appointed by the CDC Software board of directors, which determines, at its discretion, the persons to whom and the times at which awards are granted, the types and sizes of such awards, all award terms and conditions, and the related exercise price and option period.

Subject to adjustments under certain conditions, the maximum aggregate number of Class A Common Shares of CDC Software (“CDC Software Shares”) that may be issued pursuant to all awards under the 2007 Plan is 3,750,000. During the year ended December 31, 2007, the compensation committee granted an aggregate of 2,100,000 options to purchase CDC Software Shares. The options will vest in equal installments on a quarterly basis over the three-year period immediately following the consummation of an initial public offering of CDC Software Shares, and have an expiration date on the seventh anniversary of the date of grant.

Since all of the option grants made during 2007 are contingent upon the consummation of an initial public offering, none of the options are exercisable at December 31, 2007 nor has any related stock-based compensation expense been recorded as of December 31, 2007. As of December 31, 2007, CDC Software had unrecognized compensation expense relating to the 2007 Plan of Nil before taxes, related to stock option awards. Upon consummation of an initial public offering, CDC Software expects to recognize any compensation expense over a weighted average period of 3 years.

CDC Games Corporation (“CDC Games”)

During 2007, the Company approved the CDC Games Corporation 2007 Stock Incentive Plan (“2007 Games Plan”). The purpose of the 2007 Plan is to make available incentives that will assist CDC Games in attracting and retaining key employees and to encourage them to increase their efforts to promote the business of CDC Games and the business of its subsidiaries. These incentives include stock options, stock appreciation rights, restricted stock awards, restricted unit awards, performance shares and performance cash. The 2007 Games Plan is administered by the compensation committee appointed by the CDC Games board of directors, which determines, at its discretion, the persons to whom and the times at which awards are granted, the types and sizes of such awards, all award terms and conditions, and the related exercise price and option period.

Subject to adjustments under certain conditions, the maximum aggregate number of Class A Common Shares of CDC Games (“CDC Games Shares”) that may be issued pursuant to all awards under the 2007 Plan is 3,750,000. During the year ended December 31, 2007, the compensation committee granted an aggregate of 1,718,000 options to purchase CDC Games Shares. The options will vest in equal installments on a quarterly basis over the three-year period immediately following the consummation of an initial public offering of CDC Games Shares, and have an expiration date on the seventh anniversary of the date of grant.

Since all of the option grants made during 2007 are contingent upon the consummation of an initial public offering, none of the options are exercisable at December 31, 2007 nor has any related stock-based compensation expense been recorded as of December 31, 2007. As of December 31, 2007, CDC Games had unrecognized compensation expense relating to the 2007 Plan of Nil before taxes, related to stock option awards. Upon consummation of an initial public offering, CDC Games expects to recognize any compensation expense over a weighted average period of 3 years.

F-76

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

20. EMPLOYEE BENEFIT PLANS

IMI, a subsidiary of the Company acquired in 2003, provides retirement benefits for substantially all employees in the U.S. and in foreign locations. In the U.S., the United Kingdom and the Netherlands, IMI sponsors defined contribution plans. In addition, IMI’s Swedish subsidiary (“IMAB”) has a supplemental defined contribution plan for certain key management employees. Contributions by IMI relating to its defined contribution plans for the years ended December 31, 2005, 2006 and 2007, amounted to $978, $2,611 and $2,280, respectively. For the years ended December 31, 2005, 2006 and 2007, defined contribution retirement plans expenses totaled $2,148, $2,122 and $1,497, respectively.

IMAB also participates in several employee benefit plans (non-contributory for employees) which cover substantially all employees of its Swedish operations. The plans are in accordance with a nationally-agreed standard plan administered by a national organization, Pensionsregisteringsinstitute (“PRI”). These plans have been frozen and moved to the Swedish government for administration and distribution. Benefits are not paid by IMAB, but by the Swedish government. The level of benefits and actuarial assumptions used to account for these pension plans are calculated and established by the PRI and are solely based on the fully funded value of the predetermined pension payoff amount that was prescribed when the plans were transferred to the Swedish government during 2001. Accordingly, IMAB will not change benefit levels or actuarial assumptions. In addition, since the actuarial assumptions are not disclosed to IMAB, no such disclosure is provided herein. The Company accounts for pensions in accordance with SFAS No. 87, “Employers’ Accounting for Pensions”, SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits (Revised)” (“SFAS 132(R)”) and SFAS 158. During 2006, the Company paid $1,336 to satisfy the remaining liability under the IMI Benefit Plan and has subsequently been released from making future contributions to PRI related to this benefit plan.

The net periodic benefit cost for IMAB’s defined benefit pension plans in Sweden includes the following components:

	Year ended December 31, 2005		Year ended December 31, 2006
Service cost	$	—	$	—
Interest cost		73		28
Net periodic benefit cost	$	73	$	28

The following table sets forth the change in the benefit obligations for IMAB’s defined benefit plans in Sweden:

	Year ended December 31, 2006
Benefit obligations at beginning of year/at date of acquisition	$	1,673
Interest cost		28
Actuarial gains		(469	)
Settlements		(1,336	)
Effect of foreign currency exchange rate changes		104
Benefit obligations at end of year	$	—

F-77

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

21. CONTINGENCIES AND COMMITMENTS

Contingencies

Class Action Lawsuit. A class action lawsuit was filed in the United States District Court, Southern District of New York on behalf of purchasers of the Company’s securities between July 12, 1999 (the date of the Company’s IPO) and December 6, 2000, inclusive. The complaint charges the Company and the underwriters in the Company’s IPO with violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that the prospectus used in the Company’s IPO was materially false and misleading because it failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors, in exchange for which the underwriters allocated to those investors material portions of the restricted numbers of the Company’s shares issued in connection with the IPO; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate the Company’s shares to those customers, in exchange for which the customers agreed to purchase additional shares in the aftermarket at pre-determined prices.

In June 2003, the plaintiffs in the consolidated IPO class action lawsuits currently pending against the Company and over 300 other issuers who went public between 1998 and 2000, announced a proposed settlement with the Company and the other issuer defendants. The proposed settlement provides that the insurers of all settling issuers would guarantee that the plaintiffs recover $1,000 from non-settling defendants, including the investment banks that acted as underwriters in those offerings. In the event that the plaintiffs do not recover $1,000, the insurers for the settling issuers will make up the difference. Under the proposed settlement, the maximum amount that could be charged to the Company’s insurance policy in the event that the plaintiffs recovered nothing from the investment banks would be approximately $3,900. The Company believes that it has sufficient insurance coverage to cover the maximum amount that the Company may be responsible for under the proposed settlement. The independent members of the Board of Directors approved the proposed settlement at a meeting held in June 2003. As of March 2005, outside counsel advised that the court has granted preliminary approval of the settlement, subject to certain conditions. In August 2005, the court preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings (the action involving the Company is not one of those test cases). On June 25, 2007, the court entered an order terminating the proposed settlement based on a stipulation among the parties to the settlement. Plaintiffs have filed amended master allegations and amended complaints and moved for class certification in the six test cases, which the defendants in those cases have opposed. On March 26, 2008, the court largely denied the defendants’ motion to dismiss the amended complaints in the six test cases. It is uncertain whether there will be any revised or future settlement. If the litigation proceeds, the Company believes that it has meritorious defenses to plaintiffs’ claims and intends to defend the action vigorously.

ManTech International Corporation and ManTech Australia International Inc. In October 2005, ManTech International Corporation and ManTech Australia International Inc, filed a civil action against our subsidiaries CDC Australia Limited and CDC Australia (Praxa) Pty Ltd (collectively, “CDC Australia”), alleging that CDC Australia failed to pay $4,384 that was retained as part of the consideration for the acquisition of Praxa Limited. In late 2005, CDC Australia filed and served a request for further and better particulars of the statement of claim and a request for the filing of security of costs. The plaintiffs have answered the requests for further and better particulars, and further directions as to the conduct of the action were given by the Court soon after plaintiff made payment of security for costs in January 2007. The parties are engaging in discovery and interrogatories under a new timetable, and other preliminary procedural steps through early 2008 have been set. At a hearing held in February 2008, plaintiffs filed and served answers to defendants’ interrogatories and a directions hearing was scheduled for March 2008. Plaintiffs have now

F-78

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

requested additional discovery. The Company believes that the $4,384 was rightfully retained by CDC Australia in accordance with the terms of the acquisition agreement, and the action is without merit. The Company intends to vigorously defend such action. Management of the Company considers the outcome of any judgment on the lawsuit with respect to the Company to be uncertain and the amount of any expenditure from the lawsuit is not estimable.

Lam, Po Chiu Mark. In December 2003, Mr. Mark Lam filed a civil action in the High Court of Hong Kong against our subsidiary Ion Global (BVI) Limited alleging breach of contract in relation to a put option agreement under a share purchase agreement in an amount of $742. Pleadings closed in April 2004 when Mr. Lam filed his reply to the defense filed by Ion Global. The case was largely dormant until late 2005 when the plaintiff sought and was granted leave to amend his statement of claim and to join CDC Corporation, our parent company, as a party. CDC Corporation was joined in July 2006. In January 2007, Mr. Lam also joined a member of our board of directors, Mr. Peter Yip, to the proceedings. An amended statement of claim and an amended defense have been filed by the plaintiff and defendants, respectively. Management considers the outcome of any judgment in this matter to be uncertain and the amount of any expenditure from this matter is not estimable. The Company believes that this action is without merit and intend to vigorously defend such action.

Marjorie Fudali. In June 2003, Majorie Fudali (“Fudali”) filed a civil action in the United States District Court for the District of Columbia against Pivotal Corporation, alleging that she was owed commission in the amount of $423 plus override commissions under a compensation plan allegedly agreed between her and a former senior executive of Pivotal, and wages under District of Columbia wage laws. In early 2004, Pivotal’s motion to dismiss the wage law claim was granted. In July 2004, Fudali amended her claim to add a promissory estoppel ground. In August 2004, Pivotal filed a motion for summary judgment, which was denied by the Court, ruling that factual disputes existed, which should be resolved at trial. Shortly before the jury trial which was scheduled to occur in January 2007, Fudali alleged that new facts came into light and amended her damages claim to $2,276. As a result, the jury trial was adjourned. The jury trial took place in October 2007, and a verdict against Pivotal was returned. The Court ordered Fudali to provide a calculation of the amount that Fudali believes she may be entitled to based on the verdict. Fudali has provided two alternative calculations, in the amounts of $1,940 and $1,783. Pivotal has challenged those calculations and is awaiting a hearing and the Court's decision on the amount. The Company accrued Nil and $750 at December 31, 2006 and 2007, respectively.

Leedy. In August 2002, Mr. Jason Leedy filed a civil action against Vis.align. LLC, which became our subsidiary in December 2006. Mr. Leedy has alleged that his employment with Vis.align LLC had been wrongfully terminated, and severance pay and other amounts were owing to him, and sought damages in the amount of $257. After a jury trial in which a verdict favorable to Mr. Leedy was returned, the Court entered judgment in the amount of $357, which included $100 in attorney’s fees and costs. Vis.align. LLC has appealed to the Pennsylvania Superior Court. In September 2006, the Superior Court ordered that the judgment below based on the jury verdict be vacated, and that judgment be entered in favor of Vis.align LLC notwithstanding the verdict. In November 2006, the Superior Court granted Mr. Leedy's petition for rehearing en banc and withdrew its September 2006 decision. In March 2008, an evenly divided Superior Court issued two opinions, one in support of reversal of the trial court and one in affirmance of the trial court. As the Superior Court was evenly split, the trial court’s decision was affirmed by default, leaving the defendants liable for approximately $433. A petition requesting review by the Pennsylvania Supreme Court was filed in April 2008 and remains pending.

Asian Media Company Limited. Optic Communications Co., Ltd received an arbitration claim of approximately $586 from Asian Media Company Limited claiming damages related to an alleged breach of contract under an undated 3-party agreement among Guangzhou Optic Communications Co., Ltd, Asian Media Company Limited and Changchun YaAo Resources Development Company Limited. The Company intends to vigorously defend such action. Management of the Company considers the outcome of this matter with respect to the Company to be uncertain and the amount of any expenditure from this matter is not estimable.

F-79

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Chan. In March 2007, the Company filed suit against Steven Chan (“Chan”) and Bing Corporation (“Bing”), alleging that Chan and Bing illegally obtained option shares in CDC Corporation. In April 2008, Chan and Bing filed a cross-complaint against CDC Corporation and CDC Corporation Ltd. alleging breach of an oral contract and various tortious claims including interference with the exercise of purported options, and defamation. Chan and Bing currently allege damages: (i) in excess of $1,000 arising from alleged inability to exercise stock options at more favorable dates, (ii) in excess of $200 for various payments alleged to be due to Chan and/or Bing, and (iii) unspecified damages for libel.

Pure Biosciences. In June 2007, Pure Biosciences (“Pure”) filed a complaint in the Southern District of California asserting claims for breach of contract, breach of express warranty, breach of implied warranty of merchantability, breach of the implied warranty of fitness for a particular purpose, and rejection of goods and/or revocation of acceptance related to a Software License and Professional Services Agreement and related Statement of Work and Master Work Order Pure entered into with Ross in March. In August 2007, Ross filed a motion to dismiss the complaint. Pure did not respond to Ross's motion, but instead filed an amended complaint in October 2007. In November 2007, Ross filed a second motion to dismiss, and in an order dated April 4, 2008, the Court granted Ross’s motion without prejudice. Pure filed its Second Amended Complaint In May 2008 asserting claims for breach of contract, breach of express warranty, and rejection of goods/revocation of acceptance and seeking attorney’s fees and damages of at least $159. Ross filed its third motion to dismiss in May 2008, arguing that Pure still failed to adequately allege that the software failed to conform to the terms of the parties’ License Agreement or the express warranty it contains and that Pure cannot state a claim based on alleged pre-contractual marketing statements because the License Agreement contains a merger clause. Pure filed its response in June 2008, and Ross’s reply is due June 23, 2008. The Company cannot predict when the final resolution of this litigation will occur, and it is not possible to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss with respect to this matter.

William McKenna (“McKenna”). In November 2007, McKenna filed a civil action in the District Court of Denver County, Colorado, against the Company’s subsidiary, CDC Software, Inc. alleging he was terminated from his position as a sales account executive in violation of public policy, based on his refusal to engage in allegedly improper sales practices. McKenna is seeking compensatory damages in an unspecified amount, damages for emotional distress and exemplary damages. In January 2008, the Company removed the case from the Colorado State Court to the U.S. District Court for the District of Colorado and thereafter filed an answer, defenses and asserted a counterclaim alleging a breach of McKenna's Proprietary Information Agreement with the Company. In addition, the Company filed a motion to transfer venue of this case to the United States District Court for the Northern District of Georgia. In February 2008, McKenna filed an answer to the Company's counterclaim, and the Company was notified that McKenna's attorney requested permission to withdraw from the case. McKenna hired new counsel, who filed a response in opposition to the Company's motion to transfer and moved to amend the Complaint to add a cause of action for alleged violations of the Colorado Wage Claim Act. The Company filed a reply in support of its motion to transfer in April 2008, and the parties are now waiting for the Court to rule on that motion. Later in April 2008, the Company filed a response in opposition to McKenna's motion to amend, and McKenna filed a reply in early May 2008, and the United States Magistrate Judge issued a written opinion recommending that the District Court Judge grant McKenna's motion to amend, and the Company filed Objections later in May 2008. The parties have recently propounded written discovery. The Company cannot predict when the final resolution of this litigation will occur, and it is not possible to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss with respect to this matter.

F-80

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Triton IP LLC. In April 2008, Triton IP, LLC filed a claim in the United States District Court for the Eastern District of Texas against defendants NetSuite, Inc., CDC Corporation and CDC Software Inc. alleging that our MarketFirst software infringed a patent owned by Triton through assignment. The plaintiff is seeking a permanent injunction against defendants, damages, costs, expenses, interest, attorneys' fees and other restitutional remedies. The Company intends to vigorously defend such action. Management of the Company considers the outcome of this matter with respect to the Company to be uncertain and the amount of any expenditure from this matter is not estimable.

Vertical Computer Systems, Inc./NOW Solutions LLC (“Vertical” or “NOW”). In February 2003, Vertical Computer Systems (on behalf of itself and on behalf of NOW Solutions) filed a civil action in the state court in New York, New York, against the Company’s subsidiary Ross Systems, Inc. and others alleging, among other things, breach of contract, claims under contractual indemnifications and fraud arising from the February 2001 sale of assets from Ross’s HR/Payroll division to NOW Solutions. The action sought $5,000 in damages. In April 2003, Ross filed a motion to dismiss the complaint, which was granted in November 2003. The plaintiff appealed and its appeal was granted in October 2004. The matter was remanded to the trial court for adjudication. In May 2006, both Vertical and Ross filed a summary judgment motions against each other. In November 2006, the Court denied these summary motions, finding that factual issues existed to be resolved at trial. In March 2004, the Company’s subsidiary Ross filed a separate civil action against NOW in state court in New York, New York seeking payment of the final $750 installment due under a promissory note executed by NOW in connection with the February 2001 HR/Payroll division asset sale. In November 2004, NOW asserted counterclaims against Ross raising the same contractual issues asserted in the Vertical v. Ross action, as well as additional contractual claims related to the 2001 asset sale, seeking a total of approximately $15,000 in damages. In December 2004, Ross filed a motion to dismiss certain of the counterclaims, which the Court granted in February 2005, thereby reducing the total damages being sought in NOW’s counterclaims to approximately $5,000. In May 2006, Ross filed a motion for partial summary judgment that was granted in part. A jury trial of both the Vertical v. Ross and Ross v. NOW actions took place in March and April 2007 following which the Court directed certain verdicts in favor of NOW, and certain verdicts in favor of Ross. In September 2007, the Court entered a final judgment against Ross in the amount of $1,300 in damages, $900 in attorney’s fees and costs, and $900 in pre-judgment interest, for a total judgment against Ross of $3,150. In November 2007, Ross filed a Notice of Appeal, thereby commencing its appeal from the Court’s trial rulings. In February 2007, NOW Solutions, Inc, the alleged successor-by-merger to NOW Solutions, LLC, filed an action in the state court in New York, New York, against Ross, although Ross has yet been served with the Complaint. In this action, NOW Solutions, Inc. asserts claims for breach of contract and attorney’s fees based upon facts similar to those in the above action, seeking $4,100 in damages. The Company believes that this action filed in February 2007 is duplicative of the claims that have already been litigated through trial as referred to above, and is without merit, and the Company intends to vigorously defend the same. The Company accrued $300, $2,900 and $3,211 at December 31, 2005, 2006 and 2007, respectively.

Sunshine Mills. In May 2008, Sunshine Mills, Inc., a customer of CDC Software, filed a claim in the Circuit Court of Franklin County, Alabama alleging [breach of contract] and other causes of action. The Company intends to vigorously defend such action. Management of the Company considers the outcome of this matter with respect to the Company to be uncertain and the amount of any expenditure from this matter is not estimable.

Mgame Corporation (“Mgame”). In December 2003, the Company entered into its original game license agreement with Mgame for Yulgang. This agreement was subsequently supplemented in June 2004 to extend the term of the Company’s license for Yulgang to December 2007 and provide a 21% royalty on the Company’s revenue derived from Yulgang to Mgame.

F-81

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

Furthermore, in March 2007, the Company entered into an additional supplementary agreement with Mgame pursuant to which the Company extended its exclusive license to Yulgang in China (excluding Hong Kong) through 2010.

On October 17, 2007, Mgame unilaterally announced that they terminated their agreements with CDC Games, alleging breach of contract for non-payment. In October 2007, the Company filed two lawsuits against Mgame alleging breach of contract and that Mgame was not providing adequate technical support for Yulgang, and that Mgame was not supporting CDC Games in its efforts to combat pirate servers. The Company subsequently filed a second lawsuit alleging that Mgame breached contractual obligations owed to it by failing to provide certain financial and operating data and other information which Mgame is required to provide to the Company as a shareholder of Mgame.

Following the announcement of the Company’s disputes with Mgame in October 2007 and until such time as it resolved these disputes in March 2008, revenues generated by Yulgang declined significantly.

In March 2008, the Company settled its disputes with Mgame by entering into an Amended and Restated Exclusive Game License Agreement and Settlement Agreement. Under these settlement agreements, CDC Games received exclusive distribution rights to Yulgang in China until March 2010 with an option to extend for an additional year. CDC Games also agreed to work together with Mgame to launch a Version 2.0 upgrade to Yulgang as soon as possible following the settlement. In addition, the settlement agreements provided that the Company’s license fee payable to Mgame would be increased to $4,500 of which $4,000 of would be paid by the Company in the form of shares of Mgame held by the Company. Additionally, the Company agreed to pay royalty payments equal to 25% of revenues in months where revenues are less than $2,000 and 28% in months where revenues are greater than $2,000, and agreed to terminate the game license agreement with Mgame pursuant to which it received the exclusive right to distribute Wind Forest Fire Mountain, or WFFM, a combat MMORPG developed by Mgame.

Commitments

As of December 31, 2007, the Company had future minimum lease payments under non-cancelable operating leases falling due as follows:

Year ended December 31,
2008	$	14,253
2009	$	11,098
2010	$	8,341
2011	$	6,387
2012	$	5,035
Thereafter	$	851
	$	45,965

The Company recorded rental expense of $10,042, $12,825 and $15,745 and sublease income of $1,728, $1,484 and $3,025 for the years ended December 31, 2005, 2006 and 2007, respectively. As of December 31, 2007, the Company had future minimum rentals to be received under subleases of $8,799.

F-82

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

22. SEGMENT INFORMATION

Description of Products and Services by Segment

In 2005, the Company reported its operating results in four operating segments, “Software”, “Global Services”, “Mobile Services and Applications” and “Internet and Media”. In April 2006, in conjunction with the acquisition of the remaining 52% interest in the 17game Group (Note 3(c)(i)), the Company added “CDC Games” operating segment. Historically, the Company accounted for the results of CDC Games under the equity basis and included its proportionate share of losses in CDC Games in share of gains (losses) in equity investees in the accompanying consolidated statements of operations. Refer to Note 1 for a description of products and services offered by each segment.

Information about Segment Profit or Loss and Segment Assets

Prior to 2007, the Company evaluated performance and allocated resources based on segment revenue and net income (loss). During 2007, the Company changed one of its performance metrics from net income (loss) to operating income (loss). All prior periods have been reclassified to reflect this change. The accounting policies of the reportable segments are the same as those described in Note 2.

Factors Management Used to Identify the Enterprise’s Reportable Segments

The Company’s reportable segments are business units that offer different services. The reportable segments are each managed separately and are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company’s segment information is as follows:

	Year ended December 31,
	2005		2006		2007
Segment revenue from external customers:
Software:
Licenses	$	38,541	$	46,260	$	62,044
Maintenance		59,144		63,252		86,585
Consulting services		61,119		64,825		86,862
Hardware		—		—		2,769
Total Software		158,804		174,337		238,260
Global Services:
Licenses		—		—		3,235
Consulting services		42,686		66,484		103,723
Hardware		—		—		3,819
Total Global Services		42,686		66,484		110,777
CDC Games		—		26,780		33,596
China.com		8,995		10,064		11,409
Mobile Services and Applications		34,389		31,863		8,342
Total consolidated revenue	$	244,874	$	309,528	$	402,384

F-83

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	Year ended December 31,
	2005		2006		2007
Segment depreciation and amortization expenses:
Software	$	12,845	$	14,654	$	20,969
Global Services		803		1,905		4,097
CDC Games		—		2,822		6,742
China.com		366		1,517		459
Mobile Services and Applications		1,818		815		2,640
		15,832		21,713		34,907
Corporate		1,272		675		1,024
Total consolidated depreciation and amortization expenses	$	17,104	$	22,388	$	35,931

	Year ended December 31,
	2005			2006			2007
Segment operating income (loss):
Software	$	(1,565	)	$	6,396		$	15,677
Global Services		3,962			3,430			5,847
CDC Games		—			9,540			(14,555	)
China.com		(3,361	)		(8,110	)		(5,737	)
Mobile Services and Applications		4,597			1,357			(79,064	)
		3,633			12,613			(77,832	)
Corporate		(7,466	)		(8,978	)		(20,784	)
Total consolidated operating (loss) income		(3,833	)		3,635			(98,616	)
Other income (loss), net		6,735			12,579			(14,118	)
Income tax expense		(4,957	)		(3,062	)		(10,850	)
Minority interests in income of consolidated subsidiaries		(1,409	)		(2,312	)		18,551
Consolidated income (loss) from continuing operations	$	(3,464	)	$	10,840		$	(105,033	)

The Company’s segment information by geographical segment is as follows. Revenue is attributed to countries based on the location of customers.

	Year ended December 31,
	2005		2006		2007
Segment revenue from external customers:
North America	$	100,987	$	129,537	$	205,172
Europe, Middle East and Africa (“EMEA”)		63,805		81,612		100,385
Asia-Pacific		75,927		98,379		96,827
Others		4,155		—		—
Total consolidated revenue	$	244,874	$	309,528	$	402,384

F-84

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

	As of December 31,
	2006		2007
Segment long-lived assets:
North America	$	67,683		89,652
EMEA		12,907		21,592
Asia-Pacific		33,019		41,020
Total consolidated long-lived assets	$	113,609	$	152,264

23. SUBSEQUENT EVENTS

Discontinuation of MVAS Operations. In February 2008, the Company announced that China.com Inc., a 77% owned subsidiary of the Company, would be discontinuing its MVAS operations. China.com has since discontinued these operations, due to the challenging regulatory environment related to the MVAS business in China.

Integrated Solutions Limited (“ISL”). In March 2008, the Company announced that it had completed its acquisition of a 51 percent stake in Integrated Solutions Limited (ISL), a Hong Kong-based vendor of ERP systems designed for small and medium-sized discrete manufacturers in China. Under the terms of the agreement, the Company paid approximately $764 at closing for such majority interest in ISL.

Investment in Tenly Software. In April 2008, CDC Software, a wholly owned subsidiary of the Company announced that it signed a binding term sheet to acquire a 22 percent stake in Tenly Software, a leading provider of business intelligence solutions in China. The term sheet also provides CDC Software with the option to increase its stake in Tenly to approximately 37 percent, and upon completion of the initial investment, provide CDC Software with the right to appoint one representative to Tenly's board of directors. The two companies also intend to form a joint venture in which CDC Software is expected to provide implementation services and support for Tenly customers and Tenly is expected to sell CDC Software solutions to its customer base. The parties intend that CDC Software will hold a 60 percent interest, and Tenly, a 40 percent stake in this joint venture.

Agreement and Proposal for Amendment of Promissory Note Terms; Prior Event of Default and Subsequent Cure Related to $168,000 Convertible Notes. In April 2008, CDC Games Corporation (“CDC Games”), a wholly-owned subsidiary of the Company and China.com Capital Ltd. (“CCL”), a wholly owned subsidiary of China.com Inc., a 77% owned subsidiary of the Company (“China.com”) entered into an agreement (the “Modification Agreement”) for the purpose of: (i) extending the maturity date of a promissory note in the principal amount of $60,000 by and between CDC Games and CCL (the “Promissory Note”) from the initial maturity date of June 28, 2008 (the “Maturity Date”) to June 28, 2010, and (ii) including the Company as a guarantor of the Promissory Note.

The effectiveness of the Modification Agreement was conditioned upon China.com obtaining the approval of its minority shareholders (the “Minority Shareholders”). At an

F-85

CDC Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands U.S. dollars, except share and per share data)

extraordinary general meeting (“EGM”) of China.com held on May 27, 2008, the Minority Shareholders, by way of poll, rejected the proposal to ratify the Modification Agreement. As a result, the Modification Agreement lapsed automatically and did not become effective.

In June 2008, the Company determined that the execution of the Modification Agreement had constituted an “Event of Default” (as defined in the Convertible Notes) under the terms of those certain 3.75% Senior Exchangeable Convertible Notes due 2011 issued by the Company in November 2006 for the aggregate principal amount of $168,000 (the “Convertible Notes”). The Convertible Notes provide that, following an Event of Default, payment of all or a portion of any amounts due thereunder may be accelerated and become due and payable immediately upon delivery of a written notice of acceleration to the Company (an “Acceleration Notice”), unless such Event of Default shall have been cured by the Company prior to the delivery of such Acceleration Notice. Accordingly, for the period from April 2, 2008 through May 27, 2008 (the date upon which the Minority Shareholders disapproved of the Modification Agreement and it lapsed automatically), any or all of the Convertible Notes could have been called by the Noteholders and become due and payable immediately. However, the Company did not receive any written Acceleration Notice from any of the Noteholders during this period as required under the Convertible Notes. Therefore, the lapsing of the Modification Agreement automatically cured the Event of Default that existed from April 2, 2008 through May 27, 2008 under the Convertible Notes, and under the express terms of the Convertible Notes none of the Noteholders has any current or continuing right to deliver an Acceleration Notice to the Company as a result of those past events. No adjustments have been made to the financial statements as a result of the occurrence of the Event of Default or the subsequent curing of such Event of Default.

Dividend from China.com Inc. On June 27, 2008, China.com declared and paid a cash dividend to its shareholders in the aggregated amount of $74,100. Of such amount, approximately $57,500 was paid to the Company and the remaining $16,600 was paid to the independent minority shareholders of China.com. On June 27, 2008, the Company transferred an aggregate of $64,500 to CDC Games. CDC Games subsequently paid CCL the entire balance of $64,500 of principal and interest due and payable under the Promissory Note.

F-86

EX-1.1

Exhibit 1.1

CDC Corporation

(the “Company”)

(Incorporated in the Cayman Islands with limited liability)

Company No: CR-74277

NOTICE IS HEREBY GIVEN THAT THE FOLLOWING RESOLUTION IS AN EXTRACT OF THE RESOLUTIONS PASSED AT THE ADJOURNED ANNUAL GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY HELD AT 33RD FLOOR, CITICORP CENTRE, 18 WHITFIELD ROAD, CAUSEWAY BAY, HONG KONG ON NOVEMBER 15, 2007 AT 11:00 A.M.

RESOLVED AS A SPECIAL RESOLUTION

“That Article 179 of the Company’s Amended and Restated Articles of Association be deleted in its entirety and replaced by the following:

“179. The Board may, without the approval of the holders of shares of any class, direct that any dividend be satisfied wholly or in part by the distribution of specific assets of any kind and in particular of paid up shares, debentures or warrants to subscribe securities of any other company, or in any one or more of such ways, and where any difficulty arises in regard to the distribution the Board may settle the same as it thinks expedient, and in particular may disregard fractional entitlements, round the same up or down or provide that the same shall accrue to the benefit of the Company, and may fix the value for distribution of such specific assets, or any part thereof, and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Board and may appoint any person to sign any requisite instruments of transfer and other documents on behalf of the persons entitled to the dividend and such appointment shall be effective. Where required, a contract shall be filed in accordance with the provisions of the Law and the Board may appoint any person to sign such contract on behalf of the persons entitled to the dividend and such appointment shall be effective.”

Carrick John Clough

Chairman of the Meeting

chinadotcom corporation

(the “Company”)

(Incorporated in the Cayman Islands with limited liability)

Company No: CR-74277

NOTICE IS HEREBY GIVEN THAT THE FOLLOWING RESOLUTION IS AN EXTRACT OF THE RESOLUTION PASSED AT THE ADJOURNED EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY HELD AT 34^TH FLOOR, CITICORP CENTRE, 18 WHITFIELD ROAD, CAUSEWAY BAY, HONG KONG ON APRIL 27, 2005 AT 11:00 A.M.

RESOLVED AS A SPECIAL RESOLUTION

“That Article 1 of the Company’s Amended and Restated Memorandum of Association be deleted and replaced with the following:

“1. The name of the Company is CDC Corporation, the Chinese translation of which is ‘CDC ’.”

“That Article 2(i) of the Company’s Amended and Restated Articles of Association be deleted and replaced with the following:

“(i) ‘the Company’ or ‘this Company’ shall mean CDC Corporation, the Chinese translation of which is ‘CDC ’;”.

Raymond Ch’ien

Chairman of the Meeting

This Amended and Restated Memorandum and Articles of Association has been conformed to reflect changes adopted by shareholders through August 16, 2002

CAYMAN ISLANDS

The Companies Law (Revised) (Cap. 22)

Company Limited by Shares

AMENDED AND RESTATED MEMORANDUM OF ASSOCIATION

OF

chinadotcom corporation

(Adopted by special resolution passed on July 6, 2001 and amended by incorporating all

amendments up to and including July 6, 2001)

1. The name of the Company is chinadotcom corporation, the Chinese translation of which is “ ”.

2. *The Registered Office of the Company shall be at the offices of Offshore Incorporations (Cayman) Limited, Soctia Centre, 4^th Floor, P.O. Box 2804, George Town, Grand Cayman, Cayman Islands or at such other place in the Cayman Islands as the Board may from time to time decide.

3. The objects for which the Company is established are unrestricted and shall include, but without limitation, the following:

(i) To carry on business of internet content services, internet advertising services and e-business solutions services, to carry on business as an investment holding company and to acquire and hold media assets, shares, stocks, debenture stock, bonds, mortgages, obligations and securities of any kind issued or guaranteed by any company, corporation or undertaking of whatever nature and wherever constituted or carrying on business, and shares, stock, debenture stock, bonds, obligations and other securities issued or guaranteed by any government, sovereign ruler, commissioners, trust, local authority or other public body, and to vary, transpose, dispose of or otherwise deal with from time to time as may be considered expedient any of the Company’s investments for the time being;

* as amended by board resolution passed on November 29, 2001

(ii) To subscribe for, conditionally or unconditionally, to underwrite, issue on commission or otherwise, take, hold, deal in and convert stocks, shares and securities of all kinds and to enter into partnership or into any arrangement for sharing profits, reciprocal concessions or cooperation with any person or company and to promote and aid in promoting, to constitute, form or organize any company, joint venture, syndicate or partnership of any kind, for the purpose of acquiring and undertaking any property and liabilities of the Company or of advancing, directly or indirectly, the objects of the Company or for any other purpose which the Company may think expedient.

(iii) To exercise and enforce all rights and powers conferred by or incidental to the ownership of any shares, stock, obligations or other securities including without prejudice to the generality of the foregoing all such powers of veto or control as may be conferred by virtue of the holding by the Company of some special proportion of the issued or nominal amount thereof, to provide managerial and other executive, supervisory and consultant services for or in relation to any company in which the Company is interested upon such terms as may be thought fit.

(iv) To stand surety for or to guarantee, indemnify, support or secure the performance of all or any of the obligations of any person, firm or company whether or not related or affiliated to the Company in any manner and whether by personal covenant or by mortgage, charge or lien upon the whole or any part of the undertaking, property and assets of the Company, both present and future, including its uncalled capital or by any such method and whether or not the Company shall receive valuable consideration therefor.

(v) To carry on the business of promoters and entrepreneurs and to carry on business as financiers, capitalists, concessionaires, merchants, brokers, traders, dealers, agents, importers and exporters and to undertake and carry on and execute all kinds of investment, financial, commercial, mercantile, trading and other operations.

(vi) To carry on whether as principals, agents or otherwise howsoever the business of realtors, developers, consultants, estate agents or managers, builders, contractors, engineers, manufacturers, dealers in or vendors of all types of property including the provision of any services.

(vii) To purchase or otherwise acquire, to sell, exchange, surrender, lease, mortgage, charge, convert, turn to account, dispose of and deal with real and personal property and rights of all kinds and, in particular, mortgages, debentures, produce, concessions, options, contracts, patents, annuities, licences, stocks, shares, bonds, policies, book debts, business concerns, undertakings, claims, privileges and choses in action of all kinds.

(viii) To engage in or carry on any other lawful trade, business or enterprise which may at any time appear to the Directors of the Company capable of being conveniently carried on in conjunction with any of the aforementioned businesses or activities or which may appear to the Directors of the Company likely to be profitable to the Company.

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In the interpretation of this Memorandum of Association in general and of this Clause 3 in particular no object, business or power specified or mentioned shall be limited or restricted by reference to or inference from any other object, business or power, or the name of the Company, or by the juxtaposition of two or more objects, businesses or powers and that, in the event of any ambiguity in this Clause or elsewhere in this Memorandum of Association, the same shall be resolved by such interpretation and construction as will widen and enlarge and not restrict the objects, businesses and powers of and exercisable by the Company.

4. Except as prohibited or limited by the Companies Law (Revised) (Cap. 22), the Company shall have full power and authority to carry out any object not prohibited by any law as provided by Section 7(4) of the Companies Law (Revised) (Cap. 22) and shall have and be capable of from time to time and at all times exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate, irrespective of any question of corporate benefit, in doing in any part of the world whether as principal, agent, contractor or otherwise whatever may be considered by it necessary for the attainment of its objects and whatever else may be considered by it as incidental or conducive thereto or consequential thereon, including, but without in any way restricting the generality of the foregoing, the power to make any alterations or amendments to this Memorandum of Association and the Articles of Association of the Company considered necessary or convenient in the manner set out in the Articles of Association of the Company, and the power to do any of the following acts or things, viz: to pay all expenses of and incidental to the promotion, formation and incorporation of the Company; to register the Company to do business in any other jurisdiction; to sell, lease or dispose of any property of the Company; to draw, make, accept, endorse, discount, execute and issue promissory notes, debentures, debenture stock, loans, loan stock, loan notes, bonds, convertible bonds, bills of exchange, bills of lading, warrants and other negotiable or transferable instruments; to lend money or other assets and to act as guarantors; to borrow or raise money on the security of the undertaking or on all or any of the assets of the Company including uncalled capital or without security; to invest monies of the Company in such manner as the Directors determine; to promote other companies; to sell the undertaking of the Company for cash or any other consideration; to distribute assets in specie to members of the Company; to contract with persons for the provision of advice, the management and custody of the Company’s assets, the listing of the Company’s shares and its administration; to make charitable or benevolent donations; to pay pensions or gratuities or provide other benefits in cash or kind to Directors, officers, employees, past or present and their families; to purchase Directors and officers liability insurance; to carry on any trade or business and generally to do all acts and things which, in the opinion of the Company or the Directors, may be conveniently or profitably or usefully acquired and dealt with, carried on, executed or done by the Company in connection with the business aforesaid PROVIDED THAT the Company shall only carry on the businesses for which a licence is required under the laws of the Cayman Islands when so licensed under the terms of such laws.

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5. The liability of each member is limited to the amount from time to time unpaid on such member’s shares.

6. The share capital of the Company is US$205,000 divided into 800,000,000 Class A Common Shares of a nominal or par value of US$0.00025 each and 5,000,000 Preferred Shares of a nominal or par value of US$0.001 each with power for the Company insofar as is permitted by law, to redeem or purchase any of its shares and to increase or reduce said capital subject to the provisions of the Companies Law (Revised) (Cap. 22) and the Articles of Association and to issue any part of its capital, whether original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions and so that unless the conditions of issue shall otherwise expressly declare every issue of shares whether declared to be preference shares or otherwise shall be subject to the powers hereinbefore contained.

7. If the Company is registered as exempted, its operations will be carried on subject to the provisions of Section 193 of the Companies Law (Revised) (Cap. 22) and, subject to the provisions of the Companies Law (Revised) (Cap. 22) and the Articles of Association, it shall have the power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.

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This Amended and Restated Memorandum and Articles of Association has been conformed to reflect changes adopted by shareholders through August 16, 2002

CAYMAN ISLANDS

The Companies Law (Revised) (Cap. 22)

Company Limited by Shares

AMENDED AND RESTATED ARTICLES OF ASSOCIATION

OF

chinadotcom corporation

(Adopted by special resolution passed on August 16, 2002 and amended by incorporating all

amendments up to and including August 16, 2002)

TABLE A

1. The regulations contained in Table A in the First Schedule to the Companies Law shall not apply to the Company.

INTERPRETATION

2. In these Articles, unless there be something in the subject or context inconsistent therewith:

(a) *“address” shall include mailing addresses as well as electronic address, where applicable;

(b) “these Articles” shall mean the present Articles of Association and all supplementary, amended or substituted Articles for the time being in force;

(c) “Audit Committee” shall mean the audit committee established pursuant to Article 198;

(d) “Auditors” shall mean the persons appointed by the Company from time to time to perform the duties of auditors of the Company;

(e) “Board” shall mean the majority of the Directors present and voting at a meeting of Directors at which a quorum is present;

(f) “capital” shall mean the share capital from time to time of the Company;

(g) “the Chairman” shall mean the Chairman presiding at any meeting of members or of the Board;

(h) “CIC” shall mean China Internet Corporation Limited, a Bermuda Corporation;

(i) “Common Shares” means the Class A Common Shares in the capital of the Company of par value US$0.00025 each;

(j) “the Company” or “this Company” shall mean chinadotcom corporation, the Chinese translation of which is “ ”;

(k) “the Companies Law” or “the Law” shall mean the Companies Law (Revised) (Cap. 22) of the Cayman Islands and any amendments thereto or re-enactments thereof for the time being in force and includes every other law incorporated therewith or substituted therefor;

(l) “Directors” shall mean the directors from time to time of the Company;

(m) “dividend” shall include bonus dividends and distributions permitted by the Law to be categorized as dividends;

(n) “dollars” and “US$” shall mean dollars legally current in the United States;

(o) *“electronic” shall have the meaning given to it in the Electronic Transactions Law 2000 of the Cayman Islands and any amendment thereto or re-enactments thereof for the time being in force and includes every other law incorporated therewith or substituted therefor;

(p) *“electronic communication” means electronic posting to the Company’s Internet website, transmission to any number, address or internet website or other electronic delivery methods as otherwise decided and approved by not less than two-thirds of the vote of the Board;

(q) *“Electronic Signature” means an electronic symbol or process attached to or logically associated with an electronic communication and executed or adopted by a person with the intent to sign the electronic communication;

(r) “Exchange” shall mean the Nasdaq National Market operated by Nasdaq;

(s) “Hong Kong” shall mean the Hong Kong Special Administrative Region of the People’s Republic of China and its dependencies;

(t) “Independent Director” shall mean a director of the Company who is an independent director as defined in Rule 4200 of the NASD Manual & Notices to Members from time to time.;

(u) “month” shall mean a calendar month;

(v) “Nasdaq” shall mean The Nasdaq Stock Market, Inc.;

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(w) “ordinary resolution” shall mean a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, where proxies are allowed, by proxy or, in the case of corporations, by their duly authorized representatives, at a general meeting held in accordance with these Articles and includes an ordinary resolution passed pursuant to Article 92;

(x) “paid up” shall mean paid up and/or credited as paid up;

(y) Preferred Share” shall mean a Preferred Share in the capital of the Company with a nominal or par value of US$0.001 having designations, powers, preferences, privileges and participating, optional or special rights, and the qualifications, limitations or restrictions thereof, including, without limitations, dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences as the Directors shall in their sole discretion determine;

(z) “principal register” shall mean the register of members of the Company maintained at such place within or outside the Cayman Islands as the Board shall determine from time to time;

(aa) “the register” shall mean the principal register and any branch registers;

(bb) “registration office” shall mean the registered office for the time being of the Company;

(cc) “related party” shall mean:

(i) any person beneficially owning directly or indirectly 10 per cent. or more of the total voting rights of the Company;

(ii) any company that controls or is controlled by, or is under common control with the Company and for this purpose “control” of a company shall mean:

a) control (either directly or indirectly) of the composition of the board of directors of that company;

b) control (either directly or indirectly) of more than 20 per cent. of the voting rights attributable to the voting share capital of that company; or

c) the holding (either directly or indirectly) of more than 20 per cent. of the issued share capital (excluding any part of it which confers no right to participate beyond a specified amount in a distribution of either profits or capital) of that company;

(iii) any person who is (or was within the 12 months preceding the date of the transaction) a Director of the Company or a director or officer of any company referred to in (ii) above;

(dd) “related party transaction” shall mean a transaction (other than a transaction of a revenue nature in the ordinary course of business) between the Company or any of its subsidiaries and a related party;

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(ee) “Related Party Transaction Committee” shall mean the related party transaction committee established pursuant to Article 199;

(ff) “seal” shall include the common seal of the Company, the securities seal or any duplicate seal adopted by the Company pursuant to these Articles;

(gg) “Secretary” shall mean the person appointed as company secretary by the Board from time to time;

(hh) “share” shall mean a share in the capital of the Company;

(ii) “shareholders” or “members” shall mean the persons who are duly registered as the holders from time to time of shares in the register including persons who are jointly so registered;

(jj) “special resolution” shall have the same meaning as ascribed thereto in the Law and shall include a unanimous written resolution of all members: for this purpose, the requisite majority shall be not less than two-thirds of the votes of such members of the Company as, being entitled to do so, vote in person or, where proxies are allowed, by proxy or, in the case of corporations, by their duly authorized representatives, at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given and includes a special resolution passed pursuant to Article 93;

(kk) “subsidiary” and “holding company” shall have the meanings ascribed to such terms in the Companies Act of the United Kingdom;

(ll) subject as aforesaid, any words defined in the Law shall, if not inconsistent with the subject and/or context, bear the same meanings in these Articles;

(mm) *“writing” or “printing” shall include writing, printing, lithograph, photograph, type-writing and every other mode of representing words or figures in a legible and non-transitory form and, only where used in connection with a notice served by the Company on members or other persons entitled to receive notices hereunder, shall also include a record maintained in an electronic medium which is accessible in visible form so as to be useable for subsequent reference;

(nn) words importing either gender shall include the other gender and the neuter;

(oo) words importing persons and the neuter shall include companies and corporations and vice versa; and

(pp) words denoting the singular shall include the plural and words denoting the plural shall include the singular.

* as amended by special resolution passed on August 16, 2002

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3. The business of the Company may be commenced as soon after incorporation as the Directors shall see fit, notwithstanding that part only of the shares may have been allotted.

4. The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred in or about the formation and establishment of the Company including the expenses of registration.

SHARE CAPITAL

5. The capital of the Company is US$205,000 divided into 800,000,000 Class A Common Shares of a nominal or par value of US$0.00025 each and 5,000,000 Preferred Shares of a nominal or par value of US$0.001 each.

6. Subject to the provisions of these Articles and to any direction that may be given by the Company in general meeting and without prejudice to any special rights conferred on the holders of any existing shares or attaching to any class of shares, any share including the Preferred Shares may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise, and to such persons at such times and for such consideration as the Board may determine.

7. The Company in general meeting may, from time to time, whether or not all the shares for the time being authorized shall have been issued and whether or not all the shares for the time being issued shall have been fully paid up, by ordinary resolution, increase its share capital by the creation of new shares, such new capital to be of such amount and to be divided into shares of such respective amounts as the resolution shall prescribe.

MODIFICATION OF RIGHTS

8. If at any time the share capital of the Company is divided into different classes of shares, all or any of the rights attached to any class of shares for the time being issued (unless otherwise provided for in the terms of issue of the shares of that class) may, subject to the provisions of the Law, be varied or abrogated with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of shares of that class. To every such separate meeting all the provisions of these Articles relating to general meetings shall mutatis mutandis apply, but so that the quorum for the purposes of any such separate meeting and of any adjournment thereof shall be a person or persons together holding (or representing by proxy) at the date of the relevant meeting not less than one-third in nominal value of the issued shares of that class, and that any holder of shares of the class present in person or by proxy may demand a poll.

9. The special rights conferred upon the holders of shares of any class shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

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REDEMPTION AND REPURCHASE OF SHARES

10. Subject to the Law and to any rights conferred on the holders of any class of shares, the Company shall have the power (i) to purchase or otherwise acquire all or any of its own shares (which expression as used in this Article includes redeemable shares), (ii) to purchase or otherwise acquire warrants for the subscription or purchase of its own shares and shares and warrants for the subscription or purchase of any shares in any company which is its holding company and (iii) to give, directly or indirectly, by means of a loan, a guarantee, a gift, an indemnity, the provision of security or otherwise howsoever, financial assistance for the purpose of or in connection with a purchase or other acquisition made or to be made by any person of any shares or warrants in the Company or any company which is a holding company of the Company. The Company may pay for such shares or warrants in any manner authorized or not prohibited by law, including out of capital. Should the Company purchase or otherwise acquire its own shares or warrants, neither the Company nor the Board shall be required to select the shares or warrants to be purchased or otherwise acquired rateably or in any other manner as between the holders of shares or warrants of the same class or as between them and the holders of shares or warrants of any other class or in accordance with the rights as to dividends or capital conferred by any class of shares. Any such purchase or other acquisition or financial assistance shall only be made in accordance with any relevant code, rules or regulations issued by Nasdaq from time to time in force for so long as the shares of the Company are listed on the Exchange.

11. Subject to the provisions of the Law and the Memorandum of Association of the Company, and to any special rights conferred on the holders of any shares or attaching to any class of shares, shares may be issued on the terms that they may be, or at the option of the Company or the holders are, liable to be redeemed on such terms and in such manner, including out of capital, as the Board may deem fit.

12. The purchase or redemption of any share shall not be deemed to give rise to the purchase or redemption of any other share.

13. The holder of the shares being purchased, surrendered or redeemed shall be bound to deliver up to the Company at its registered office or such other place as the Board shall specify the certificate(s) thereof for cancellation and thereupon the Company shall pay to him the purchase or redemption monies in respect thereof.

ISSUE OF SHARES AND WARRANTS

14. Subject to the provisions of the Law, of the Memorandum of Association of the Company, and of these Articles relating to new shares, the unissued shares in the Company (whether forming part of its original or any increased capital) shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration, and upon such terms, as the Board shall determine. No shares shall be issued to bearer.

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15. The Board may issue warrants to subscribe for any class of shares or other securities of the Company on such terms as it may from time to time determine. No warrants shall be issued to bearer.

COMMISSION ON SHARES

16. The Company may, unless prohibited by law, at any time pay a commission to any person for subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company, but so that the conditions and requirements of the Law shall be observed and complied with.

NON-RECOGNITION OF TRUSTS

17. Except as otherwise expressly provided by these Articles or as required by law or as ordered by a court of competent jurisdiction, no person shall be recognized by the Company as holding any share upon any trust and the Company shall not be bound by or be compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any shares or any interest in any fractional part of a share or any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.

REGISTER OF MEMBERS AND SHARE CERTIFICATES

18. The Board shall cause to be kept at such place within or outside the Cayman Islands as they deem fit a principal register of the members and there shall be entered therein the particulars of the members and the shares issued to each of them and other particulars required under the Law.

19. If the Board considers it necessary or appropriate, the Company may establish and maintain a branch register or registers of members at such location or locations within or outside the Cayman Islands as the Board thinks fit. The principal register and the branch register(s) shall together be treated as the register for the purposes of these Articles.

20. The Board may, in its absolute discretion, at any time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

21. The Company shall as soon as practicable and on a regular basis record in the principal register all transfers of shares effected on any branch register and shall at all times maintain the principal register in such manner as to show at all times the members for the time being and the shares respectively held by them, in all respects in accordance with the Companies Law.

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22. The register may be closed at such times and for such periods as the Board may from time to time determine, either generally or in respect of any class of shares, provided that the register shall not be closed for more than 30 days in any year (or such longer period as the members may by ordinary resolution determine provided that such period shall not be extended beyond 60 days in any year).

23. Every person whose name is entered as a member in the register shall be entitled without payment to receive, within 60 days, after allotment or lodgment of transfer (or within such other period as the conditions of issue shall provide), one certificate for all his shares of each class or, upon payment of such reasonable fee as the Board shall prescribe, such number of certificates for shares held as that person may request, provided that in respect of a share or shares held jointly by several persons the Company shall not be bound to issue a certificate or certificates to each such person, and the issue and delivery of a certificate or certificates to one of several joint holders shall be sufficient delivery to all such holders.

24. Every certificate for shares or debentures or representing any other form of security of the Company shall be issued under the seal of the Company, which shall only be affixed with the authority of the Board.

25. Every share certificate shall specify the number of shares in respect of which it is issued and the amount paid thereon or the fact that they are fully paid, as the case may be, and may otherwise be in such form as the Board may from time to time prescribe.

26. The Company shall not be bound to register more than four persons as joint holders of any share. If any share shall stand in the names of two or more persons, the person first named in the register shall be deemed the sole holder thereof as regards service of notices and, subject to the provisions of these Articles, all or any other matters connected with the Company, except the transfer of the share.

27. If a share certificate is defaced, lost or destroyed, it may be replaced on payment of such reasonable fee, if any, as the Board may from time to time prescribe and on such terms and conditions, if any, as to publication of notices, evidence and indemnity, as the Board thinks fit and where it is defaced or worn out, after delivery up of the old certificate to the Company for cancellation.

TRANSFER OF SHARES

28. All transfers of shares may be effected by an instrument of transfer in the usual common form or in such other form as the Board may approve. All instruments of transfer must be left at the registered office of the Company or at such other place as the Board may appoint and all such instruments of transfer shall be retained by the Company.

29. The instrument of transfer shall be executed by or on behalf of the transferor and by or on behalf of the transferee PROVIDED that the Board may dispense with the execution of the instrument of transfer by the transferee in any case which it thinks fit in its

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discretion to do so. The instrument of transfer of any share shall be in writing and shall be executed with a manual signature or facsimile signature (which may be machine imprinted or otherwise) by or on behalf of the transferor and transferee PROVIDED that in the case of execution by facsimile signature by or on behalf of a transferor or transferee, the Board shall have previously been provided with a list of specimen signatures of the authorized signatories of such transferor or transferee and the Board shall be reasonably satisfied that such facsimile signature corresponds to one of those specimen signatures. The transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register in respect thereof.

30. The Board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share which is not fully paid up or on which the Company has a lien. The Board may also decline to register any transfer of any shares unless:

(a) the instrument of transfer is lodged with the Company accompanied by the certificate for the shares to which it relates (which shall upon registration of the transfer be cancelled) and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer and/or with regard to whether or not the transfer would result in any contravention of the restrictions (if any) on the holding of shares imposed by the Board pursuant to Article 35;

(b) the instrument of transfer is in respect of only one class of shares;

(c) the instrument of transfer is properly stamped (in circumstances where stamping is required);

(d) in the case of a transfer to joint holders, the number of joint holders to which the share is to be transferred does not exceed four;

(e) the shares concerned are free of any lien in favour of the Company; and

(f) a fee of such maximum amount as Nasdaq may from time to time determine to be payable (or such lesser sum as the Board may from time to time require) is paid to the Company in respect thereof.

31. If the Board shall refuse to register a transfer of any share, it shall, within two months after the date on which the transfer was lodged with the Company, send to each of the transferor and the transferee notice of such refusal.

32. No transfer shall be made to an infant or to a person in respect of whom an order has been made by an competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs or under other legal disability.

33. Upon every transfer of shares the certificate held by the transferor shall be given up to be cancelled, and shall forthwith be cancelled accordingly, and a new certificate shall be issued without charge to the transferee in respect of the shares transferred to him, and if any of the shares included in the certificate so given up shall be retained by the transferor, a new certificate in respect thereof shall be issued to him without charge. The Company shall also retain the instrument(s) of transfer.

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34. The registration of transfers may be suspended and the register closed at such times for such periods as the Board may from time to time determine, provided always that such registration shall not be suspended or the register closed for more than 30 days in any year (or such longer period as the members may by ordinary resolution determine provided that such period shall not be extended beyond 60 days in any year).

COMPULSORY TRANSFER OF SHARES

35. (a) The Board shall have power to impose such restrictions as it may think necessary for the purpose of ensuring that no shares are held by:

(i) any person in breach of the law or requirements of any country or governmental authority; or

(ii) any person or persons in circumstances (whether directly or indirectly affecting such person or persons and whether taken alone or in conjunction with any other persons, connected or not, or any other circumstances appearing to the Board to be relevant) which in the opinion of the Board might result in the Company incurring any liability to taxation or suffering any other pecuniary disadvantage which the Company might not otherwise have incurred or suffered.

(b) If it shall come to the notice of the Board that any shares are owned directly or beneficially by any person in contravention of any such restrictions as are referred to in paragraph (a) of this Article, the Board may give notice to such person requiring him to transfer such shares to a person who would not thereby be in contravention of any such restrictions as aforesaid. If any person upon whom such a notice is served pursuant to this paragraph does not within thirty days after such notice transfer such shares as aforesaid or establish to the satisfaction of the Board (whose judgment shall be final and binding) that such shares are not held in contravention of any such restrictions he shall be deemed upon the expiration of such period of thirty days to have given an instrument of transfer in respect of all his shares the subject of such notice and the Directors shall be entitled to sell such shares at the best price reasonably obtainable from any other person and to appoint any person to sign on his behalf such documents as may be required for the purposes of the sale and transfer. Upon the Directors resolving to sell the shares of a member pursuant to this Article, the member shall be bound forthwith to deliver to the Company or its authorized agents the certificate(s) for such shares.

(c) Payment of the purchase moneys payable on a purchase under this Article will be made in dollars and will be deposited by the Company with or to the order of a third party bank in the name of the Company for payment to any such person. Upon the deposit of such purchase moneys as aforesaid such person shall have no further interest in such shares or any of them or any claim against the Company in respect thereof except the right to receive the moneys so deposited (without interest).

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(d) The Company may, if required to do so by law or by any authority or by Nasdaq, make available to such authority or to Nasdaq such evidence or information which may have been furnished to or which may come into the possession of the Company as regards the identity of a holder of shares and/or the qualification of such a holder to hold or to continue to hold such shares and the Company shall not be liable to such holder for any loss occasioned by reason of such disclosure.

TRANSMISSION OF SHARES

36. In the case of the death of a member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognized by the Company as having any title to his interest in the shares; but nothing herein contained shall release the estate of a deceased holder (whether sole or joint) from any liability in respect of any share solely or jointly held by him.

37. Any person becoming entitled to a share in consequence of the death or bankruptcy or winding-up of a member may, upon such evidence as to his title being produced as may from time to time be required by the Board and subject as hereinafter provided, either be registered himself as holder of the share or elect to have some other person nominated by him registered as the transferee thereof.

38. If the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have his nominee registered he shall testify his election by executing in favour of his nominee a transfer of such share. All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or bankruptcy or winding-up of the member had not occurred and the notice or transfer were a transfer executed by such member.

39. A person becoming entitled to a share by reason of the death or bankruptcy or winding-up of the holder shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share. However, the Board may, if it thinks fit, withhold the payment of any dividend payable or other advantages in respect of such share until such person shall become the registered holder of the share or shall have effectually transferred such share, but, subject to the requirements of Article 94 being met, such a person may vote at meetings.

LIEN

40. The Company shall have a first and paramount lien on every share (not being a fully paid up share) for all moneys, whether

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presently payable or not, called or payable at a fixed time in respect of such share; and the Company shall also have a first and paramount lien and charge on all shares (other than fully paid up shares) standing registered in the name of a member (whether solely or jointly with others) for all the debts and liabilities of such member or his estate to the Company and whether the same shall have been incurred before or after notice to the Company of any equitable or other interest of any person other than such member, and whether the period for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such member or his estate and any other person, whether such person is a member of the Company or not.

41. The Company’s lien (if any) on a share shall extend to all dividends and bonuses declared in respect thereof. The Board may resolve that any share shall for some specified period be exempt wholly or partially from the provisions of this Article.

42. The Company may sell in such manner as the Board thinks fit any shares on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable or the liability or engagement in respect of which such lien exists is liable to be presently fulfilled or discharged, nor until the expiration of 14 days after a notice in writing, stating and demanding payment of the sum presently payable or specifying the liability or engagement and demanding fulfillment or discharge thereof and giving notice of intention to sell in default, shall have been given to the registered holder for the time being of the shares or the person, of which the Company has notice, entitled to the shares by reason of such holder’s death, mental disorder or bankruptcy.

43. The net proceeds of such sale by the Company after the payment of the costs of such sale shall be applied in or towards payment or satisfaction of the debt or liability or engagement in respect whereof the lien exists, so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the shares prior to the sale and upon surrender, if required by the Company, for cancellation of the certificate for the share sold) be paid to the holder immediately before such sale of the share. For giving effect to any such sale, the Board may authorize any person to transfer the shares sold to the purchaser thereof and may enter the purchaser’s name in the register as holder of the shares, and the purchaser shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

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CALLS ON SHARES

44. The Board may from time to time make such calls as it may think fit upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal amount of the shares or by way of premium or otherwise) and not by the conditions of allotment thereof made payable at fixed times. A call may be made payable either in one sum or by installments. A call may be revoked or postponed as the Board may determine.

45. At least 14 days’ notice of any call shall be given to each member specifying the time and place of payment and to whom such payment shall be made.

46. Every member upon whom a call is made shall pay the amount of every call so made on him to the person and at the time or times and place or places as the Board shall specify. A person upon whom a call is made shall remain liable on such call notwithstanding the subsequent transfer of the shares in respect of which the call was made.

47. The joint holders of a share shall be severally as well as jointly liable for the payment of all calls and installments due in respect of such share or other moneys due in respect thereof.

48. The Board may from time to time at its discretion extend the time fixed for any call, but no member shall be entitled to any such extension as a matter of grace and favour.

49. If the sum or any installment payable in respect of any call is unpaid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 15 per cent. per annum as the Board shall determine from the day appointed for the payment thereof to the time of actual payment, but the Board may waive payment of such interest wholly or in part.

50. No member shall be entitled to receive any dividend or bonus or to be present and vote (save as proxy for another member) at any general meeting, either personally or by proxy, or be reckoned in a quorum, or to exercise any other privilege as a member until all sums or installments due from him to the Company in respect of any call, whether alone or jointly with any other person, together with interest and expenses (if any) shall have been paid.

51. At the trial or hearing of any action or other proceedings for the recovery of any money due for any call, it shall be sufficient to prove that the name of the member sued is entered in the register as the holder, or one of the holders, of the shares in respect of which such debt accrued; that the resolution making the call is duly recorded in the minute book; and that notice of such call was duly given to the member sued, in pursuance of these Articles; and it shall not be necessary to prove the appointment of the Directors who made such call, nor any other matters whatsoever, and the proof of the matters aforesaid shall be conclusive evidence of the debt.

52. Any sum which by the terms of allotment of a share is made payable upon allotment or at any fixed date, whether on account of the nominal value of the share and/or by way of premium or otherwise, shall for all purposes of these Articles be deemed to be a call duly made and payable on the date fixed for payment, and in case of non-payment, all the relevant provisions of these Articles as to payment of interest and expenses, liabilities of joint holders, forfeiture and the like, shall apply as if such sum had become payable by virtue of a call duly made and notified.

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53. The Board may, if it thinks fit, receive from any member willing to advance the same, and either in money or money’s worth, all or any part of the money uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the moneys so advanced the Company may pay interest at such rate (if any) as the Board may decide. The Board may at any time repay the amount so advanced upon giving to such member not less than one month’s notice in writing of its intention in that behalf, unless before the expiration of such notice the amount so advanced shall have been called up on the shares in respect of which it was advanced. No such sum paid in advance of calls shall entitle the member paying such sum to any portion of a dividend declared in respect of any period prior to the date upon which such sum would, but for such payment, become presently payable.

FORFEITURE OF SHARES

54. If a member fails to pay any call or installment of a call on the day appointed for payment thereof, the Board may, at any time during such time as any part thereof remains unpaid, without prejudice to the provisions of Article 43, serve a notice on him requiring payment of so much of the call or installment as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment.

55. The notice shall name a further day (not earlier than the expiration of 14 days from the date of service of the notice) on or before which, and the place where, the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time and at the place appointed, the shares in respect of which the call was made or installment is unpaid will be liable to be forfeited. The Board may accept a surrender of any share liable to be forfeited hereunder and in such case, references in these Articles to forfeiture shall include surrender.

56. If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends and bonuses declared in respect of the forfeited share, and not actually paid before the forfeiture.

57. Any share so forfeited shall be deemed to be the property of the Company, and may be re-allotted sold or otherwise disposed of on such terms and in such manner as the Board thinks fit and at any time before a re-allotment, sale or disposition the forfeiture may be cancelled by the Board on such terms as it thinks fit.

58. A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to the Company all moneys which, at the date of forfeiture, were payable by him to the Company in respect of the shares, together with (if the Board shall in its discretion so require) interest thereon from the date of

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forfeiture until payment at such rate not exceeding 15 per cent. per annum as the Board may prescribe, and the Board may enforce the payment thereof if it thinks fit, and without any deduction or allowance for the value of the shares forfeited, at the date of forfeiture. For the purposes of this Article any sum which, by the terms of issue of a share, is payable thereon at a fixed time which is subsequent to the date of forfeiture, whether on account of the nominal value of the share or by way of premium, shall notwithstanding that time has not yet arrived, be deemed to be payable at the date of forfeiture, and the same shall become due and payable immediately upon the forfeiture, but interest thereon shall only be payable in respect of any period between the said fixed time and the date of actual payment.

59. A statutory declaration in writing that the declarant is a Director or Secretary of the Company, and that a share in the Company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. The Company may receive the consideration, if any, given for the share on any re-allotment, sale or disposition thereof and the Board may authorize any person to execute a letter of re-allotment or transfer the share in favour of the person to whom the share is re-allotted, sold or disposed of and he shall thereupon be registered as the holder of the share, and shall not be bound to see to the application of the subscription or purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, re-allotment, sale or other disposal of the share.

60. When any share shall have been forfeited, notice of the forfeiture shall be given to the member in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture, with the date thereof, shall forthwith be made in the register. Notwithstanding the above, no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice as aforesaid.

61. Notwithstanding any such forfeiture as aforesaid, the Board may at any time, before any share so forfeited shall have been re-allotted, sold, or otherwise disposed of, permit the share forfeited to be redeemed upon the terms of payment of all calls and interest due upon and expenses incurred in respect of the share, and upon such further terms (if any) as it thinks fit.

62. The forfeiture of a share shall not prejudice the right of the Company to any call already made or installment payable thereon.

63. The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.

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ALTERATION OF CAPITAL

64. The Company may from time to time by ordinary resolution:

(a) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares. On any consolidation of fully paid shares and division into shares of larger amount, the Board may settle any difficulty which may arise as it thinks expedient and in particular (but without prejudice to the generality of the foregoing) may as between the holders of shares to be consolidated determine which particular shares are to be consolidated into each consolidated share, and if it shall happen that any person shall become entitled to fractions of a consolidated share or shares, such fractions may be sold by some person appointed by the Board for that purpose and the person so appointed may transfer the shares so sold to the purchaser thereof and the validity of such transfer shall not be questioned, and so that the net proceeds of such sale (after deduction of the expenses of such sale) may either be distributed among the persons who would otherwise be entitled to a fraction or fractions of a consolidated share or shares rateably in accordance with their rights and interests or may be paid to the Company for the Company’s benefit;

(b) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled subject to the provisions of the Law; and

(c) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association of the Company, subject nevertheless to the provisions of the Law, and so that the resolution whereby any share is sub-divided may determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred or other special rights, over, or may have such deferred rights or be subject to any such restrictions as compared with the others as the Company has power to attach to unissued or new shares.

65. The Company may by special resolution reduce its share capital, any capital redemption reserve or any share premium account in any manner authorized and subject to any conditions prescribed by Law.

BORROWING POWERS

66. The Board may from time to time at its discretion exercise all the powers of the Company to raise or borrow or to secure the payment of any sum or sums of money for the purposes of the Company and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof.

67. The Board may raise or secure the payment or repayment of such sum or sums in such manner and upon such terms and conditions in all respects as it thinks fit and, in particular, by the issue of debentures, debenture stock, bonds or other securities of the Company, whether outright or as collateral security for any debts, liability or obligations of the Company or of any third party.

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68. Debentures, debenture stock, bonds and other securities may be made assignable free from any equities between the Company and the person to whom the same may be issued.

69. Any debentures, debenture stock, bonds or other securities may be issued at a discount, premium or otherwise and with any special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of Directors and otherwise.

70. The Board shall cause a proper register to be kept, in accordance with the provisions of the Law, of all mortgages and charges specifically affecting the property of the Company and shall duly comply with the requirements of the Law in regard to the registration of mortgages and charges therein specified and otherwise.

71. If the Company issues debentures or debenture stock (whether as part of a series or as individual instruments) not transferable by delivery, the Board shall cause a proper register to be kept of the holders of such debentures.

72. Where any uncalled capital of the Company is charged, all persons taking any subsequent charge thereon shall take the same subject to such prior charge, and shall not be entitled, by notice to the members or otherwise, to obtain priority over such prior charge.

GENERAL MEETINGS

73. The Company shall in each year hold a general meeting as its annual general meeting in addition to any other meeting in that year and shall specify the meeting as such in the notices calling it; and not more than 15 months shall elapse (or such longer period as Nasdaq may authorize) between the date of one annual general meeting of the Company and that of the next. So as long as the first annual general meeting of the Company is held within 15 months from the date of its incorporation, it need not be held in the year of its incorporation. The annual general meeting shall be held at such time and place as the Board shall appoint.

74. All general meetings other than annual general meetings shall be called extraordinary general meetings.

75. The Board may, whenever it thinks fit, convene an extraordinary general meeting. General meetings shall also be convened on the written requisition of any two or more members of the Company deposited at the registered office specifying the objects of the meeting and signed by the requisitionists, provided that such requisitionists held as at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company which carries the right of voting at general meetings of the Company. General meetings may also be convened on the written requisition of any one member of the Company which is a clearing house (or its nominee) deposited at the registered office of the Company specifying the objects of the meeting and signed by the requisitionist, provided that such requisitionist held as at the date of deposit of the requisition not less than one-tenth of the paid

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up capital of the Company which carries the right of voting at general meetings of the Company. If the Board does not within 21 days from the date of deposit of the requisition proceed duly to convene the meeting, the requisitionist(s) themselves or any of them representing more than one-half of the total voting rights of all of them, may convene the general meeting in the same manner, as nearly as possible, as that in which meetings may be convened by the Board provided that any meeting so convened shall not be held after the expiration of three months from the date of deposit of the requisition, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to them by the Company.

76. An annual general meeting and any extraordinary general meeting called for the passing of a special resolution shall be called by not less than 21 days’ notice in writing and any other extraordinary general meeting shall be called by not less than 14 days’ notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and shall specify the time, place, and agenda of the meeting, particulars of the resolutions to be considered at the meeting and in the case of special business (as defined in Article 81) the general nature of that business. The notice convening an annual general meeting shall specify the meeting as such, and the notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as a special resolution. Notice of every general meeting shall be given to:

(a) all members other than such as, under the provisions hereof or the terms of issue of the shares they hold, are not entitled to receive such notice from the Company;

(b) the Auditors; and

(c) for so long as the shares of the Company are listed on the Exchange, the Exchange.

77. Notwithstanding that a meeting of the Company is called by shorter notice than that referred to in Article 76, it shall be deemed to have been duly called if it is so agreed:

(a) in the case of a meeting called as an annual general meeting, by all the members of the Company entitled to attend and vote thereat or their proxies; and

(b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right.

78. There shall appear with reasonable prominence in every notice of general meetings of the Company a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and, on a poll, vote instead of him and that a proxy need not be a member of the Company.

79. The accidental omission to give any such notice to, or the non-receipt of any such notice by, any person entitled to receive notice shall not invalidate any resolution passed or any proceeding at any such meeting.

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80. In cases where instruments of proxy are sent out with notices, the accidental omission to send such instrument of proxy to, or the non-receipt of such instrument of proxy by, any person entitled to receive notice shall not invalidate any resolution passed or any proceeding at any such meeting.

PROCEEDINGS AT GENERAL MEETINGS

81. All business shall be deemed special that is transacted at an extraordinary general meeting and also all business shall be deemed special that is transacted at an annual general meeting with the exception of the following, which shall be deemed ordinary business:

(a) the declaration and sanctioning of dividends;

(b) the consideration and adoption of the accounts and balance sheets and the reports of the Directors and Auditors and other documents required to be annexed to the balance sheet;

(c) the election of Directors in place of those retiring;

(d) the appointment of Auditors;

(e) the fixing of, or the determining of the method of fixing of, the remuneration of the Directors and of the Auditors;

82. For all purposes the quorum for a general meeting shall be members present in person or by proxy holding not less than one-third of the issued shares of the Company entitled to vote at the meeting in question. No business (except the appointment of a Chairman) shall be transacted at any general meeting unless the requisite quorum shall be present at the commencement of the business.

83. If within 15 minutes from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved, but in any other case it shall stand adjourned to the same day in the next week and at such time and place as shall be decided by the Board, and if at such adjourned meeting a quorum is not present within 15 minutes from the time appointed for holding the meeting, the member or members present in person or by proxy shall be a quorum and may transact the business for which the meeting was called.

84. The Chairman shall take the chair at every general meeting, or, if there be no such Chairman or, if at any general meeting such Chairman shall not be present within 15 minutes after the time appointed for holding such meeting or is unwilling to act, the Directors present shall choose another Director as Chairman, and if no Director be present, or if all the Directors present decline to take the chair, or if the Chairman chosen shall retire from the chair, then the members present shall choose one of their own number to be Chairman.

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85. The Chairman may, with the consent of any general meeting at which a quorum is present, and shall, if so directed by the meeting, adjourn any meeting from time to time and from place to place as the meeting shall determine. Whenever a meeting is adjourned for 14 days or more, at least seven clear days’ notice, specifying the place, the day and the hour of the adjourned meeting shall be given in the same manner as in the case of an original meeting but it shall not be necessary to specify in such notice the nature of the business to be transacted at the adjourned meeting. Save as aforesaid, no member shall be entitled to any notice of an adjournment or of the business to be transacted at any adjourned meeting. No business shall be transacted at any adjourned meeting other than the business which might have been transacted at the meeting from which the adjournment took place.

86. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. A poll may be demanded by the Chairman of the meeting or any other shareholder present in person or by proxy before or on the declaration of the result of the show of hands.

87. Unless a poll is so demanded and not withdrawn, a declaration by the Chairman that a resolution has on a show of hands been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the Company’s book containing the minutes of proceedings of meetings of the Company shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

88. If a poll is demanded as aforesaid, it shall (subject as provided in Article 99) be taken in such manner (including the use of ballot or voting papers or tickets) and at such time and place, not being more than 30 days from the date of the meeting or adjourned meeting at which the poll was demanded as the Chairman directs. No notice need be given of a poll not taken immediately. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The demand for a poll may be withdrawn, with the consent of the Chairman, at any time before the close of the meeting at which the poll was demanded or the taking of the poll, whichever is earlier.

89. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded.

90. Any poll duly demanded on the election of a Chairman of a meeting or on any question of adjournment shall be taken at the meeting and without adjournment.

91. In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote.

92. A resolution in writing (in one or more counterparts), including a special resolution, signed by all members for the time being entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly appointed

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representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. Any such resolution shall be deemed to have been passed at a meeting held on the date on which it was signed by the last member to sign.

VOTES OF MEMBERS

93. Subject to any special rights, privileges or restrictions as to voting for the time being attached to any class or classes of shares, at any general meeting on a show of hands every holder of issued shares of the Company entitled to vote who is present in person (or, in the case of a holder being a corporation by its duly authorized representative) shall have one vote, and on a poll every holder of issued shares of the Company entitled to vote present in person (or, in the case of a member being a corporation, by its duly authorized representative) or by proxy shall have one vote for each issued share of the Company registered in his name in the register. On a poll a member entitled to more than one vote is under no obligation to cast all his votes in the same way.

94. Any person entitled under Article 37 to be registered as a holder of a share may vote at any general meeting in respect thereof in the same manner as if he were the registered holder of such share, provided that at least 48 hours before the time of the holding of the meeting or adjourned meeting (as the case may be) at which he proposed to vote, he shall satisfy the Board of his right to be registered as the holder of such share or the Board shall have previously admitted his right to vote at such meeting in respect thereof.

95. Where there are joint registered holders of any share carrying a right to vote, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at any meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding. Several executors or administrators of a deceased member in whose name any share stands shall for the purposes of this Article be deemed joint holders thereof.

96. A member in respect of whom an order has been made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs may vote, whether on a show of hands or on a poll, by any person authorized in such circumstances to do so, and such person may vote on a poll by proxy.

97. Save as expressly provided in these Articles or as otherwise determined by the Board, no person other than a member duly registered and who shall have paid everything for the time being due from him payable to the Company in respect of his shares shall be entitled to be present or to vote (save as proxy for another member), or to be reckoned in a quorum, either personally or by proxy at any general meeting.

98. No objection shall be raised as to the qualification of any person exercising or purporting to exercise any vote or to the

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admissibility of any vote except at the meeting or adjourned meeting at which the person exercising or purporting to exercise his vote or the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. In the case of any dispute as to the admission or rejection of any vote, the Chairman of the meeting shall determine the same and such determination shall be final and conclusive.

PROXIES

99. Any member of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person (who must be an individual) as his proxy to attend and vote instead of him and a proxy so appointed shall have the same right as the member to speak at the meeting. Forms of proxy shall be sent by the Company to each member together with the notice convening each annual and general meeting of the Company. On a poll votes may be given either personally or by proxy. A proxy need not be a member of the Company. A member may appoint any number of proxies to attend in his stead at any one general meeting (or at any one class meeting).

100. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorized in writing, or if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person duly authorized to sign the same.

101. The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered at the registered office of the Company (or at such other place as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case, in any document sent therewith) not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote, or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less than 48 hours before the time appointed for the taking of the poll, and in default the instrument of proxy shall not be treated as valid provided always that the Chairman of the meeting may at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited upon receipt of telex or cable or facsimile confirmation from the appointor that the instrument of proxy duly signed is in the course of transmission to the Company. No instrument appointing a proxy shall be valid after the expiration of 12 months from the date named in it as the date of its execution. Delivery of any instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting or poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

102. Every instrument of proxy, whether for a specified meeting or otherwise, shall be in common form or such other form as the Board may from time to time approve, provided that it shall enable a member, according to his intention, to instruct his proxy to vote in favour of or against (or in default of instructions or in the event of conflicting instructions, to exercise his discretion in respect of) each resolution to be proposed at the meeting to which the form of proxy relates.

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103. The instrument appointing a proxy to vote at a general meeting shall:

(a) be deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of a resolution put to the meeting for which it is given as the proxy thinks fit; and

(b) unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates, provided that the meeting was originally held within 12 months from such date.

104. A vote given in accordance with the terms of an instrument of proxy or resolution of a member shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or power of attorney or other authority under which the proxy or resolution of a member was executed or revocation of the relevant resolution or the transfer of the share in respect of which the proxy was given, provided that no intimation in writing of such death, insanity, revocation or transfer as aforesaid shall have been received by the Company at its registered office, or at such other place as is referred to in Article 113, at least two hours before the commencement of the meeting or adjourned meeting at which the proxy is used.

CORPORATE REPRESENTATIVES

105. Any corporation which is a member of the Company may, by resolution of its directors or other governing body or by power of attorney, authorize such person as it thinks fit to act as its representative at any meeting of the Company or of members of any class of shares of the Company and the person so authorized shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member of the Company and where a corporation is so represented, it shall be treated as being present at any meeting in person.

CLEARING HOUSES

106. If a clearing house (or its nominee) is a member of the Company it may, by resolution of its directors or other governing body or by power of attorney, authorize such person or persons as it thinks fit to act as its representative or representatives at any general meeting of the Company or at any general meeting of any class of members of the Company provided that, if more than one person is so authorized, the authorization shall specify the number and class of shares in respect of which each such person is so authorized. A person so authorized pursuant to this provision shall be entitled to exercise the same powers on behalf of the clearing house (or its nominee) which he represents as that clearing house (or its nominee) could exercise if it were an individual member of the Company holding the number and class of shares specified in such authorization.

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BOARD OF DIRECTORS

107. So long as the shares of the Company are listed on the Exchange, the Company shall maintain a minimum of three Independent Directors on its Board. The Board shall consist of not less than one nor more than fifteen persons (exclusive of alternate Directors) PROVIDED HOWEVER, that the Company may from time to time by ordinary resolution increase or reduce the limits in the number of Directors.

108. The first Directors of the Company shall be determined in writing by, or appointed by a special resolution of, the subscribers to the Memorandum of Association or a majority of them.

109. The Directors shall be divided into three classes, designated Class I, Class II and Class III. All classes shall be as nearly equal in number as possible. The Directors as initially classified shall hold office for terms as follows:

(a) the Class I Directors shall hold office until the date of the annual general meeting of shareholders in 2000 or until their successors shall be elected and qualified;

(b) the Class II Directors shall hold office until the date of the annual general meeting of shareholders in 2001 or until their successors shall be elected and qualified; and

(c) the Class III Directors shall hold office until the date of the annual general meeting or shareholders in 2002 or until their successors shall be elected and qualified.

Upon expiration of the term of office of each class as set forth above, the Directors in each class shall be elected for a term of three years to succeed the Directors whose terms of office expire.

110. Each Director shall hold office until the expiration of his term and until his successor shall have been elected and qualified.

111. Subject to the provisions of these Articles and the Law, the Company may by ordinary resolution elect any person to be a Director either to fill a casual vacancy or as an addition to the existing Directors.

112. The Board shall have power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy or as an addition to the Board. Any Director so appointed shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election at that meeting.

113. The Company may by special resolution at any time remove any Director (including a Managing Director or other executive Director) before the expiration of his period of office notwithstanding anything in these Articles or in any agreement between the Company and such Director and may by ordinary resolution elect another person in his stead.

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114. Nothing in Article 113 should be taken as depriving a Director removed under any provisions of that Article of compensation or damages payable to him in respect of the termination of his appointment as Director or of any other appointment or office as a result of the termination of his appointment as Director or as derogatory from any power to remove a Director which may exist apart from the provision of that Article.

115. The Company shall keep at its office a register of directors and officers containing their names and addresses and occupations and any other particulars required by the Law and shall send to the Registrar of Companies of the Cayman Islands a copy of such register and shall from time to time notify to the Registrar of Companies of the Cayman Islands any change that takes place in relation to such Directors as required by the Law.

116. A Director need not hold any qualification shares. No Director shall be required to vacate office by reason only of his having attained any particular age.

ALTERNATE DIRECTORS AND PROXIES FOR DIRECTORS

117. A Director may at any time by notice in writing delivered to the registered office of the Company or at a meeting of the Board, appoint any person (including another Director) to be his alternate Director in his place during his absence and may in like manner at any time determine such appointment. Such appointment, unless previously approved by the Board, shall have effect only upon and subject to being so approved, provided that the Board may not withhold approval of any such appointment where the proposed appointee is a Director.

118. The appointment of an alternate Director shall determine on the happening of any event which, were he a Director, would cause him to vacate such office or if his appointor ceases to be a Director.

119. An alternate Director shall be entitled to receive and waive (in lieu of his appointor) notices of meetings of the Directors and shall be entitled to attend and vote as a Director and be counted in the quorum at any such meeting at which the Director appointing him is not personally present and generally at such meeting to perform all the functions of his appointor as a Director and for the purposes of the proceedings at such meeting the provisions of these Articles shall apply as if he (instead of his appointor) were a Director. If he shall be himself a Director or shall attend any such meeting as an alternate for more than one Director his voting rights shall be cumulative and he need not use all his votes or cast all the votes he uses in the same way. To such extent as the Board may from time to time determine in relation to any committee of the Board, the foregoing provisions of this Article shall also apply mutatis mutandis to any meeting of any such committee of which his appointor is a member. An alternate Director shall not, save as aforesaid, have power to act as a Director nor shall he be deemed to be a Director for the purposes of these Articles.

120. An alternate Director shall be entitled to contract and be interested in and benefit from contracts or arrangements or transactions

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and to be repaid expenses and to be indemnified to the same extent mutatis mutandis as if he were a Director, but he shall not be entitled to receive from the Company in respect of his appointment as alternate Director any remuneration except only such part (if any) of the remuneration otherwise payable to his appointor as such appointor may by notice in writing to the Company from time to time direct.

121. In addition to the foregoing provisions of this Article, a Director may be represented at any meeting of the Board (or of any committee of the Board) by a proxy appointed by him, in which event the presence or vote of the proxy shall for all purposes be deemed to be that of the Director. A proxy need not himself be a Director and the provisions of Articles 99 to 104 shall apply mutatis mutandis to the appointment of proxies by Directors save that an instrument appointing a proxy shall not become invalid after the expiration of twelve months from its date of execution but shall remain valid for such period as the instrument shall provide or, if no such provision is made in the instrument, until revoked in writing and save also that a Director may appoint any number of proxies although only one such proxy may attend in his stead at meetings of the Board (or of any committee of the Board).

REMUNERATION OF DIRECTORS

122. The Directors shall be entitled to receive by way of remuneration for their services such sum as shall from time to time be determined by the Company in general meeting or by the Board, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided amongst the Directors in such proportions and in such manner as they may agree, or failing agreement, equally, except that in such event any Director holding office for less than the whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time during such period for which he has held office. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office.

123. The Board may grant special remuneration to any Director, who shall perform any special or extra services at the request of the Company. Such special remuneration may be made payable to such Director in addition to or in substitution for his ordinary remuneration as a Director, and may be made payable by way of salary, commission or participation in profits or otherwise as may be agreed.

124. The remuneration of an Executive Director or a Director appointed to any other office in the management of the Company shall from time to time be fixed by the Board and may be by way of salary, commission, or participation in profits or otherwise or by all or any of those modes and with such other benefits (including share option and/or pension and/or gratuity and/or other benefits on retirement) and allowances as the Board may from time to time decide. Such remuneration shall be in addition to such remuneration as the recipient may be entitled to receive as a Director.

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125. The Directors shall be entitled to be paid all expenses, including travel expenses, reasonably incurred by them in or in connection with the performance of their duties as Directors including their expenses of travelling to and from Board meetings, committee meetings or general meetings or otherwise incurred whilst engaged on the business of the Company or in the discharge of their duties as Directors.

VACATION OF OFFICE OF DIRECTOR

126. The office of a Director shall be vacated:

(a) if he resigns his office by notice in writing to the Company at its registered office;

(b) if an order is made by any competent court or official on the grounds that he is or may be suffering from mental disorder or is otherwise incapable of managing his affairs and the Board resolves that his office be vacated;

(c) if, without leave, he is absent from meetings of the Board (unless an alternate Director appointed by him attends in his place) for a continuous period of 12 months, and the Board resolves that his office be vacated;

(d) if he becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally;

(e) if he ceases to be or is prohibited from being a Director by law or by virtue of any provisions in these Articles;

(f) if he shall be removed from office by notice in writing served upon him signed by not less than three-fourths in number (or, if that is not a round number, the nearest lower round number) of the Directors (including himself) then in office; or

(g) if he shall be removed from office by a special resolution of the members of the Company pursuant to Article 110.

INTERESTED DIRECTORS

127. No Director or proposed Director shall be disqualified by his office from contracting with the Company either as vendor, purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company with any person, company or partnership of or in which any Director shall be a member or otherwise interested be capable on that account of being avoided, nor shall any Director so contracting or being any member or so interested be liable to account to the Company for any profit so realized by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship thereby established, provided that such Director shall, if his interest in such contract or arrangement is material, declare the nature of his interest at the earliest meeting of the Board at which it is practicable for him to do so, either specifically or by way of a general notice stating that, by reason of the facts specified in the notice, he is to be regarded as interested in any contracts of a specified description which may subsequently be made by the Company.

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128. Any Director may continue to be or become a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of any other company in which the Company may be interested and (unless otherwise agreed between the Company and the Director) no such Director shall be liable to account to the Company or the members for any remuneration or other benefits received by him as a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of any such other company. The Directors may exercise the voting powers conferred by the shares in any other company held or owned by the Company, or exercisable by them as directors of such other company in such manner in all respects as they think fit (including the exercise thereof in favour of any resolution appointing themselves or any of them directors, managing directors, joint managing directors, deputy managing directors, executive directors, managers or other officers of such company) and any Director may vote in favour of the exercise of such voting rights in manner aforesaid notwithstanding that he may be, or is about to be, appointed a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer of such a company, and that as such he is or may become interested in the exercise of such voting rights in the manner aforesaid.

129. A Director may hold any other office or place of profit with the Company (except that of Auditor) in conjunction with his office of Director for such period and upon such terms as the Board may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profit or otherwise) as the Board may determine, and such extra remuneration shall be in addition to any remuneration provided for by or pursuant to any other Article.

130. No person shall be disqualified from the office of Director or alternate Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or transaction by reason of such Director holding office or of the fiduciary relation thereby established. A Director (or his alternate Director in his absence) shall be at liberty to vote in respect of any contract or transaction in which he is so interested as aforesaid provided however that the nature of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him or the alternate Director appointed by him at or prior to its consideration and any vote thereon.

131. A general notice or disclosure to the Directors or otherwise contained in the minutes of a Meeting or a written resolution of the Directors or any committee thereof that a Director or alternate Director is a shareholder of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure under Article 130 and after such general notice it shall not be necessary to give special notice relating to any particular transaction.

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MANAGING DIRECTOR

132. The Board may from time to time appoint any one or more of its body to the office of Managing Director, Joint Managing Director, Deputy Managing Director, or other Executive Director and/or such other employment or executive office in the management of the business of the Company as it may decide for such period and upon such terms as it thinks fit and upon such terms as to remuneration as it may decide in accordance with these Articles.

133. Every Director appointed to an office under Article 132 hereof shall, without prejudice to any claim for damages that such Director may have against the Company or the Company may have against such Director for any breach of any contract of service between him and the Company, be liable to be dismissed or removed therefrom by the Board.

134. A Director appointed to an office under Article 132 shall be subject to the same provisions as to removal as the other Directors of the Company, and he shall, without prejudice to any claim for damages that such Director may have against the Company or the Company may have against such Director for any breach of any contract of service between him and the Company, ipso facto and immediately cease to hold such office if he shall cease to hold the office of Director for any cause.

135. The Board may from time to time entrust to and confer upon a Managing Director, Joint Managing Director, Deputy Managing Director or Executive Director all or any of the powers of the Board that it may think fit. But the exercise of all powers by such Director shall be subject to such regulations and restrictions as the Board may from time to time make and impose, and the said powers may at any time be withdrawn, revoked or varied but no person dealing in good faith and without notice of such withdrawal, revocation or variation shall be affected thereby.

MANAGEMENT

136. The management of the business of the Company shall be vested in the Board which, in addition to the powers and authorities by these Articles expressly conferred upon it, may exercise all such powers and do all such acts and things as may be exercised or done or approved by the Company and are not hereby or by the Law expressly directed or required to be exercised or done by the Company in general meeting, but subject nevertheless to the provisions of the Law and of these Articles and to any regulation from time to time made by the Company in general meeting not being inconsistent with such provisions or these Articles, PROVIDED THAT no regulation so made shall invalidate any prior act of the Board which would have been valid if such regulation had not been made and PROVIDED FURTHER THAT, for so long as the shares of the Company are listed on the Exchange and so long as an exemption is not available from Nasdaq (in which event shareholder approval will not be

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required), the Company shall require shareholder approval of a plan or arrangement under (a) below or, prior to the issuance of designated securities under (b), (c) or (d) below:

(a) When a share option or purchase plan is to be established or other arrangement made pursuant to which shares may be acquired by officers or Directors, except for warrants or rights issued generally to shareholders of the Company or broadly based plans or arrangements including other employees (for example, employee saving plans). In a case where the shares are issued to a person not previously employed by the Company, as an inducement essential to the individual’s entering into an employment contract with the Company, shareholder approval will not be required. The establishment of a plan or arrangement under which the amount of securities which may be issued does not exceed the lesser of 1 percent. of the number of shares, 1 percent. of the voting power outstanding, or 25,000 shares will also not require shareholder approval.

(b) When the issuance will result in a change of control of the Company (and for this purpose, the term “control” shall have the meaning set out in paragraph (ii) of the definition of “related party” in Article 2).

(c) In connection with the acquisition of the shares or assets of another company if:

(i) any Director, officer or substantial shareholder of the Company has a 5 percent. or greater interest (or such persons collectively have a 10 percent. or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of shares or securities convertible into or exercisable for shares could result in an increase in outstanding shares or voting power of 5 percent. or more; or

(ii) where, due to the present or potential issuance of shares, or securities convertible into or exercisable for shares, other than a public offering for cash:

(a) the shares have or will have upon issuance voting power equal to or in excess of 20 percent. of the voting power outstanding before the issuance of shares or securities convertible into or exercisable for shares; or

(b) the number of shares to be issued is or will be equal to or in excess of 20 percent. of the number of shares in issue before the issuance of the shares or securities.

(d) In connection with a transaction other than a public offering involving:

(i) the sale or issuance by the Company of shares (or securities convertible into or exercisable for shares) at a price less than the greater of book or market value which together with sales by officers, Directors or substantial shareholders of the Company equals 20 percent. or more of the shares or 20 percent. or more of the voting power outstanding before the issuance; or

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(ii) the sale or issuance by the Company of shares (or securities convertible into or exercisable for shares) equal to 20 percent. or more of the shares in issue or 20 percent. or more of the voting power before the issuance for less than the greater of book or market value of the shares.

For the purposes of the foregoing:

(a) Only shares actually issued (excluding shares held by a subsidiary) are to be used in making any calculation provided for in this Article.

(b) Voting power outstanding refers to the aggregate number of votes which may be cast by holders of those securities in issue which entitle the holders thereof to vote generally on all matters submitted to the Company’s shareholders for a vote.

(c) An interest consisting of less than either 5 percent. of the number of shares or 5 percent. of the voting power outstanding of the Company or other relevant party shall not be considered a substantial interest or cause the holder of such an interest to be regarded as a substantial shareholder.

(d) Where shareholder approval is required, the minimum vote which will constitute shareholder approval shall be a majority of the total votes cast on the proposal in person or by proxy.

PROCEEDINGS OF DIRECTORS

137. The Board may meet together for the despatch of business, adjourn and otherwise regulate its meetings and proceedings as it thinks fit in any part of the world and may determine the quorum necessary for the transaction of business. Unless otherwise determined two Directors shall be a quorum. For the purposes of this Article an alternate Director shall be counted in a quorum in place of the Director who appointed him and an alternate Director who is an alternate for more than one Director shall for quorum purposes be counted separately in respect of himself (if he is a Director) and in respect of each Director for whom he is an alternate (but so that nothing in this provision shall be construed as authorising a meeting to be constituted when only one person is physically present). A meeting of the Board or any committee of the Board may be held by means of a telephone or tele-conferencing or any other telecommunications facility provided that all participants are thereby able to communicate contemporaneously by voice with all other participants and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

138. A Director may, and the Secretary shall upon request of a Director, at any time summon a meeting of the Board. Notice thereof shall be given to each Director either in writing or by telephone or by facsimile, telex or telegram at the address or telephone, facsimile or telex number from time to time notified to the Company by such Director or in such other manner as the Board may from time to time determine.

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139. Questions arising at any meeting of the Board shall be decided by a majority of votes, and in case of an equality of votes the Chairman shall have a second or casting vote.

140. The Board may elect a Chairman of its meetings and determine the period for which he is to hold office; but if no such Chairman is elected, or if at any meeting the Chairman is not present within 15 minutes after the time appointed for holding the same, the Directors present may choose one of their number to be Chairman of the meeting.

141. A meeting of the Board for the time being at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions by or under these Articles for the time being vested in or exercisable by the Board generally.

142. The Board may delegate any of its powers to committees consisting of such member or members of the Board (including alternate Directors in the absence of their appointers) as the Board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall in the exercise of the powers so delegated conform to any regulations that may from time to time be imposed upon it by the Board.

143. All acts done by any such committee in conformity with such regulations and in fulfilment of the purposes for which it is appointed, but not otherwise, shall have the like force and effect as if done by the Board, and the Board shall have power, with the consent of the Company in general meeting, to remunerate the members of any such committee, and charge such remuneration to the current expenses of the Company.

144. The meetings and proceedings of any such committee consisting of two or more members of the Board shall be governed by the provisions herein contained for regulating the meetings and proceedings of the Board so far as the same are applicable thereto and are not replaced by any regulations imposed by the Board pursuant to Article 142.

145. The Board shall cause minutes to be made of:-

(a) all appointments of officers made by the Board;

(b) the names of the Directors present at each meeting of the Board and any of committees of the Board;

(c) all declarations made or notices given by any Director of his interest in any contract or proposed contract or of his holding of any office or property whereby any conflict of duty or interest may arise; and

(d) all resolutions and proceedings at all meetings of the Company and of the Board and of such committees.

146. Any such minutes shall be conclusive evidence of any such proceedings if they purport to be signed by the chairman of the meeting or by the chairman of the succeeding meeting.

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147. All acts bona fide done by any meeting of the Board or by a committee of Directors or by any person acting as Director shall, notwithstanding that it shall be afterwards discovered that there was some defect in the appointment of such Director or persons acting as aforesaid or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director or member of such committee as the case may be.

148. The continuing Directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Director or Directors may act for the purpose of increasing the number of Directors to that number or of summoning a general meeting of the Company but for no other purpose.

149. A resolution in writing signed by each and every one of the Directors (or their respective alternates) shall be as valid and effectual as if it had been passed at a meeting of the Board duly convened and held and may consist of several documents in like form each signed by one or more of the Directors or alternate Directors.

SECRETARY

150. A Secretary may be appointed by the Board for such term, at such remuneration and upon such conditions as it may think fit, and any Secretary so appointed may be removed by the Board. Anything by the Law or these Articles required or authorized to be done by or to the Secretary, if the office is vacant or there is for any other reason no Secretary capable of acting, may be done by or to any assistant or deputy Secretary appointed by the Board, or if there is no assistant or deputy Secretary capable of acting, by or to any officer of the Company authorized generally or specifically in that behalf by the Board.

151. A provision of the Law or of these Articles requiring or authorizing a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as or in place of the Secretary.

GENERAL MANAGEMENT AND USE OF SEAL

152. The Board shall provide for the safe custody of the seal which shall only be used by the authority of the Board or of a committee of the Board authorized by the Board in that behalf, and every instrument to which such seal shall be affixed shall be signed by a Director and shall be countersigned by the Secretary or by a second Director or by some other person appointed by the Board for the purpose. The securities seal which shall be a facsimile of the common seal with the word “Securities” engraved thereon shall be used exclusively for sealing securities issued by the Company and for sealing documents creating or evidencing securities so issued. The Board may either generally or in any particular case resolve that the securities seal or any signatures or any of them may be affixed to certificates for shares, warrants, debentures or any other form of security by facsimile or other mechanical

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means specified in such authority or that any such certificates sealed with the securities seal need not be signed by any person. Every instrument to which the seal is affixed as aforesaid shall, as regards all persons dealing in good faith with the Company, be deemed to have been affixed to that instrument with the authority of the Directors previously given.

153. The Company may have a duplicate seal as and where the Board shall determine, and the Company may by writing under the seal appoint any agents or agent, committees or committee abroad to be the agents of the Company for the purpose of affixing and using such duplicate seal and they may impose such restrictions on the use thereof as may be thought fit. Wherever in these Articles reference is made to the seal, the reference shall, when and so far as may be applicable, be deemed to include any such duplicate seal as aforesaid.

154. All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments, and all receipts for moneys paid to the Company shall be signed, drawn, accepted, indorsed or otherwise executed, as the case may be, in such manner as the Board shall from time to time by resolution determine. The Company’s banking accounts shall be kept with such banker or bankers as the Board shall from time to time determine.

155. The Board may from time to time and at any time, by power of attorney under the seal, appoint any company, firm or person or any fluctuating body of persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Articles) and for such period and subject to such conditions as it may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit, and may also authorize any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him.

156. The Company may, by writing under its seal, empower any person, either generally or in respect of any specified matter, as its attorney to execute deeds and instruments on its behalf in any part of the world and to enter into contracts and sign the same on its behalf and every deed signed by such attorney on behalf of the Company and under his seal shall bind the Company and have the same effect as if it were under the seal of the Company.

REGIONAL OR LOCAL BOARDS

157. The Board may establish any committees, regional or local boards or agencies for managing any of the affairs of the Company, either in the Cayman Islands, Hong Kong, the United States or elsewhere, and may appoint any persons to be members of such committees, regional or local boards or agencies and may fix their remuneration, and may delegate to any committee, regional or local board or agent any of the powers, authorities and discretions vested in the Board (other than its powers to make calls and

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forfeit shares), with power to sub-delegate, and may authorize the members of any local board or any of them to fill any vacancies therein and to act notwithstanding vacancies, and any such appointment or delegation may be upon such terms and subject to such conditions as the Board may think fit, and the Board may remove any person so appointed and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby.

PENSION FUNDS

158. The Board may establish and maintain or procure the establishment and maintenance of any contributory or non-contributory pension or provident or superannuation funds or (with the sanction of an ordinary resolution) employee or executive share option schemes for the benefit of, or give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company, or of any company which is a subsidiary of the Company, or is allied or associated with the Company or with any such subsidiary company, or who are or were at any time directors or officers of the Company or of any such other company as aforesaid, and holding or who have held any salaried employment or office in the Company or such other company, and the wives, widows, families and dependents of any such persons. The Board may also establish and subsidise or subscribe to any institutions, associations, clubs or funds calculated to be for the benefit of or to advance the interests and well-being of the Company or of any such other company as aforesaid, and may make payments for or towards the insurance of any such persons as aforesaid, and subscribe or guarantee money for charitable or benevolent objects or for any exhibition or for any public, general or useful object. The Board may do any of the matters aforesaid, either alone or in conjunction with any such other company as aforesaid. Any Director holding any such employment or office shall be entitled to participate in and retain for his own benefit any such donation, gratuity, pension, allowance or emolument.

CAPITALISATION OF RESERVES

159. The Company in general meeting may upon the recommendation of the Board by ordinary resolution resolve that it is desirable to capitalize all or any part of the amount for the time being standing to the credit of any of the Company’s reserve accounts or funds or to the credit of the profit and loss account or otherwise available for distribution (and not required for the payment or provision of dividend on any shares with a preferential right to dividend) and accordingly that such sums be set free for distribution amongst the members who would have been entitled thereto if distributed by way of dividend and in the same proportion on condition that the same be not paid in cash but be applied either in or towards paying up any amounts for the time being unpaid on any shares held by such members respectively or paying up in full unissued shares, debentures or other securities of the Company to be allotted and distributed credited as fully paid up to and amongst such members in proportion

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aforesaid or partly in one way and partly in the other, and the Board shall give effect to such resolution, provided that a share premium account and a capital redemption reserve and any reserve or fund representing unrealised profits may, for the purposes of this Article, only be applied in paying up unissued shares to be issued to members of the Company as fully paid up shares or paying up calls or instalments due or payable on partly paid securities of the Company subject always to the provisions of the Law.

160. Wherever such a resolution as referred to in Article 159 shall have been passed the Board shall make all appropriations and applications of the undivided profits resolved to be capitalised thereby, and all allotments and issues of fully paid up shares, debentures or other securities, if any, and generally shall do all acts and things required to give effect thereto, with full power to the Board:

(a) to make such provision by the issue of fractional certificates or by payment in cash or otherwise (including provisions whereby, in whole or in part, fractional entitlements are aggregated and sold and the net proceeds distributed to those entitled, or are disregarded or rounded up or down or whereby the benefit of fractional entitlements accrues to the Company rather than to the members concerned) as they think fit in cases where shares, debentures or other securities become distributable in fractions;

(b) to exclude the right of participation or entitlement of any member with a registered address outside any territory where in the absence of a registration statement or other special or onerous formalities the circulation of an offer of such right or entitlement would or might be unlawful or where the Board consider the costs, expense or possible delays in ascertaining the existence or extent of the legal and other requirements applicable to such offer or the acceptance of such offer out of proportion to the benefits of the Company; and

(c) to authorize any person to enter on behalf of all members entitled thereto into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares, debentures or other securities to which they may be entitled upon such capitalization, or, as the case may require, for the payment up by the Company on their behalf, by the application thereto of their respective proportions of the profits resolved to be capitalized, of the amounts or any part of the amounts remaining unpaid on their existing shares, and any agreement made under such authority shall be effective and binding on all such members.

161. The Board may, in relation to any capitalization sanctioned under these Articles in its absolute discretion specify that, and in such circumstances and if directed so to do by a member or members entitled to an allotment and distribution credited as fully paid up of unissued shares or debentures in the Company pursuant to such capitalization, shall allot and distribute credited as fully paid up the unissued shares, debentures or other securities to which that member is entitled to such person or persons as that member may nominate by notice in writing to the Company, such notice to be received not later than the day for which the general meeting of the Company to sanction the capitalization is convened.

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DIVIDENDS AND RESERVES

162. Subject to the Law and these Articles, the Company in general meeting may declare dividends in any currency but no dividends shall exceed the amount recommended by the Board.

163. The dividends, interest and bonuses and any other benefits and advantages in the nature of income receivable in respect of the Company’s investments, and any commissions, trusteeship, agency, transfer and other fees and current receipts of the Company shall, subject to the payment thereout of the expenses of management, interest upon borrowed money and other expenses which in the opinion of the Board are of a revenue nature, constitute the profits of the Company available for distribution.

164. The Board may from time to time pay to the members such interim dividends as appear to the Board to be justified by the profits of the Company and, in particular (but without prejudice to the generality of the foregoing), if at any time the share capital of the Company is divided into different classes, the Board may pay such interim dividends in respect of those shares in the capital of the Company which confer on the holders thereof deferred or non-preferential rights as well as in respect of those shares which confer on the holders thereof preferential rights with regard to dividend and provided that the Board acts bona fide, the Board shall not incur any responsibility to the holders of shares conferring any preferential rights.

165. The Board may also pay half-yearly or at other intervals to be selected by it any dividend which may be payable at a fixed rate if the Board is of the opinion that the profits available for distribution justify the payment.

166. The Board may in addition from time to time declare and pay special dividends on shares of any class of such amounts and on such dates as they think fit, and the provisions of Article 164 as regards the powers and the exemption from liability of the Board as relate to declaration and payment of interim dividends shall apply, mutatis mutandis, to the declaration and payment of any such special dividends.

167. No dividend shall be declared or payable except out of the profits and reserves of the Company lawfully available for distribution including share premium. No dividend shall carry interest against the Company.

168. Whenever the Board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the Board may further resolve either:

(a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment. In such case, the following provisions shall apply:

(i) the basis of any such allotment shall be determined by the Board;

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(ii) the Board, after determining the basis of allotment, shall give not less than two weeks’ notice in writing to the shareholders of the right of election accorded to them and shall send with such notice forms of election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms of election must be lodged in order to be effective;

(iii) the right of election may be exercised in respect of the whole or part of that portion of the dividend in respect of which the right of election has been accorded; and

(iv) the dividend (or that part of the dividend to be satisfied by the allotment of shares as aforesaid) shall not be payable in cash on shares in respect whereof the cash election has not been duly exercised (“the non-elected shares”) and in satisfaction thereof shares shall be allotted credited as fully paid to the holders of the non-elected shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalize and apply out of any part of the undivided profits of the Company or any part of any of the Company’s reserve accounts (including any special account, share premium account and capital redemption reserve (if there be any such reserve)) or profit or loss account or amounts otherwise available for distribution as the Board may determine, a sum equal to the aggregate nominal amount of the shares to be allotted on such basis and apply the same in paying up in full the appropriate number of shares for allotment and distribution to and amongst the holders of the non-elected shares on such basis; or

(b) that shareholders entitled to such dividend shall be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit. In such case, the following provisions shall apply:

(i) the basis of any such allotment shall be determined by the Board;

(ii) the Board, after determining the basis of allotment, shall give not less than two weeks’ notice in writing to shareholders of the right of election accorded to them and shall send with such notice forms of election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms of election must be lodged in order to be effective;

(iii) the right of election may be exercised in respect of the whole or part of that portion of the dividend in respect of which the right of election has been accorded; and

(iv) the dividend (or that part of the dividend in respect of which a right of election has been accorded) shall not be payable on shares in respect whereof the share election has been duly exercised (“the elected shares”)

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and in lieu thereof shares shall be allotted credited as fully paid to the holders of the elected shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalize and apply out of any part of the undivided profits of the Company’s reserve accounts (including any special account, share premium account and capital redemption reserve (if there be any such reserve)) or profit and loss account or amounts otherwise available for distribution as the Board may determine, a sum equal to the aggregate nominal amount of the shares to be allotted on such basis and apply the same in paying up in full the appropriate number of shares for allotment and distribution to and amongst the holders of the elected shares on such basis.

(c) The shares allotted pursuant to the provisions of this Article shall be of the same class as the class of, and shall rank pari passu in all respects with the shares then held by the respective allottees save only as regards participation in the relevant dividend (or share or cash election in lieu thereof as aforesaid) or in any other distributions, bonuses or rights paid, made, declared or announced prior to or contemporaneously with the payment or declaration of the relevant dividend, unless contemporaneously with the announcement by the Board of its proposal to apply the provisions of this Article in relation to the relevant dividend or contemporaneously with its announcement of the distribution, bonus or rights in question, the Board shall specify that the shares to be allotted pursuant to the provisions of this Article shall rank for participation in such distributions, bonuses or rights.

169. The Company may upon the recommendation of the Board by ordinary resolution resolve in respect of any one particular dividend of the Company that notwithstanding any other provision of these Articles, a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

170. The Board may do all acts and things considered necessary or expedient to give effect to any capitalization pursuant to the provisions of these Articles with full power to the Board to make such provisions as it thinks fit in the case of shares becoming distributable in fractions (including provisions whereby, in whole or in part, fractional entitlements are aggregated and sold and the net proceeds distributed to those entitled, or are disregarded or rounded up or down or whereby the benefit of fractional entitlements accrues to the Company rather than to the members concerned). The Board may authorize any person to enter into on behalf of all members interested, an agreement with the Company providing for such capitalization and matters incidental thereto and any agreement made pursuant to such authority shall be effective and binding on all concerned.

171. The Board may on any occasion determine that rights of election and the allotment of shares under these Articles shall not be made available or made to any shareholders with registered addresses in any territory where in the absence of a registration statement or other special formalities the circulation of an offer of such rights of election or the allotment of shares would or might be unlawful, or where the Board considers the costs, expenses or possible delays in ascertaining the existence or extent of

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the legal and other requirements applicable to such offer or the acceptance of such offer out of proportion to the benefit of the Company, and in any such case the provisions aforesaid shall be read and construed subject to such determination.

172. The Board shall establish an account to be called the share premium account and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any share in the Company. The Company may apply the share premium account in any manner permitted by the Companies Law. The Company shall at all times comply with the provisions of the Companies Law in relation to the share premium account.

173. The Board may, before recommending any dividend, set aside out of the profits of the Company such sums as it thinks fit as a reserve or reserves which shall, at the discretion of the Board, be applicable for meeting claims on or liabilities of the Company or contingencies or for paying off any loan capital or for equalizing dividends or for any other purpose to which the profits of the Company may be properly applied, and pending such application may, at the like discretion, either be employed in the business of the Company or be invested in such investments (including shares, warrants and other securities of the Company) as the Board may from time to time think fit, and so that it shall not be necessary to keep any reserves separate or distinct from any other investments of the Company. The Board may also without placing the same to reserve carry forward any profits which it may think prudent not to distribute by way of dividend.

174. Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends shall (as regards any shares not fully paid throughout the period in respect of which the dividend is paid) be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. For the purpose of this Article no amount paid up on a share in advance of calls shall be treated as paid up on the share.

175. The Board may retain any dividends or other moneys payable on or in respect of a share upon which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists.

176. The Board may retain any dividends or other monies payable upon shares in respect of which any person is, under the provisions as to the transmission of shares hereinbefore contained, entitled to become a member, or in respect of which any person is under those provisions entitled to transfer, until such person shall become a member in respect of such shares or shall transfer the same.

177. The Board may deduct from any dividend or other monies payable to any member all sums of money (if any) presently payable by him to the Company on account of calls, installments or otherwise.

178. Any general meeting sanctioning a dividend may make a call on the members of such amount as the meeting resolves, but so that the call on each member shall not exceed the dividend payable to him, and so that the call be made payable at the same time as the dividend, and the dividend may, if so arranged between the Company and the member, be set off against the call.

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179. The Board, with the sanction of the members in general meeting, may direct that any dividend be satisfied wholly or in part by the distribution of specific assets of any kind and in particular of paid up shares, debentures or warrants to subscribe securities of any other company, or in any one or more of such ways, and where any difficulty arises in regard to the distribution the Board may settle the same as it thinks expedient, and in particular may disregard fractional entitlements, round the same up or down or provide that the same shall accrue to the benefit of the Company, and may fix the value for distribution of such specific assets, or any part thereof, and may determine that cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Board and may appoint any person to sign any requisite instruments of transfer and other documents on behalf of the persons entitled to the dividend and such appointment shall be effective. Where required, a contract shall be filed in accordance with the provisions of the Law and the Board may appoint any person to sign such contract on behalf of the persons entitled to the dividend and such appointment shall be effective.

180. A transfer of shares shall not pass therewith the right to any dividend or bonus declared thereon with a record date prior to the date of the agreement to transfer the shares.

181. Any resolution declaring or resolving upon the payment of a dividend or other distribution on shares of any class, whether a resolution of the Company in general meeting or a resolution of the Board, may specify that the same shall be payable or made to the persons registered as the holders of such shares at the close of business on a particular date, and thereupon the dividend or other distribution shall be payable or made to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect of such dividend of transferors and transferees of any such shares.

182. If two or more persons are registered as joint holders of any shares, any one of such persons may give effectual receipts for any dividends, interim and special dividends or bonuses and other moneys payable or rights or property distributable in respect of such shares.

183. Unless otherwise directed by the Board, any dividend, interest or other sum payable in cash to a holder of shares may be paid by cheque or warrant sent through the post to the registered address of the member entitled, or, in case of joint holders, to the registered address of the person whose name stands first in the principal register in respect of the joint holding or to such person and to such address as the holder or joint holders may in writing direct. Every cheque or warrant so sent shall be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the register in respect of such shares and shall be sent at his or their risk, and the payment of any such cheque or warrant by the bank on which it is drawn shall operate as a good discharge to the Company in respect of the dividend and/or bonus represented thereby, notwithstanding that it may subsequently appear that the same has been stolen or that any endorsement thereon has been forged.

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184. The Company may cease sending such cheques for dividend entitlements or dividend warrants by post if such cheques or warrants have been left uncashed on three consecutive occasions.

185. All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the Board for the exclusive benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof or be required to account for any money earned thereon. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the Board and shall revert to the Company and after such forfeiture no member or other person shall have any right to or claim in respect of such dividends or bonuses.

UNTRACEABLE SHAREHOLDERS

186. The Company shall be entitled to sell any shares of a member or the shares to which a person is entitled by virtue of transmission on death or bankruptcy or operation of law if and provided that:

(a) all cheques or warrants, not being less than three in number, for any sums payable in cash to the holder of such shares have remained uncashed for a period of 12 years;

(b) the Company has not during that time or before the expiry of the three month period referred to in paragraph (d) below received any indication of the whereabouts or existence of the member or person entitled to such shares by death, bankruptcy or operation of law;

(c) during the 12 year period, at least three dividends in respect of the shares in question have become payable and no dividend during that period has been claimed by the member; and

(d) upon expiry of the 12 year period, the Company has given notice of its intention to sell such shares to the shareholder at its address as shown in the principal register and a period of three months has elapsed since such notice and the shareholder has not responded to it.

187. To give effect to any sale contemplated by Article 183, the Company may appoint any person to execute as transferor an instrument of transfer of the said shares and such other documents as are necessary to effect the transfer, and such documents shall be as effective as if it had been executed by the registered holder of or person entitled by transmission to such shares and the title of the transferee shall not be affected by any irregularity or invalidity in the proceedings relating thereto. The net proceeds of sale shall belong to the Company which shall be obliged to account to the former member or other person previously entitled as aforesaid for an amount equal to such proceeds and shall enter the name of such former member or other person in the books of the Company as a creditor for such amount. No trust shall be created in respect of the debt, no interest shall be payable in respect of the same and the Company shall not be required to account for any money earned on the net proceeds, which may be employed in the business of the Company or invested in such investments (other than shares or other securities in or of the Company or its holding company if any) or as the Board may from time to time think fit.

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DOCUMENT DESTRUCTION

188. The Company shall be entitled to destroy all instruments of transfer, probate, letters of administration, stop notices, powers of attorney, certificates of marriage or death and other documents relating to or affecting title to securities in or of the Company (“Registrable Documents”) which have been registered at any time after the expiration of six years from the date of registration thereof and all dividend mandates and notifications of change of address at any time after the expiration of two years from the date of recording thereof and all share certificates which have been cancelled at any time after the expiration of one year from the date of the cancellation thereof and it shall conclusively be presumed in favour of the Company that every entry in the register if purporting to have been made on the basis of an instrument of transfer or Registrable Document so destroyed was duly and properly made and every instrument of transfer or Registrable Document so destroyed was a valid and effective instrument or document duly and properly registered and every share certificate so destroyed was a valid and effective certificate duly and properly cancelled and every other document hereinbefore mentioned so destroyed was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company, provided always that:

(a) the provisions aforesaid shall apply only to the destruction of a document in good faith and without express notice of the Company of any claim (regardless of the parties thereto) to which the document might be relevant;

(b) nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any other circumstances which would not attach to the Company in the absence of this Article; and

(c) references herein to the destruction of any document include references to the disposal thereof in any manner.

ANNUAL RETURNS AND FILINGS

189. The Board shall make the requisite annual returns and any other requisite filings in accordance with the Law.

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ACCOUNTS

190. The Board shall cause to be kept such books of account as are necessary to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions and otherwise in accordance with the Law.

191. The books of account shall be kept at the Company’s principal place of business in Hong Kong or, subject to the provisions of the Law, at such other place or places as the Board thinks fit and shall always be open to the inspection of the Directors.

192. The Board shall from time to time determine whether, to what extent, at what times and places and under what conditions or regulations, the accounts and books of the Company, or any of them, shall be open to the inspection of the members (other than officers of the Company) and no member shall have any right of inspecting any accounts or books or documents of the Company except as conferred by the Law or any other relevant law or regulation or as authorized by the Board or by the Company in general meeting.

193. The Board shall, commencing with the first annual general meeting cause to be prepared and to be laid before the members of the Company at every annual general meeting a profit and loss account for the preceding financial year together with a balance sheet as at the last day of the preceding financial year and a Directors’ report with respect to the profit or loss of the Company for the period covered by the profit and loss account and the state of the Company’s affairs as at the end of such period, an Auditors’ report on such accounts prepared pursuant to Article 192 and such other reports and accounts as may be required by law.

194. *Copies of those documents to be laid before the members of the Company at an annual general meeting shall not less than 10 days before the date of the meeting be sent in the manner in which notices may be served by the Company as provided herein to every member of the Company and every holder of debentures of the Company, provided that the Company shall not be required to send copies of those documents to any person of whose address the Company is not aware or to more than one of the joint holders of any shares or debentures. To the extent permitted by and subject to due compliance with these Articles and all applicable rules and regulations, and to obtaining all necessary consents, if any, required thereunder, the requirements of this Article 194 shall be deemed satisfied in relation to any member or any holder of debentures of the Company by sending to such person instead of such copies, not less than 10 days before the date of the annual general meeting, in any manner not prohibited by these Articles, a summary financial statement derived from the Company’s annual accounts, together with the Directors’ report and the Auditor’s report on such accounts, which shall be in the form and containing the information required by these Articles and all applicable laws and regulations, provided that any person who is otherwise entitled to the annual accounts of the Company, together with the Director’s report and the Auditor’s report thereon may, if he so requires, by notice in writing served on the Company, demand that the Company sends to him, whether in printed or electronic form, in addition to the summary financial statement, a complete copy of the Company’s annual accounts, together with the Directors’ report and the Auditor’s report thereon.

* as amended by special resolution passed on August 16, 2002

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AUDIT

195. The Auditors shall audit the profit and loss account and balance sheet of the Company in each year and shall prepare a report thereon to be annexed thereto. Such report shall be laid before the Company at its annual general meeting in each year and shall be open to inspection by any member. The Auditors shall at the next annual general meeting following their appointment and at any other time during their term of office, upon request of the Board or any general meeting of the members, make a report on the accounts of the Company in general meeting during their tenure of office.

196. The Company shall at any annual general meeting appoint an auditor or auditors of the Company who shall hold office until the next annual general meeting. The remuneration of the Auditors shall be fixed by the Company at the annual general meeting at which they are appointed provided that in respect of any particular year the Company in general meeting may delegate the fixing of such remuneration to the Board. No person may be appointed as the, or an, Auditor, unless he is independent of the Company. The Board may before the first annual general meeting appoint an auditor or auditors of the Company who shall hold office until the first annual general meeting unless previously removed by an ordinary resolution of the members in general meeting in which case the members at that meeting may appoint Auditors. The Board may fill any casual vacancy in the office of Auditor but while any such vacancy continues the surviving or continuing Auditor or Auditors, if any, may act. The remuneration of any Auditor appointed by the Board under this Article may be fixed by the Board.

197. Every statement of accounts audited by the Auditors and presented by the Board at an annual general meeting shall after approval at such meeting be conclusive except as regards any error discovered therein within three months of the approval thereof. Whenever any such error is discovered within that period, it shall forthwith be corrected, and the statement of account amended in respect of the error shall be conclusive.

AUDIT COMMITTEE

198. For so long as the shares of the Company are quoted on the Exchange, it shall establish and maintain an Audit Committee as a committee of the Board, the composition and responsibilities of which shall comply with Rule 4350(d) of the NASD Manual & Notices to Members, as amended from time to time. The Audit Committee shall have at least three members, comprised solely of Independent Directors or such other Directors as allowed from time to time, each of whom is able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement, and cash flow statement.

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The Company shall adopt a formal written audit committee charter and review and assess the adequacy of the formal written charter on an annual basis. The charter shall specify the responsibilities of the Audit Committee which shall include responsibility for ensuring its receipt from the outside auditors of the Company of a formal written statement delineating all relationships between the auditor and the Company, consistent with Independence Standards Board Standard 1, and the Audit Committee’s responsibility for actively engaging in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor and for taking or recommending that the full Board take, appropriate action to oversee the independence of the outside auditor. In addition, the responsibilities of the Audit Committee shall include:

(a) to recommend annually to the Directors the appointment of the independent auditors of the Company, discuss and review in advance the scope and the fees of the annual audit and review the results thereof with the independent auditors, review and approve non-audit services of the independent auditors, review compliance with existing major accounting and financial reporting policies of the Company, review the adequacy of the financial organization of the Company, and review management’s procedures and policies relating to the adequacy of the Company’s internal accounting controls and compliance with applicable laws relating to accounting practices; and

(b) in the absence or unavailability of the Related Party Transaction Committee, reviewing potential conflict of interest situations pursuant to Article 199.

CONFLICTS OF INTEREST

199. For so long as the shares of the Company are listed on the Exchange the Company shall conduct an appropriate review of all material related party transactions on an ongoing basis and shall utilize the Related Party Transaction Committee or a comparable body of the Board for the review of potential conflicts of interest situations where appropriate. A majority of the members of the Related Party Transaction Committee shall be persons other than an officer or employee of the Company or its subsidiaries or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of the independent judgment in carrying out the responsibilities of a Director.

200.  (a)   In anticipation that the Company will cease to be a subsidiary of CIC and that the Company and CIC may engage in the same or similar activities or lines of business and have an interest in the same or similar business opportunities, and in recognition of (i) the benefits to be derived by the Company through its continued contractual, corporate and business relations with CIC (including the services of officers and directors of CIC as officers and directors of the Company), and (ii) the difficulties attendant to any director, who desires and endeavours fully to satisfy such director’s fiduciary duties, in determining the full scope of such duties in any particular situation, the provisions of this Article 200 are set forth to regulate, define and guide the conduct of certain affairs of the Company as they may involve CIC and its officers and directors, and the powers, rights, duties and liabilities of the Company and its officers, directors and shareholders in connection therewith.

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(b) Except as CIC may otherwise agree in writing, (i) neither CIC nor any of its subsidiaries (other than the Company) shall have a duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Company; and (ii) neither CIC nor any of its subsidiaries (other than the Company) nor any officer or director thereof (except as provided in paragraph (c) of this Article 200) shall be liable to the Company or its shareholders for breach of any fiduciary duty by reason of any such activities of CIC or any such subsidiary or of such person’s participation therein. In the event that CIC or such subsidiary acquires knowledge of a potential transaction or matter that may be a business opportunity for both CIC or such subsidiary and the Company, CIC or such subsidiary shall have no duty to communicate or offer such business opportunity to the Company and shall not be liable to the Company or its shareholders for breach of any fiduciary duty by reason of the fact that CIC or such subsidiary pursues or acquires such business opportunity for itself, directs such business opportunity to another person or entity, or does not communicate information regarding, or offer, such business opportunity to the Company.

(c) In the event that a director, officer or employee of the Company who is also a director, officer or employee of CIC or any subsidiary of CIC (other than the Company) acquires knowledge of a potential transaction or matter that may be a business opportunity for the Company and CIC or such subsidiary, such director, officer or employee of the Company shall have fully satisfied his fiduciary duty to the Company and its shareholders with respect to such business opportunity and shall not be liable to the Company or its shareholders for breach of fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the best interests of the Company or the derivation of any improper personal benefit by reason of the fact that CIC or such subsidiary pursues or acquires such business opportunity for itself or directs such business opportunity to another person or does not communicate information regarding such business opportunity to the Company if such director, officer or employee acts in good faith in a manner consistent with the following policy:

(i) a business opportunity offered to any person who is an officer (whether or not a director) of the Company and who is also a director but not an officer of CIC or any subsidiary of CIC (other than the Company) shall belong to the Company, unless such opportunity is expressly offered to such person primarily in such person’s capacity as a director of CIC or such subsidiary in which case such opportunity shall belong to CIC or the subsidiary of which such person is a director;

(ii) a business opportunity offered to any person who is a director but not an officer of the Company and who is also an officer (whether or not a director) of CIC or any subsidiary of CIC (other than the Company) shall belong to CIC or

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to the subsidiary (other than the Company) of which such person is an officer unless such opportunity is expressly offered to such person primarily in such person’s capacity as a director of the Company, in which case such opportunity shall belong to the Company; and

(iii) a business opportunity offered to any other person who is either an officer of both the Company and CIC or any subsidiary of CIC (other than the Company), or a director of both the Company and CIC or such subsidiary (other than the Company) shall belong to the Company or to CIC or such subsidiary (other than the Company) of which such person is either an officer or a director, as the case may be, if such opportunity is expressly offered to such person primarily in his capacity as an officer or director of the Company or of CIC or such subsidiary (other than the Company), respectively; otherwise, such opportunity shall belong either to the Company or to CIC or the subsidiary (other than the Company) of which such person is either an officer or a director, in either case as a majority of the directors of the Company who are not officers of CIC, any subsidiary of CIC (other than the Company) or the Company, or directors of CIC or any subsidiary of CIC (other than the Company), shall determine in their good faith judgment, taking into account all the facts and circumstances with respect to such opportunity.

(d) In the event that actions are taken by any director, officer of employee of the Company that are inconsistent with the policy set forth in paragraph (c) of this Article 200, no presumption shall arise that such actions constitute a breach of such director’s, officer’s or employee’s fiduciary duty or duty of loyalty to the Company or its shareholders or failure to act in (or not opposed to) the best interests of the Company or the derivation of an improper personal benefit.

(e) For the purposes of this Article 200, “business opportunities” shall not include any business opportunities that the Company is not financially able to undertake, or that are, from their nature, not in the line of the Company’s business or are of no practical advantage to it or that are ones in which the Company has no interest or reasonable expectancy.

(f) Any person or entity purchasing or otherwise acquiring any interest in any shares in the capital of the Company shall be deemed to have notice of and to have consented to the provisions of this Article 200.

(g) For purposes of this Article 200 only, the “Company” shall mean the Company and companies, partnerships, joint venture, associations and other entities in which the Company beneficially owns (directly or indirectly) fifty per cent. or more of the outstanding voting stock, voting power or similar voting interests.

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SERVICE OF NOTICES AND OTHER DOCUMENTS

201. *Except as otherwise provided in these Articles, any notice or other document may be served on or delivered to any member by the Company either personally or by sending it through the post in a prepaid letter addressed to such member at his registered address as appearing in the principal register or, to the extent permitted by all applicable laws and regulations, by electronic communication or by delivering it to or leaving it at such registered address addressed as aforesaid. In the case of joint holders of a share, service or delivery of any notice or other document on or to one of the joint holders shall for all purposes be deemed a sufficient service on or delivery to all the joint holders.

202. *Any such notice or other document, if sent by post, shall be deemed to have been served or delivered on the day after the day when it was put in the post (if sent to an address in the same country) and on the fifth day after the day when it was put in the post (if sent from one country or territory to an address in another country), and in proving such service or delivery it shall be sufficient to prove that the notice or document was properly addressed, stamped and put in the post. Any notice or other document delivered or left at a registered address otherwise than by post shall be deemed to have been served or delivered on the day it was so delivered or left. Any notice given by electronic means as provided herein shall be deemed to have been served and delivered on the day following that on which it is successfully transmitted or at such later time as may be prescribed by any applicable laws or regulations.

203. *Any notice or other document delivered or sent to any member in pursuance of these Articles shall, notwithstanding that such member is then dead or bankrupt or that any other event has occurred, and whether or not the Company has notice of the death or bankruptcy or other event, be deemed to have been duly served or delivered in respect of any share registered in the name of such member as sole or joint holder unless his name shall, at the time of the service or delivery of the notice or document, have been removed from the Register as the holder of the share and such service or delivery shall for all purposes be deemed a sufficient service or delivery of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share.

204. *The signature to any notice to be given by the Company may be written or printed by means of facsimile or, where relevant, by Electronic Signature.

* as amended by special resolution passed on August 16, 2002

INFORMATION

205. No member shall be entitled to require discovery of or any information in respect of any detail of the Company’s trading or any matter which is or may be in the nature of a trade secret or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Board would not be in the interests of the members or the Company to communicate to the public.

206. The Board shall be entitled to release or disclose any information in its possession, custody or control regarding the Company or its affairs to any of its members including, without limitation, information contained in the register of members and transfer books of the Company.

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WINDING UP

207. If the Company shall be wound up (whether the liquidation is voluntary, under supervision or by the court) the liquidator may, with the authority of a special resolution of the Company and any other sanction required by the Law divide among the members in specie or kind the whole or any part of the assets of the Company (whether the assets shall consist of property of one kind or shall consist of properties of different kinds) and may for such purpose set such value as he deems fair upon any property to be divided and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority or sanction vest the whole or any part of such assets in trustees upon such trusts for the benefit of the members as the liquidator, with the like authority or sanction and subject to the Law, shall think fit, and the liquidation of the Company may be closed and the Company dissolved, but so that no member shall be compelled to accept any assets, shares or other securities in respect of which there is a liability.

208. If the Company shall be wound up, and the assets available for distribution amongst the members as such shall be insufficient to repay the whole of the paid up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. And if in a winding up the assets available for distribution amongst the members shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the members in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. This Article is to be without prejudice to the rights of the holders of shares issued upon special terms and conditions.

INDEMNITIES

209. The Directors and officers for the time being of the Company and any trustee for the time being acting in relation to any of the affairs of the Company and their heirs, executors, administrators and personal representatives respectively shall be indemnified out of the assets of the Company from and against all actions, proceedings, costs, charges, losses, damages and expenses which they or any of them shall or may incur or sustain by reason of any act done or omitted in or about the execution of their duty in their respective offices or trusts, except such (if any) as they shall incur or sustain by or through their own wilful neglect or default respectively. No Director, officer or trustee shall be answerable for the acts, receipts, neglects or defaults of any other Director, officer or trustee or for joining in any receipt for the sake of conformity or for the solvency or honesty of any banker or other persons with whom any monies or effects belonging to the Company may be lodged or deposited for safe custody or for any insufficiency of any security upon which any monies of the Company may be invested or for any other loss or damage due

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to any such cause as aforesaid or which may happen in or about the execution of his office or trust unless the same shall happen through the wilful neglect or default of such Director, officer or trustee.

210. Subject to the Companies Law, if any Director or other person shall become personally liable for the payment of any sum primarily due from the Company, the Board may execute or cause to be executed any mortgage, charge, or security over or affecting the whole or any part of the assets of the Company by way of indemnity to secure the Director or person so becoming liable as aforesaid from any loss in respect of such liability.

FINANCIAL YEAR

211. The financial year of the Company shall be 31st December in each year or as otherwise prescribed by the Board from time to time.

REGISTERED OFFICE

212. The registered office of the Company shall be at such place in the Cayman Islands as the Board shall from time to time appoint.

AMENDMENT OF MEMORANDUM AND ARTICLES

213. Subject to the Law, the Company may at any time and from time to time by special resolution alter or amend its Memorandum of Association and Articles of Association in whole or in part.

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EX-4.(A)5

Exhibit 4(a)5

CDC BUSINESS SOLUTIONS INC.

as Purchaser

DB PROFESSIONALS, INC.

as Company

SHANKAR VISWANATHAN

AND

PRABHA ANANTHANARAYANA

as Sellers

ADDENDUM NO. 2 TO STOCK PURCHASE AGREEMENT

ADDENDUM NO. 2 TO STOCK PURCHASE AGREEMENT

This ADDENDUM NO. 2 TO STOCK PURCHASE AGREEMENT dated as of August 30, 2007, is made by and among CDC Business Solutions, Inc., a company organized and existing under the laws of the state of Delaware (the “Purchaser”); DB Professionals, Inc., a company organized and existing under the laws of the state of Oregon (the “Company”); and Mr. Shankar Viswanathan (“Shankar”) having an address of 3725 N.W. Banff Drive, Portland, OR 97229 and Ms. Prabha Ananthanarayana having an address of 3725 N.W. Banff Drive, Portland, OR 97229 (“Prabha” and together with Shankar, collectively, the “Sellers”), all of whom may be collectively referred to herein as the “Parties” or individually as a “Party”.

WITNESSETH

WHEREAS, the Parties entered into a Stock Purchase Agreement dated June 1, 2006, (the “Agreement”) and Addendum No. 1 to Stock Purchase Agreement dated March 13, 2007, (the “Addendum No. 1”), and the Company entered into an Employment Agreement with Shankar Viswanathan dated June 1, 2006 (the “Employment Agreement”).

WHEREAS, Prabha is currently employed as Chief Financial Officer of the Company.

WHEREAS, except for the Third Cash Installment as defined in the Agreement, the Purchaser has made all the other payments of the Total Consideration (as defined in the Agreement) as required by Section 2.02(b) of the Agreement, and as required by Addendum No. 1.

WHEREAS, the Parties now desire to enter into this Addendum No. 2 to, among other things: (i) replace the Purchaser’s obligation to make the Third Cash Installment as set forth in the Agreement by the obligations of the Purchaser specified herein; (ii) set November 30, 2007, as the date for the termination of Shankar’s employment by the Company under the Employment Agreement; and (iii) otherwise modify the rights and obligations of the Parties under the Agreement, Addendum No. 1, and the Employment Agreement upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the Parties agree as follows:

Section 1. Definitions and Principles of Construction

1.01 Defined Terms. As used in this Addendum No. 2, and unless the context requires a different meaning, the terms defined in the Agreement described above shall have the meanings defined therein, and the following terms shall have the meanings indicated:

“Addendum No. 1” shall mean the Addendum No. 1 to Stock Purchase Agreement referred to above and the exhibit to such addendum, as the same may be amended, supplemented, or modified from time to time pursuant to Section 8.02 thereof.

“Addendum No. 2” shall mean this Addendum No. 2 to Stock Purchase Agreement referred to above, as the same may be amended, supplemented, or modified from time to time pursuant to Section 6.02 hereof.

1.02 Principles of Construction.

(a) All references in this Addendum No. 2 to sections or exhibits are to sections or exhibits in or to this Addendum No. 2 unless otherwise specified.

(b) The words “hereof,” “herein,” “hereby” and “hereunder” and words of similar import when used in this Addendum No. 2 shall refer to this Addendum No. 2 as a whole and not to any particular provisions of this Addendum No. 2.

(c) The singular terms include the plural and the plural terms include the singular.

(d) The headings used in this Addendum No. 2 have been inserted for convenience of reference only and do not define or limit the provisions hereof.

Section 2. Termination of Sellers’ Employment

2.01 Shankar shall continue to perform all his duties and obligations under the Employment Agreement from the date hereof through November 30, 2007, and Prabha shall continue her employment with the Company in the normal and ordinary course until the date on which her services are no longer required by the Company, as determined by Shankar, or until November 30, 2007, whichever comes first.

2.02 On the date hereof, Shankar shall enter into that certain Employee Severance and Release Agreement in the form attached hereto as Exhibit A which shall be effective as of November 30, 2007, pursuant to which, among other things, Shankar’s employment with the Company shall cease (the “Shankar Severance Agreement”).

2.03 On the date hereof, Prabha shall enter into that certain Employee Severance and Release Agreement in the form attached hereto as Exhibit B which shall be effective as of her final date of employment as determined pursuant to Section 2.01 above, pursuant to which, among other things, Prabha’s employment with the Company shall cease (the “Prabha Severance Agreement” and together with the Shankar Severance Agreement, collectively, the “Severance Agreements”).

Section 3. Payment in Lieu of the Third Installment under the Agreement

3.01 The Purchaser shall make the following four (4) payments to the Sellers in the manner provided in Section 2.02(d) of the Agreement:

(a) Upon the execution hereof by all Parties, the Purchaser shall pay to the Sellers a lump sum payment of $625,000 (the “Initial Payment”);

(b) On or before September 28, 2007, the Purchaser shall pay to the Sellers a lump sum payment of $208,333.33 (the “Second Payment”);

(c) On or before October 31, 2007, the Purchaser shall pay to the Sellers a lump sum payment of $208,333.33 (the “Third Payment”); and

(d) On or before November 30, 2007, the Purchaser shall pay to the Sellers a lump sum payment of $208,333.33 (the “Final Payment”).

3.02 Provided that the Purchaser makes the Initial Payment, the Second Payment, the Third Payment, and the Final Payment to Sellers, substantially as and when above provided, the Purchaser and the Company shall be fully and completely relieved from any and all obligations to make: (i) the Third Cash Installment; and (ii) any other payments to Sellers under the Agreement, Addendum No. 1 and this Addendum No. 2 which have not previously been paid (except as provided in Section 5.04 hereof), and Purchaser and the Company shall be deemed to have paid the entire unpaid balance of the Total Consideration in full.

Section 4. Mutual Release

4.01 Except for the Sellers’ respective obligations set forth herein and in the Severance Agreements, the Purchaser and the Company hereby release, acquit, and forever discharge Sellers, and each of them, of and from any and all actions, causes of action, claims, demands, damages, costs, loss of services, liabilities, obligations, representations, warranties, expenses, and compensation, of any kind or nature whatsoever, whether known or unknown, and whether or not on account of, provided in, or in any way arising out of the Agreement, Addendum No.1, and/or Addendum No. 2, or any of the transactions described therein.

4.02 Except for the Purchaser’s obligations set forth herein and in the Severance Agreements, the Sellers each hereby release, acquit, and forever discharge Purchaser, the Company, and their respective affiliates, subsidiaries, officers, employees, directors, agents and representatives, of and from any and all actions, causes of action, claims, demands, damages, costs, loss of services, liabilities, obligations, representations, warranties, expenses, and compensation, of any kind or nature whatsoever, whether known or unknown, and whether or not on account of, provided in, or in any way arising out of, the Agreement, Addendum No.1, and/or Addendum No. 2 or any of the transactions described therein.

Section 5. Effect of this Addendum No. 2

5.01 This Addendum No. 2 is entered into to supplement, amend, and modify the Agreement, Addendum No. 1, the Employment Agreement and the Transaction Documents. Except as supplemented, amended, and/or modified hereby, and except for the obligations and matters released pursuant to the provisions of Section 4 hereof, the Agreement, Addendum No. 1 and the Employment Agreement remain in full force and effect and shall continue to be effective and enforceable in accordance with their respective terms.

5.02 (a) The Agreement is hereby amended as follows:

(i) The definition of the “Indemnified Period” as set forth in Section 1.01 of the Agreement is hereby amended to hereafter read as follows:

“‘Indemnified Period’ shall mean the period between Closing and November 30, 2007.”

(ii) The last sentence of Section 10.01(a) is amended to hereafter read as follows:

“The amount of the Indemnity provided for by this Section 10.01(a) shall be limited to the amount of the Second Cash Installment plus the total amount of the payments required to be made by Purchaser pursuant to Section 3.01 of Addendum No. 2 to this Agreement.”

(iii) The last sentence of Section 10.01(b) is amended to hereafter read as follows:

“The amount of the Indemnity provided for by this Section 10.01(b) shall be limited to the amount of the Second Cash Installment plus the total amount of the payments required to be made by Purchaser pursuant to Section 3.01 of Addendum No. 2 to this Agreement.”

(iv) The following provision is added hereafter as Section 10.01(e) of the Agreement:

“(e) Notwithstanding anything herein to the contrary, no Party shall be entitled to indemnification under the Agreement, Addendum No. 1 or Addendum No. 2 from any other Party after the last day of the Indemnified Period except that Purchaser’s indemnity obligations under Section 3(c) of Addendum No. 1 shall continue after the last day of the Indemnified Period.”

(b) The following provision is hereby added to Addendum No. 1 as Section 8.16 thereof:

“8.16 Termination of Indemnities. Notwithstanding anything herein to the contrary, no Party shall be entitled to indemnification under the Agreement, Addendum No. 1 or Addendum No. 2 from any other Party after the last day of the Indemnified Period except that Purchaser’s indemnity obligations under Section 3(c) of this Addendum No. 1 shall continue after the last day of the Indemnified Period.”

5.03 Notwithstanding Section 4.01 hereof, the obligations of Sellers contained in Sections 5.12 and 10 of the Agreement, Section 3(d) and 8.14 of Addendum No. 1, and the Severance Agreements shall survive the execution of this Addendum No. 2 and shall remain in full force and effect, subject to the terms thereof as amended by this Addendum No. 2.

5.04 Notwithstanding Section 4.02 hereof, the obligations of Purchaser contained in Section 10 of the Agreement, Section 3(c) of Addendum No. 1 and the Severance Agreements shall survive the execution of this Addendum No. 2 and shall remain in full force and effect, subject to the terms thereof as amended by this Addendum No. 2. The indemnity obligations of Purchaser under Section 3(c) of Addendum No. 1 are not subject to the limitations of Section 10.02(f) of the Agreement.

5.05 At the time the Agreement, Addendum No. 1, the Employment Agreement and the Transaction Documents were entered into, the name of the Purchaser was erroneously designated as CDC Business Solutions Corporation when the actual name of the Purchaser was CDC Business Solutions, Inc., a Delaware corporation. The Parties agree that for the purposes of the Agreement, Addendum No. 1, the Employment Agreement, the Transaction Documents, and this Addendum No. 2, CDC Business Solutions, Inc. and CDC Business Solutions Corporation shall be deemed to be one and the same corporation and all obligations undertaken and all agreements made in such documents under the name CDC Business Solutions Corporation are equally binding upon CDC Business Solutions, Inc. as though it had also signed such documents undertaking the same obligations and agreements that were undertaken and made therein under the name CDC Business Solutions Corporation and all such obligations and agreements continue as obligations and agreements of CDC Business Solutions, Inc.

5.06 Sellers shall not be liable to Purchaser or the Company for any Loss or liability only to the extent such Loss or liability is covered by insurance carried by or otherwise covering the Purchaser or the Company and then, only to the extent that the Purchaser or the Company has actually received full cash payment for any such claim or claims, Loss or liability from the relevant insurance company.

Section 6. Miscellaneous

6.01 Waiver. Any term or condition of this Addendum No. 2 may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Addendum No. 2, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Addendum No. 2 on any future occasion.

6.02 Amendment. This Addendum No. 2 may be amended, supplemented, or modified only by a written instrument duly executed by or on behalf of each Party hereto.

6.03 No Third Party Beneficiary. The terms and provisions of this Addendum No. 2 are intended solely for the benefit of each Party hereto and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.

6.04 Assignment; Binding Effect. Subject always to the subsequent sentence, neither this Addendum No. 2 nor any right, interest, or obligation hereunder may be assigned by any Party hereto without the prior written consent of the other Party hereto and any attempt to do so will be void, except for assignments and transfers by operation of Law. At any time after the execution of this Addendum No. 2, the Purchaser may assign any or all of its rights, interests, and obligations hereunder to an affiliate or subsidiary of CDC Corporation, or to any third party in connection with a merger, share purchase, asset purchase or other strategic or corporate transaction undertaken by Purchaser, the Company or any affiliate or subsidiary thereof; provided that, each such assignee agrees in writing to be bound by all of the terms, conditions and provisions contained herein. Subject to the preceding sentence, this Addendum No. 2 is binding upon, inures to the benefit of, and is enforceable by the Parties hereto and their respective successors and assigns.

6.05 Invalid Provisions. If any provision of this Addendum No. 2 is held to be illegal, invalid, or unenforceable under any present or future Law, and if the rights or obligations of any Party hereto under this Addendum No. 2 will not be materially and adversely affected thereby: (a) such provision will be fully severable; (b) the remaining provisions of this Addendum No. 2 will remain in full force and effect and will not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom; and (c) in lieu of such illegal, invalid, or unenforceable provision, there will be added automatically as a part of this Addendum No. 2 a legal, valid, and enforceable provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible.

6.06 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon without giving effect to the conflicts of laws principles thereof.

6.07 Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Addendum No. 2 or the transactions contemplated hereby shall be brought against any of the Parties in the courts of the State of Oregon and each of the Parties hereby consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such suit, action or proceeding and waives any objection to venue laid therein.

6.08 Counterparts. This Addendum No. 2 may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

6.10 Exercise of Rights. A Party may exercise a right, power, or remedy at its discretion, and separately or concurrently with another right, power or remedy. A single or partial exercise of a right, power, or remedy by a Party does not prevent a further exercise of that or of any other right, power, or remedy. Failure by a Party to exercise or delay in exercising a right, power, or remedy does not prevent its exercise. The rights, powers, and remedies provided in this Addendum No. 2 are cumulative with and not exclusive of the rights, powers, or remedies provided by law independently of this Addendum No. 2.

6.11 Further Assurances. Each Party agrees on the request of any other Party, to do everything reasonably necessary to give effect to this Addendum No. 2 and the transactions contemplated by it (including, without limitation, the execution of documents) and to use all reasonable endeavours to cause relevant third parties to do likewise.

6.12 Rule of Construction. As each of the Parties has reviewed this Addendum No. 2, has been represented by legal counsel, and has had the opportunity to make revisions hereto, the Parties agree that any rule of construction to the effect that any ambiguities are to be construed against the drafting Party shall not apply in the interpretation of this Addendum No. 2.

6.13 Entire Agreement. This Addendum No. 2 contains the entire understanding of the Parties relating to the subject matter hereof and supersedes any prior agreements, representations, and warranties, written or oral, with respect to the same subject matter, but does not supersede the Agreement, Addendum No. 1, the Employment Agreement, or the Transaction Documents except as expressly set forth herein.

6.14 Joint and Several Liability. Where in this Agreement, any liability is undertaken by two or more persons, the liability of each of them shall be joint and several.

6.15 Costs and Expenses. Each of the Sellers and the Purchaser shall pay for their own respective costs and expenses relating to the negotiation, execution, and closing of this Addendum No. 2 and the Severance Agreements, and the transactions contemplated thereby.

6.16 Sellers’ Representations and Covenants.

(a) Sellers each hereby represent and warrant to Purchaser that to the best of their knowledge, they are not aware: (i) of any claim or claims whether actual, pending, or threatened, by any Party or third party, which could be a reasonable basis for Purchaser to make an indemnity claim against Sellers pursuant to Section 10 of the Agreement; or (ii) of any facts or circumstances from which they should reasonably conclude that any such claim may be made. This representation and warranty is made as a representation and warranty under the Agreement, and Purchaser’s sole and exclusive remedy for any breach of this Section 6.16(a) by Sellers is pursuant to Section 10 of the Agreement as amended by this Addendum No. 2. For the avoidance of doubt, the last day of the Indemnified Period which is hereafter applicable to Section 10 of the Agreement is November 30, 2007.

(b) Sellers each hereby represent, warrant, covenant, and agree that they shall timely and completely pay all tax liabilities which may become due and payable by them as a result of their receipt of the Initial Payment, the Second Payment, the Third Payment, and the Final Payment.

(c) Sellers shall indemnify the Purchaser and shall hold the Purchaser harmless, for, from, and against any and all Loss or liability (including reasonable attorney’s fees) suffered, incurred, or sustained by Purchaser resulting from, arising out of, or associated with any failure on the part of Sellers to pay any taxes which may become due and payable by them as a result of their receipt of the Initial Payment, the Second Payment, the Third Payment, and the Final Payment.

(d) Until November 30, 2007, Sellers each hereby covenant and agree to promptly notify the Company and Purchaser, in writing in the event any Seller hereafter receives any summons, complaint, other court document, written notice, demand letter, or fax of any matter described in Section 6.16(a) hereof.

6.17 Termination of Authority. The authorization provided in Section 5(a) of Addendum No. 1 by Purchaser to Seller is hereby expressly and unconditionally terminated and revoked in all respects.

* * * * * * * * *

IN WITNESS WHEREOF, this Addendum No. 2 has been duly executed and delivered by the duly authorized officer of each Party hereto, and shall be effective as of the date first above written.

CDC BUSINESS SOLUTIONS INC.
By:	/s/ Verone M. Johnson
Name:	Verone M. Johnson
Title:	VP/CFO
DB PROFESSIONALS, INC.
By:	/s/ V. Shankar
Name:	SHANKAR VISWANATHAN
Title:	CEO, DBPI
SHANKAR VISWANATHAN
/s/ V. Shankar
PRABHA ANANTHANARAYANA
/s/ A. Prabha

[SIGNATURE PAGE TO ADDENDUM NO. 2]

EX-4.(A)14

Exhibit 4(a).14

SHARES SALE AND PURCHASE AGREEMENT

DATED AS OF

DECEMBER 17, 2007

BY AND BETWEEN

CDC GAMES CORPORATION

(AS PURCHASER)

AND

NIKKO ANTFACTORY K.K.

(AS SELLER)

THIS AGREEMENT is made on December 17, 2007

BETWEEN:

(1) NIKKO ANTFACTORY K.K., a corporation duly established and validly existing under the laws of Japan and having its principal office at 1-2-1 Marunouchi, Chiyoda-ku, Tokyo, Japan (the “Seller”); and

(2) CDC GAMES CORPORATION, a corporation duly established and validly existing under the laws of the Cayman Islands and having its principal office at No. 11 HuiXin Dong Street, Chao Yang District Beijing, People’s Republic of China (the “Purchaser”).

IT IS AGREED as follows:

1. Purpose and Definitions

1.1 This Agreement sets out the terms and conditions of the sale by the Seller and the purchase by the Purchaser of the Sale Shares (as defined below).

1.2 In this Agreement, unless the context otherwise requires, the following words and expressions shall have the following meanings:

“Bank Account”	shall have the meaning set forth in Section 3.2;
“BBMF Group Inc”	means BBMF Group Inc, a company incorporated under the laws of the British Virgin Islands and having its registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands;
“BBMF K.K.”	means BBMF K.K., a company incorporated under the laws of Japan and having its registered office at 3-12-16 Mita, Minato-ku, Tokyo, Japan;

— 1 —

“Business Day”	means a day, other than a Saturday or Sunday, on which banks are open for business in Japan and the Republic of Singapore;
“Closing”	means the closing of the purchase and sale of the Sale Shares by the Purchaser from the Seller in accordance with the terms of this Agreement;
“Closing Date”	means the date on which closing occurs pursuant to Section 6;
“Common Shares”	means the common stock, $0.01 par value per share of the Company;
“Company”	means BBMF Inc, a company incorporated under the laws of the British Virgin Islands and having its registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands;
“Complete Closing of SPA”	shall have the meaning ascribed to “Complete Closing” in the Escrow Agreement;
“Conditions”	means the conditions set forth in Clause 4;
“Consideration”	means the amount specified in Section 3.1;
“Digital Heaven”	means Digital Heaven Group Limited, a corporation duly established and validly existing under the laws of the British Virgin Islands and having its principal office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands;

— 2 —

“Escrow Account”	means the bank account agreed among the parties to the SPA pursuant to the terms and conditions of the SPA and the Escrow Agreement;
“Escrow Agent”	means the person who acts as an escrow agent under the Escrow Agreement;
“Escrow Agreement”	means the escrow agreement to be entered among the Original Sellers, the Seller, and the Escrow Agent as the escrow agent in relation to the escrow arrangement of the closing under the SPA, a copy of which is attached hereto as Annex A;
“Kingson”	means Kingson Group Limited, a corporation duly established and validly existing under the laws of the British Virgin Islands and having its principal office at P.O. Box 146, Road Town, Tortola, British Virgin Islands;
“New Light”	means New Light Trading Limited, a corporation duly established and validly existing under the laws of the British Virgin Islands and having its principal office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands;
“Original Closing Date”	means the 26th day of December, 2007 or any other date which the consideration is released to the Original Sellers and the title documents are released to the Seller pursuant to the terms of the Escrow Agreement;
“Original Payment Date”	means the 26th day of December, 2007 or any

— 3 —

	other date which the parties to the SPA agree for the transfer of the consideration to the Escrow Account and the transaction documents to the Escrow Agent pursuant to terms and conditions of the Escrow Agreement and the SPA;
“Original Sellers”	means Kingson, New Light, and Digital Heaven;
“Other Claimants”	means Albert Fung, Au Yeung Wan Chi, Chan Sze Wing Tommy, Danroad Technology Ventures Inc., Dorfield Investments Limited, Fung Yeh Chi Otto, Kevin Pak, Lau Kit Yi, Lee Shiu Yin Boniface, Outer Space Investments Limited, Seaforth Assets Limited and William Lopiu Shia;
“Parties”	means the Seller and the Purchaser;
“Pending Claims”	means the suits and claims set out in Schedule I hereto;
“Sale Shares”	means 346,800 Common Shares issued by the Company and currently registered in the names of Kingson, New Light, and Digital Heaven, representing approximately 40.30% (rounded to the nearest hundredth) of the total issued and outstanding shares of Common Shares;
“Signing Date”	means the date of this Agreement;
“SPA”	means the agreement entered into on December 17, 2007 among Kingson, New Light, Digital Heaven, Mr. Yih Hann Lian, Mr. Chin Siang Hui, and the Seller regarding the sale and purchase of 433,500 Common Shares;

— 4 —

“Termination Date”	means the date that is 1 month from the Signing Date or such other date which the Purchaser designates (in any event no later than the date that is 3 months from the Signing Date);
“Threatened Claims”	means the claims set out in Schedule II hereto;
“Title Documents”	means (i) certificates representing the Sale Shares; (ii) instrument of transfer executed by the Seller; and (iii) the minutes of the board resolution of the Company approving the transfer of the Sale Shares; and
“USD”	means the lawful currency of the United States.

1.3 Unless otherwise stated, all references herein to time of a day are to Tokyo.

2. Sale and Purchase of the Sale Shares

Subject to the terms and conditions set forth herein, the Seller hereby agrees to sell and the Purchaser hereby agrees to purchase the Sale Shares which the Seller acquires from the Original Sellers pursuant to the SPA.

3. Consideration and Payment

3.1 The Consideration for the Sale Shares shall be USD 6.8 million, in the aggregate and as provided in Clause 3.3, net of all deductions and withholdings (whether in respect of set off, counterclaim, duties, taxes, charges or otherwise whatsoever).

3.2 The Consideration shall be paid by the Purchaser via wire transfer to an account designated by the Seller (the “Bank Account”) on or prior to the 19th date of December, 2007. The Consideration will be transferred to the Escrow Account and the amount in the Escrow Account will be released to the Original Sellers from the Escrow upon the satisfaction of the closing conditions pursuant to the SPA and the Escrow Agreement.

— 5 —

In the event that (i) the Original Sellers do not deliver to the Seller the title documents, including, but not limited to, original certificates representing the Sale Shares, on or prior to the Original Payment Date, (ii) the Seller does not deliver the Title Documents to the Purchaser within three (3) days from the Original Closing Date, or (iii) the transactions contemplated by this Agreement have not been consummated by the Termination Date, the Consideration shall be returned to the Purchaser.

3.3 All payments by the Purchaser to the Seller under this Agreement shall be made without any deduction or withholding (whether in respect of set off, counterclaim, duties, taxes, charges or otherwise whatsoever). If the deduction or withholding from the Consideration is required by law or the deduction or withholding from the consideration payable to the Original Sellers by the Seller pursuant to the SPA is required by law, unless such deduction or withholding from the consideration payable to the Original Sellers by the Seller arises by reason of Singaporean, the British Virgin Islands and China taxes payable by law by the Seller, the sum payable by the Seller in respect of which the relevant deduction or withholding is required shall be increased to the extent necessary to ensure that the Seller and the Original Sellers receive on the due date and retain (free from any liability in respect of any deduction or withholding) a net sum equal to what they would have received and retained had no such deduction or withholding been required or made.

4. Conditions

4.1 The obligation of the Seller to proceed with the Closing shall be conditional upon each and all of the following conditions being satisfied (or waived by the Seller in accordance with Clause 4.3):

(a) the Seller acquiring the legal and beneficial title to the Sale Shares from the Original Sellers pursuant to the SPA;

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(b) the Purchaser having performed, in all material respects, all of its undertakings or obligations under this Agreement on or before the Closing Date; and

(c) all representations and warranties of the Purchaser contained herein being true and accurate in all material respects on and as if made on the Closing Date.

4.2 The obligation of the Purchaser to proceed with Closing shall be conditional upon each and all of the following conditions being satisfied (or waived by the Purchaser in accordance with Clause 4.4):

(a) the Seller acquiring the legal and beneficial title to the Sale Shares from the Original Sellers pursuant to the SPA;

(b) the Seller having performed, in all material respects, all of its undertakings or obligations under this Agreement on or before the Closing Date; and

(c) all representations and warranties of the Seller contained herein being true and accurate in all material respects on and as if made on the Closing Date.

4.3 The Seller may in its sole and absolute discretion elect in writing to proceed with Closing notwithstanding that any or all of the conditions set out in Clause 4.1 have not been fulfilled. Such election shall not relieve the Purchaser from its obligation to procure the fulfillment of the conditions set out in Clause 4.1 and without prejudice to the rights of the Seller against the Purchaser arising from such failure.

4.4 The Purchaser may in its sole and absolute discretion elect in writing to proceed with Closing notwithstanding that any or all of the conditions set out in Clause 4.2 have not been fulfilled. Such election shall not relieve the Seller from its obligation to procure the fulfillment of the conditions set out in Clause 4.2 and without prejudice to the rights of the Purchaser against the Seller arising from such failure.

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5. Covenants

5.1 On or prior to the Closing Date, the Seller shall not do or omit to do or cause or allow to be done or omitted to be done any act or thing which would result or be likely to result in a breach of any of the representations and warranties of the Seller, including but not limited to issuing shares or other securities, incurring indebtedness for borrowed money, and entering into any transactions out of the ordinary course of business by the Company.

5.2 On or prior to:

(a) the Original Closing Date, the Purchaser shall deliver, or cause to be delivered, to the Seller the documents set forth in Clause 3.2 (b), (c) (d) and (e) of the Escrow Agreement; and

(b) the Closing Date, the Purchaser shall not do or omit to do or cause or allow to be done or omitted to be done any act or thing which would result or be likely to result in a breach of any of the representations and warranties of the Purchaser.

5.3 After a Complete Closing of SPA, the Seller shall deliver to the Purchaser the documents set forth in Clauses 3.1 (b) and (c) of the Escrow Agreement and the Purchaser shall cause such documents to be duly executed by their solicitors and filed in the competent courts of the British Virgin Islands.

5.4 Subject to occurrence of Closing, the Seller shall use its best efforts to provide to the Purchaser any documents which the Purchaser may reasonably request in writing for a period of one (1) month after the Original Closing Date for the purpose of the management of the Company and its subsidiaries if it receives such documents from the Original Sellers.

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6. Closing

6.1 Closing shall take place in Singapore on the same date as the Original Closing Date, subject to the Parties being satisfied as to the fulfillment of all their respective Conditions, or at such other place and/or such other day as the parties may agree, whereupon:

(a) the Purchaser shall have delivered the Consideration pursuant to Section 3.2 and the terms hereof; and

(b) the Seller shall deliver to the Purchaser the Title Documents, upon acquiring the title documents from the Original Sellers pursuant to the SPA and the Escrow Agreement.

7. Representations and Warranties

7.1 The Seller hereby represents and warrants to the Purchaser that:

(a) Due Incorporation. As of the Signing Date and the Closing Date, the Seller is duly incorporated, validly existing, and in good standing under the laws of Japan.

(b) Due Authorization. As of the Signing Date and the Closing Date, the Seller has full corporate power and authority and has taken all necessary corporate action to execute and deliver this Agreement and to perform its obligations hereunder.

(c) Sale Shares. As of the Closing Date, the Sale Shares are 346,800 shares, all of which are duly authorized, validly issued, fully paid and outstanding, and the Seller is the sole legal and beneficial owner of all of the Sale Shares, free and clear of any encumbrance and any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such shares), and may (subject to approval by Outer Space to the transfer if necessary) transfer and deliver to the Purchaser at Closing full valid title to all the Sale Shares, free and clear of any encumbrance and any such limitation or restriction and with full rights attaching on and from Closing; provided always that the

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foregoing shall not apply to any and all of the allegations levied and actions initiated by Outer Space seeking to challenge, among other things, Mr. Chin Siang Hui’s appointment as a director of the Company and his actions on behalf of the Company.

(d) Enforceability. As of the Signing Date and the Closing Date, this Agreement has been duly executed and delivered by the Seller and constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions subject to applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally.

(e) Consents. As of the Signing Date and the Closing Date, all consents, clearances, approvals, authorizations, orders, registrations or qualifications of or with any court or governmental agency or body of Japan required for the execution and delivery of this Agreement, the sale of the Sale Shares have been obtained and are in full force and effect and are not subject to any conditions which are required to be satisfied prior to the date hereof and have not been satisfied.

(f) Due Incorporation of the Company. As of the Signing Date and the Closing Date, the Company is duly incorporated, validly existing, and in good standing under the laws of the British Virgin Islands.

(g) Issued share capital. As of the Signing Date and the Closing Date, the issued share capital of the Company comprises of 860,153 Common Shares, all of which are duly authorized, validly issued, fully paid and outstanding. Save as provided in the preceding sentence, there are no outstanding (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (iii) options or other rights to acquire from the Company, or other obligation of the Company to issue any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company.

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(h) BBMF Group Shares. As of the Signing Date and the Closing Date, the Company is the sole legal and beneficial owner of 20,000,000 shares of common stock of BBMF Group Inc, all of which are duly authorized, validly issued, fully paid and outstanding, free and clear of any encumbrance and any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such shares).

(i) No outstanding and contingent liabilities. As of the Closing Date, save for certain claims and/or allegations being made by and/or against Mr. Antony Ip, Outer Space, the Other Claimants, the Purchaser, Mr. Hiroyuki Taniguchi, Mr. Masato Sukegawa, BBMF Group Inc, BBMF K.K., including without limitation the Pending Claims and the Threatened Claims, the Company does not have any liability (whether actual, contingent, unqualified or disputed) or outstanding capital commitment which is not fully disclosed to the Purchaser.

7.2 The Purchaser hereby represents and warrants to the Seller as of the Signing Date that:

(a) Due Incorporation. The Purchaser is duly organized, validly existing, and in good standing under the laws of the Cayman Islands.

(b) Due Authorization. The Purchaser has full corporate power and authority and has taken all necessary corporate action to execute and deliver this Agreement and to perform its obligations hereunder.

(c) Enforceability. This Agreement has been duly executed and delivered by the Purchaser and constitutes the valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms and conditions subject to applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally.

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(d) Consents. To the Purchaser’s knowledge, all consents, clearances, approvals, authorizations, orders, registrations or qualifications of or with any court or governmental agency or body of the Cayman Islands required for the execution and delivery of this Agreement, the purchase of the Sale Shares have been obtained and are in full force and effect and are not subject to any conditions which are required to be satisfied prior to the date hereof and have not been satisfied.

7.3 All representations and warranties made by the Parties herein shall survive the Closing and continue in full force and effect until expiry of the time period set forth in Clause 8 hereof.

8. Indemnification

8.1 Subject to the occurrence of Closing, the Seller shall indemnify the Purchaser for any losses of the Purchaser as a result of, based upon or arising from any inaccuracy in, breach of or nonperformance of any of the representations and warranties, covenants or other obligations contained herein, made by the Seller in this Agreement, provided that the Purchaser provides written notice of any claim hereunder to the Seller on or before the date two (2) years from the Closing Date.

8.2 Subject to the occurrence of Closing, the Purchaser shall indemnify the Seller for:

(a) any losses of the Seller as a result of, based upon or arising from any inaccuracy in, breach of or nonperformance of any of the representations and warranties, covenants or other obligations contained herein made by the Purchaser pursuant to this Agreement, provided that the Seller provides written notice of any claim for indemnity hereunder to the Purchaser on or before the date two (2) years from the Closing Date; and

(b) any losses and damages incurred by the Seller arising from any legal proceeding initiated by Mr. Antony Ip, Mr. Peter Ip, any entity directly or indirectly controlled, or beneficially owned by Mr. Antony Ip

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and/or Mr. Peter Ip (including without limitation, Outer Space, the Purchaser, CDC Corporation, CDC Mobile Corporation, (after the Closing) the Company, and any of their subsidiaries or affiliates), against any of the Original Sellers, Mr. Lian Yih Hann, Mr. Chin Siang Hui, BBMF Inc and their affiliates on or after the Signing Date in connection with any dispute or controversy over any matters or issues relating to the Company, BBMF Group, BBMF Corporation, and BBMF K.K. and the affiliates of the foregoing including, without limitation, control thereof and/or the fulfillment (or failure to fulfill) by the Original Sellers, Mr. Lian Yih Hann, and/or Mr. Chin Siang Hui, of their duties and/or obligations (including without limitation contractual obligations) as a director, officer, consultant and/or shareholder of the Company, BBMF Group Inc, BBMF CORPORATION and BBMF K.K. or the affiliates of the foregoing. For the avoidance of doubt, this provision shall apply to any action brought against Mr. Lian enforcing or purporting to enforce any guarantee provided by Mr. Lian in respect of the liability of the Company, BBMF Group, BBMF Corporation, BBMF K.K. or the affiliates of the foregoing to CDC Corporation and/or CDC Mobile Corporation, initiated or caused by one of the foregoing persons or entities).

8.3 In no event shall the Seller or the Purchaser be liable for consequential, special, indirect, incidental, punitive or exemplary loss, damage, or expense relating to this Agreement. The remedies under this Section 8 shall be the exclusive remedy for any breach of the terms and conditions of this Agreement.

8.4 Subject to occurrence of Closing, the Purchaser shall unconditionally and irrevocably waive and release and cause (a) all corporations directly or indirectly controlled by the Purchaser or any of its subsidiaries or affiliates, (b) BBMF Corp. and its subsidiaries and affiliates, and (c) the Company and its subsidiaries and affiliates to unconditionally and irrevocably waive and release any and all claims and/or rights (of whatsoever nature, at law or in equity, and howsoever arising), which the Purchaser and/or the aforesaid

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entities now has, or may at any time in the future have, against the Original Sellers and/or Mr. Lian and Mr. Chin in respect of any matter, transaction, arrangement or dealing (of whatsoever description) relating to or concerning BBMF Group Inc., BBMF Corp., the Company or their respective affiliates. For the avoidance of doubt, this provision shall not be interpreted to mean that the Purchaser waives its rights to bring any action against the Original Sellers arising from causes of action occurring on or after the Signing Date (save where such causes of action were consequent upon any act or omission of the Sellers and/or Mr. Lian and Mr. Chin and/or the Purchaser and/or the persons set forth in Clause 8.4(a) to (c) prior to the Signing Date).

9. Miscellaneous

9.1 Each Party agrees not to disclose the execution, contents, or performance of this Agreement and the information concerning negotiations for this Agreement without prior written approval of the other party, except for (i) such disclosure to its directors, officers, employees, and advisors, (ii) such disclosure required by applicable law, regulation, or an order of the competent court or governmental entity or (iii) the protection or enforcement of any of its rights under this Agreement.

9.2 This Agreement is not capable of assignment in whole or in part by either Party without the prior written consent of the other.

9.3 Each party shall bear its own costs and expenses incidental to the negotiation and execution of this Agreement and the performance of its obligations under this Agreement including the delivery of the Sale Shares.

9.4 All notices, requests, demands and other communications required to be made or given under the terms of this Agreement or in connection herewith shall be given by or made to the Parties in writing and delivered by hand or by registered mail (air-mail, if outside the sender’s country or territory), or by facsimile confirmed in writing by registered mail dispatched within 24 hours of the facsimile dispatch in question, and shall be addressed to the appropriate Party at the address set out in this Agreement or to such other address as such Party hereto may from time to time designate to the others of them in writing.

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9.5 This Agreement sets out the entire agreement and understanding between the Parties in connection with the sale and purchase of the Sale Shares and supersedes all previous agreements or arrangements (if any) between the Parties relating to the subject matter hereof and all or any such previous agreements or arrangements shall cease to have effect from the date hereof.

9.6 No modification, variation or amendment of this Agreement shall be effective unless such modification, variation or amendment is in writing and has been signed by or on behalf of both Parties.

9.7 No waiver of any breach or default under this Agreement or any of the terms hereof shall be effective unless such waiver is in writing and has been signed by the Party or Parties against which it is asserted. No waiver of any breach or default shall constitute a waiver of any other or subsequent breach or default.

9.8 If at any time any provisions of this Agreement is or becomes illegal, invalid or unenforceable in any respect, the remaining provisions hereof shall in no way be affected or impaired thereby.

9.9 This Agreement is governed by and shall be construed in all respects in accordance with the laws of Japan and each Party hereto hereby irrevocably submits to the exclusive jurisdiction of the Tokyo District Court in connection with any dispute arising hereunder.

9.10 This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile and upon such delivery the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other parties.

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[signature page follows]

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IN WITNESS WHEREOF, the Parties have duly entered this Agreement as of the date first above written.

NIKKO ANTFACTORY K.K.
By:	/s/ Kazunori Ozaki
	Name: Kazunori Ozaki
	Title: Chairman and CEO

IN WITNESS WHEREOF, the Parties have duly entered this Agreement as of the date first above written.

CDC GAMES CORPORATION
By:	/s/ Michael Latimore
	Name: Michael Latimore
	Title: CFO

EX-4.(A)17

Exhibit 4(a).17

MASTER FRAMEWORK AGREEMENT

By and Among

Bonarich Enterprises Ltd

CDC Corporation

and

CDC Games Holdings Limited

Table of Contents

			Page
Section 1.		Definitions and Principles of Construction	1
	1.01	Defined Terms	1
	1.02	Principles of Construction	7
Section 2.		Transfer of the Equity Interest, the Related Entity Equity Interest, the Assignment of Remaining Optic Debt, and Consideration	7
	2.01A	Transfer of the Equity Interest	7
	2.01B	Transfer of the Related Entity Equity Interest	8
	2.01C	Assignment of Remaining Optic Debt	8
	2.02	Consideration	8
	2.03A	The WOFE Closing	9
	2.03B	The Optic Closing	10
	2.03C	Post-Closing	12
Section 3.		Representations and Warranties of the Seller	12
	3.01	Authority	12
	3.02	Organization of the Company	12
	3.03	Total Equity	13
	3.04	Related Entity	13
	3.05	No Conflicts	14
	3.06	Governmental Approvals and Filings	15
	3.07	Legal Proceedings	15
	3.08	Compliance with Laws and Orders	15
	3.09	[Intentionally Deleted]	15
	3.10	No Bankruptcy or Insolvency	15
	3.11	Financial Representations	16
	3.12	No Undisclosed Indebtedness	16
	3.13	Taxes	16
	3.14	Employment and Benefits	18
	3.15	Real Property and Business Premises	19
	3.16	Tangible Personal Property and Plant & Equipment	19
	3.17	Intellectual Property	20
	3.18	Contracts	21
	3.19	Licenses	22
	3.20	Insurance	22
	3.21	Disclosure and Information	22
	3.22	Absence of Changes	23
	3.23.	Powers of Attorney	24
	3.24.	[Intentionally Deleted.]	24
	3.25	[Intentionally Deleted.]	24
	3.26	Related Party Transactions	24
Section 4.		Representations and Warranties of the Purchaser	24
	4.01	Organization of the Purchaser	24
	4.02	No Conflicts	24
	4.03	Litigation	25
	4.04	Authority	25
Section 5.		Covenants of the Seller	25
	5.02	Fulfillment of Conditions	26
	5.03	Notice and Cure	26
	5.04	Conduct of Business in Ordinary Course	26
	5.05	Indebtedness	27
	5.06	Regulatory and Other Approvals	27

	5.07	Insurance	27
	5.08	No Solicitation	28
	5.09	Employee Matters	28
	5.10	[Intentionally Deleted.]	29
	5.11	[Intentionally Deleted.]	29
	5.12	[Intentionally Deleted.]	29
	5.13	Dividends	29
	5.14	HABBO	29
	5.15	[Intentionally Deleted.]	29
Section 6.		Covenants of the Purchaser	29
	6.01	Notice and Cure	29
	6.02	Fulfillment of Conditions	30
	6.03	Regulatory and her Approvals	30
	6.04	Guarantee	30
	6A.	Covenants of Purchaser and Seller	31
	6A.01	Financial Statements	31
	6A.02	Assignment of Licenses	31
	6A.03	Retention of Key Employees	31
Section 7.		Conditions to Obligations of the Purchaser	31
	7.01	Representations and Warranties	32
	7.02	Performance	32
	7.03	Renewal of Licence	32
	7.04	[Intentionally Deleted.]	32
	7.05	[Intentionally Deleted.]	32
	7.06	Legal Action	32
	7.07	No Material Adverse Change	32
	7.08	Investment Certifcates	32
	7.09	[Intentionally Deleted.]	33
	7.10	Closing Documents	33
	7.11	[Intentionally Deleted.]	33
	7.12	[Intentionally Deleted.]	33
	7.13	[Intentionally Deleted.]	33
	7.14	Financial Statements	33
	7.15	Intra-company Debt	33
Section 8.		Conditions to Obligations of the Seller and the Company	33
	8.01	Representations and Warranties	33
	8.02	Performance	33
	8.03	Consents and Approvals	33
	8.04	Approval of the Purchaser’s Board of Directors or Delegated Subcommittee	34
	8.05	[Intentionally Deleted.]	34
Section 9.		Representations, Warranties and Indemnities	34
Section 10.		[Intentionally Deleted.]	35
Section 11.		Termination	35
	11.01	Termination	35
	11.02	Effect of Termination	35
Section 12.	Miscellaneous		36
	12.01	Notices	36
	12.02	Expenses	37
	12.03	[Intentionally Deleted]	37
	12.04	Waiver	37
	12.05	Amendment	37
	12.06	No Third Party Beneficiary	37
	12.07	Assignment; Binding Effect	37
	12.08	Invalid Provisions	38
	12.08A	Set-off	38

12.09	Governing Law	38
12.10	Arbitration	39
12.11	Counterparts	39
12.12	Confidentiality	39
12.13	Exercise of Rights	40
12.14	Rule of Construction	40
12.15	Further Assurances	40

ii

This MASTER FRAMEWORK AGREEMENT, dated as of June 29, 2007, is made by and among CDC Games Holdings Limited, a company organized and existing under the laws of the British Virgin Islands (the “Purchaser”); Bonarich Enterprises Ltd, a company organized and existing under the laws of the British Virgin Islands (the “Seller”); and CDC Corporation, all of whom may be collectively referred to herein as the “Parties” or individually as a “Party”.

RECITALS:

A. The Company is a wholly-owned foreign enterprise established under the laws of the PRC on March 15, 2004 with a registered capital of USD1,210,000 as at the date of this Agreement and principal place of business at 1/F, Subway Building, No.56 Jianzhong Road, Tianhe Industrial Park, Tianhe District, Guangzhou. As at the date hereof, the entire registered capital of the Company is owned by the Seller.

B. The Related Entity is a company with limited liability established under the laws of the PRC on March 23, 1999 with a registered capital of RMB30,000,000 as at the date of this Agreement and principal place of business at No.58, Jianzhong Road, High and New Technology Industrial Park, Zhongshang Avenue West, Guangzhou. As at the date hereof, the entire registered capital of the Related Entity is owned by the individuals whose identities are set out in Schedule y to this Agreement.

C. The parties agreed that of the total debts in the aggregate amount of B193,983,973 owed by the Related Entity to the Creditor as at the date hereof, the Purchaser will procure the Related Entity to repay RMB60,000,000 thereof to the Creditor after Optic Closing.

D. The Seller has agreed to sell and the Purchaser has agreed to purchase the Equity Interest, the Related Entity Equity Interest and the Remaining Optic Debt upon the terms set out in this Agreement, the Equity Transfer Agreement (the form of which is set out in Schedule x to this Agreement), the Related Entity Equity Transfer Agreement (the form of which is set out in Schedule y to this Agreement) and the Assignment of Remaining Optic Debt (the form of which is set out in Schedule z to this Agreement).

E. The entire share capital of the Purchaser is owned by CDC as at the date herein. CDC has agreed to guarantee the obligations of the Purchaser on terms set out in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:

Section 1. Definitions and Principles of Construction

1.01 Defined Terms.

As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

“$” or “US$” shall mean the U.S. dollar, the legal currency of the U.S.

“2005 Financial Statements” shall mean the financial statements of the Company and the Related Entity for the year ended December 31, 2005 prepared in accordance with the generally accepted accounting principles of Hong Kong audited by KPMG.

“2006 Financial Statements” shall mean the financial statements of the Company and the Related Entity for the year ended December 31, 2006 prepared in accordance with the generally accepted accounting principles of Hong Kong audited by KPMG

1

“Affiliate” shall mean any Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“Agreement” shall mean this Master Framework Agreement, the schedules hereto, and Disclosure Schedule delivered in accordance herewith, as the same may be amended, supplemented or modified from time to time.

“Assets” shall mean all assets and properties of the Company and the Related Entity of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person, including without limitation cash, cash equivalents, investment assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory, goods, Intellectual Property, the IP Assets, the Material Contracts, the Property Leases and the Equipment Leases.

“Assignment of Remaining Optic Debt” shall mean the deed of assignment of the Remaining Optic Debt as set out in Schedule z to this Agreement.

“Associate” means, with respect to any Person, any corporation or other business organization of which such Person is an officer or partner or is the beneficial owner, directly or indirectly, of ten percent (10%) or more of any class of equity securities, any trust or estate in which such Person has a substantial beneficial interest or as to which such Person serves as a trustee or in a similar capacity and any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person.

“Benefit Plan” means any plan, scheme or arrangement established by the Company or any Related Entity, or any predecessor or Affiliate of any of the foregoing, existing at the Effective Date or prior thereto, to which the Company or any Related Entity, as the case may be, contributes or has contributed, or under which any employee, former employee or director of the Company or any Related Entity or any beneficiary thereof is covered, is eligible for coverage or has benefit rights whether provided by the Company, or any Related Entity or pursuant to any governmental program, or otherwise.

“Board” shall mean the board of directors of the Company.

“Business” shall mean the Related Entity’s business and the Company’s business as a whole including but not limited to online games, wireless, research and development, and studio business in the PRC.

“Business Combination” means with respect to any Person any merger, consolidation or combination to which such Person is a party, any sale, dividend, split or other disposition of capital stock or other equity interests of such Person, or any sale, dividend or other disposition of all or substantially all of the Assets of such Person.

“Business Day” shall mean a day other than Saturday, Sunday or any day on which banks located in Hong Kong and PRC are authorized or obligated to close.

“Business or Condition of the Company” means the business, condition (financial or otherwise), results of operations, Assets and prospects of the Company and the Related Entity taken as a whole.

2

“Business Premises” shall have the meaning given in Section 3.15(c).

“CDC” shall mean CDC Corporation, a corporation incorporated under the laws of the Cayman Islands.

“Closing” shall mean the WOFE Closing or the Optic Closing, as the case may be.

“Closing Date” shall mean the WOFE Closing Date or the Optic Closing Date, as the case may be.

“Company” shall mean a wholly-owned foreign enterprise established under the laws of the PRC.

“Consideration” shall have the meaning given to such term in Section 2.02.

“Constitution” shall mean the memorandum of association, articles of association, certificate or articles of incorporation and by-laws, or similar charter documents, as may be amended from time to time.

“contract” shall mean any agreement, instrument, written contract or other arrangement, together with any related amendments, waivers, supplements, schedules, exhibits, work orders, notices as to termination or change thereunder.

“Creditor” shall mean a company with limited liability established under the laws of the PRC.

“Debt” shall mean the portion of the total debt owed by the Related Entity to the Creditor, amounting to RMB 60,000,000, which the Purchaser shall procure the Related Entity to repay to the Creditor within Five Business Days after the Optic Closing.

“Disclosure Schedule” shall mean a schedule delivered to the Purchaser by the Seller herewith and dated as of the Effective Date containing all lists, descriptions, exceptions, qualifications and other information and materials as are required to be included therein by the Seller pursuant to this Agreement.

“Effective Date” shall mean the date of this Agreement.

“Equipment Leases” shall mean leases of, and agreements to hire, equipment (including motor vehicles) to the Company including, without limitation, those listed in Section 3. I6(c) of the Disclosure Schedule.

“Equity interest” shall mean the entire equity interest in the registered capital of the Company.

“Equity Transfer Agreement^” shall have the meaning given in Section 2.01 A.

“Financial Statements” shall mean, collectively, 2005 Financial Statements, 2006 Financial Statements and the Management Accounts of the Company and the Related Entity for January, February, March, April and May of 2007.

“Governmental Licenses” means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority.

3

“Governmental or Regulatory Authority” shall mean any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the British Virgin Islands, PAC, Hong Kong or any applicable foreign country or any domestic or foreign state, county, city or other political subdivision.

“Hong Kong” shall mean Hong Kong Special Administrative Region of the People’s Republic of China.

“Inception Date” shall mean the date of incorporation of the Company and/or the Related Entity as the case may be.

“Indebtedness” means, with respect to any Person: (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services, (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sake of such property), (e) all obligations of such Person as lessee under leases that have been or should be, recorded as capital leases, (0 all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any share capital of such Person or any warrants, rights or options to acquire such share capital, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness of others referred to in clauses (a) through (g) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (i) all Indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any encumbrance on property including, without limitation, accounts and contract rights owned by such Person (including Assets as relates to the Company and the Related Entity), even though such Person has not assumed or become liable for the payment of such Indebtedness.

“Intellectual Property” shall mean: (a) copyrightable works, copyrights and design rights including all applications, registrations, and renewals in connection therewith; (b) trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and_, renewals in connection therewith; (c) inventions, discoveries and patents (whether patentable or unpatentable and whether or not reduced to practice); (d) trade secrets and confidential information (including ideas, research and development, know-how, formulas, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (e) computer software (including data and related documentation) or source or object code, including improvements, revisions, amendments, modifications or alternations; (I) other proprietary, intellectual and industrial rights in whatever form or medium, including moral rights; and (g) the IP Assets.

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“IP Assets” shall mean (a) the computer software and music content created, developed, designed, licensed and owned by the Company and/or the Related Entity and all improvements, revisions, amendments, modifications or alterations thereto, including but not limited to those as set forth in Sections 3.17(c) and (d) of the Disclosure Schedule; (b) the platform, carrier and/or protocol specific applications; (c) the localization versions of software embedded with content owned by third parties; and (d) all improvements, revisions, amendments, modifications or alterations thereto.

“KPMG” shall mean KPMC; the reporting accountants of the Company and the Related Entity.

“Law^” shall mean all laws, statutes, rules, regulations, ordinances, Orders and other pronouncements having the effect of law of the British Virgin Islands, PRC, Hong Kong or of any Governmental or Regulatory Authority.

“Liability” as used either singularly or in the plural shall mean any liability, debt or obligation of the Company or the Related Entity, including any drawdowns under any loans made to the Company or the Related Entity after the Closing Date.

“Lien” shall mean any lien, pledge, hypothecation, mortgage, charge, security interest, claim, lease, charge, option, right of first refusal, right to acquire, pre-emptive rights, conversion rights, easement, encroachment, transfer restriction, or other encumbrance or commitment of any kind.

“Loss” shall mean any and all damages, fines, fees, penalties, obligations, judgments, deficiencies, losses and expenses (including without limitation interest, actual court costs, reasonable fees of attorneys, reasonable retainers, reasonable fees of accountants and other experts or other reasonable expenses of litigation, reasonable witnesses costs/expenses or other proceedings or of any claim, default or assessment).

“Management Accounts” shall mean the unaudited balance sheet and profit and loss statement of the Company and the Related Entity for January 2007, February 2007, March 2007, April 2007 and May 2007 made available to the Purchaser prior to Closing.

“Material Adverse Effect” shall mean any event, change in or effect on the Company or the Related Entity that, individually or in the aggregate, has had or is reasonably expected to have a material adverse effect on the Business or Condition of the Company.

“Material Contracts” shall have the meaning given in Section 3.18(d).

“Optic Closing” shall have the meaning given to such term in Section 2.038.

“Optic Closing Date” shall mean the third Business Day after all conditions precedent for the transfer of the Related Entity Equity Interest have been fulfilled or waived in accordance with Section 7 and 8 of this Agreement and the Related Entity Equity Transfer Agreement, respectively, or such other date as the Purchaser and the Seller shall mutually agree in writing.

“Order” shall mean any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).

“Person” shall mean an individual, partnership, corporation, association, trust, joint venture, unincorporated organization, and any government, governmental department or agency or political subdivision thereof.

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“Plant and Equipment” shall have the meaning given in Section 3.16(b).

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

“Proceeding” shall have the meaning given in Section 3.07.

“Property Leases” shall mean all property leases executed by the Company or any Related Entity that are effective as of the Effective Date.

“Purchaser” shall have the meaning given in the preamble hereto.

“RMB” shall mean the renminbi, the legal currency of the PRC

“Records” shall mean originals or copies, of all books, files, reports or records of or relating to or used in connection with the Company and the Related Entity and including, without limitation: (a) minute books, statutory books and registers, books of account and copies of taxation returns; (b) all sales and purchasing records; and (c) lists of all regular suppliers and customers.

“Related Entity” shall mean or Guangzhou Optic Communications Co., Ltd , a company with limited liability established under the laws of the PRC.

“Related Entity Equity Interest” means the entire equity interest in the registered capital of the Related Entity.

“Related Entity Equity Transfer Agreement” shall have the meaning given in Section 2.01B.

“Remaining Optic Debt” shall mean the remaining amount of debt owed by the Related Entity to the Creditor as at the Optic Closing less the Debt which the Related Entity will repay pursuant to Section 2.02(a)(iii).

“Representatives” shall have the meaning given in Section 5.01.

“Seller” shall have the meaning given in the preamble hereto.

“Subsidiaries” when used in plural or “Subsidiary” when used singly shall mean, in relation to the Company, a corporate entity (a) whose voting shares or equity interests are owned more than 50% by the Company and (b) over which managing body the Company exercises control, directly or indirectly, including the Related Entity.

“Tax” and “Taxes” means and includes any and all taxes (including, without limitation, any and all income, franchise, sales, use, excise, withholding, employment, payroll, social security, property, fringe benefits, capital gains, goods and services, group and stamp and custom duties taxes) and similar assessments, customs, duties, charges and fees (including interest, penalties and additions to such taxes, assessments, customs, duties, charges and fees, penalties for failure to file or late filing of any return, report or other filing, and any interest in respect of such penalties and additions) imposed or assessed by any federal, state or local taxing authority, including without limitation, British Virgin Islands, the PRC or Hong Kong (or any political subdivision thereof or therein) in relation to the Company and/or the Related Entity only.

“Tax Claim” shall mean any assessment notice (including a notice of adjustment of a loss

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in a manner adversely affecting the Company or any Related Entity), demand or other document issued or action taken by or on behalf of any Governmental or Regulatory Authority, based on any facts or circumstances (or part thereof) arising or existing prior to the WOFE Closing and the Optic Closing, as the case may be, as a result of which the Company or any Related Entity is liable to make a payment for any tax, levy, impost, deduction, charges, withholdings and duties (excluding stamp duties) or has suffered a loss, together with related interest, penalties, fines and other statutory charges whether accrued before or after the WOFE Closing and the Optic Closing.

“Transaction Documents” shall mean this Agreement (and all relevant share transfers, share certificates, board and shareholder resolutions and any other ancillary documents required for the consummation of this Agreement), the Equity Transfer Agreement, the Related Entity Equity Transfer Agreement, Assignment of Remaining Optic Debt, and any documents modifying or supplementing the contractual arrangements between the Purchaser, the Company and/or the Related Entity.

“U.S.” or “US” shall mean the United States of America.

“WOFE Closing” shall have the meaning given to such term in Section 2.03A.

“WOFE Closing Date” shall mean the third Business Day after all conditions precedent for the transfer of Equity Interest have been satisfied or waived in accordance with Section 7 and 8 of this Agreement and the Equity Transfer Agreement, respectively, or such other date as the Purchaser and the Seller shall mutually agree in writing.

1.02 Principles of Construction.

(a) All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified. The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provisions of this Agreement.

(b) All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles in Hong Kong

(c) The singular terms include the plural and the plural terms include the singular.

(d) The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

(e) Any reference to a Person’s “knowledge” or “best knowledge” shall be deemed to include an additional statement that all reasonable, due and careful inquiry has been made.

Section 2. Transfer of the Equity Interest, the Related Entity Equity Interest, the Assignment of Remaining Optic Debt, and Consideration.

Subject to the terms and conditions hereof, and in reliance upon the representations, warranties and covenants contained in this Agreement as of the date hereof and on the Closing Date, the Seller shall:

2.01A Transfer of the Equity Interest.

transfer to the Purchaser, and the Purchaser shall purchase from the Seller the Equity

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Interest on terms and conditions set out in the agreement governing the transfer of the Equity Interest (the “Equity Transfer Agreement”) (the form of which is set out in Schedule x to this Agreement);

2.01B Transfer of the Related Entity Equity Interest.

procure the individuals and the designated entities, whose identities and company names are set out in Schedule y to this Agreement, who collectively hold 100% equity interests in the Related Party as at the Effective Date, to enter into the agreement in relation to the transfer of the entire equity interest in the Related Entity (the “Related Entity Transfer Agreement”) (the form of which is shown in Schedule y to this Agreement). The Seller shall not be held liable whatsoever under the Transaction Documents if the transfer of the Related Entity Equity Interest to the Purchaser or its nominee(s) is not completed due to the acts of the Purchaser or the fact that persons or entities nominated by the Purchaser are not qualified as eligible persons to be holders of the registered capital of the Related Entity under relevant law and regulations in PRC. For avoidance of doubt, the Purchaser has the obligations to procure persons or nominees which are qualified as eligible persons to be holders of the registered capital of the Related Entity under relevant law and regulations in PRC. The Seller shall procure the individuals and/or the designated entities, whose identities and company names are set out in Schedule y to this Agreement, to complete and sign all documents necessary to effect the transfer of the Related Entity Equity Interest; and

2.01C. Assignment of Remaining Optic Debt.

assign to the Purchaser or its nominee the Remaining Optic Debt on terms and conditions set out in the Assignment of Remaining Optic Debt (the form of which is set out in Schedule z to this Agreement). In the event that the Assignment of Remaining Optic Debt is found to be invalid or unenforceable for any reason whatsoever the Seller agrees that the Seller will cause the assignor of the Remaining Optic Debt to hold any proceeds they receive from any payment of the Remaining Optic Debt in trust for the Purchaser or its nominee and the assignor will pay such proceeds to the Purchaser or its nominee at the Purchaser’s direction. The Seller unconditionally and irrevocably guarantees to the Purchaser the due and punctual discharge by the assignor of all of its obligations under this Section 2.01C and promises to pay on demand each sum (including any interest charges thereon up to and including such charges arising from the date of demand hereof until the date of payment hereunder) which the assignor is liable to pay under this Section 2.0I C.

2.02 Consideration.

(a) The total consideration to be paid for the Equity Interest and the Related Entity Equity Interest by the Purchaser shall be RMB100 million (the “Consideration”) and shall be paid in cash by wire transfer to the designated account of the Seller in the following manner:

(i) RMB10,000,000 in US$ equivalent shall be paid by the Purchaser to the Seller on the WOFE Closing Date;

(ii) RMB30,000,000 shall be paid by the Purchaser to the Seller or its nominee on the Optic Closing Date; and

(iii) the Purchaser shall procure the Related Entity to repay the Debt in full to the Creditor within Five Business Days after the Optic Closing. CDC unconditionally and irrevocably guarantees to the Seller the due and

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punctual discharge by the Purchaser and the Related Entity of all of its obligations under this Section 2.02(a)(iii) and promises to pay on demand each sum (including any interest charges thereon up to and including such charges arising from the date of demand hereof until the date of payment hereunder) which the Related Entity is liable to repay under this Section 2.02(a)(iii). CDC’s obligations shall be a continuing guarantee. The Seller may make claims and demands from the Purchaser without limit of number.

(b) For the purpose of this Section 2.02, unless otherwise agreed in this Agreement, Equity Transfer Agreement, the Related Entity Equity Transfer Agreement and the Assignment of Remaining Optic Debt, any translation from one currency or currency unit to another shall be at the official rate of exchange recognized by the central bank for the conversion of that currency or currency unit into the other published on the Business Day immediately prior to the date of the relevant payment pursuant to Section 2.02(a) above.

(c) For the avoidance of doubt, the consideration for the Assignment of Remaining Optic Debt shall be zero.

2.03A The WOFE Closing.

The closing for the transfer of the Equity Interest (the “WOFE Closing”) shall take place on the WOFE Closing Date at the offices of the Purchaser in Hong Kong or at such other time, date and place as the Parties may agree in writing. At or before the WOFE Closing:

(a) the Seller shall deliver or cause to be delivered to the Purchaser the completion documents as provided under the Equity Transfer Agreement, including but not limited to the followings:

(i) certified copies of board or other necessary resolutions of the Company for the implementation of the matters referred to in Section 2.03A(b) below;

(ii) an original copy of board resolution of the board of directors of the Seller certified by the notary public of the British Virgin Islands and legalized by the Chinese Embassy in London to approve the Equity Transfer Agreement and duly authorize a director of the Seller to execute the Equity Transfer Agreement;

(iii) the approval of the State Administration of Industry and Commerce of the PRC in relation to the transfer of Equity Interest from the Seller to the Purchaser or its nominee; and

(iv) such other PRC governmental and regulatory approvals in relation to the transfer of Equity Interest (if any);

(b) the Seiler shall procure that the following businesses be transacted at a meeting of the directors of the Company:

(i) the directors of the Company to approve the transfer of the Equity Interest and the registration of the Equity Transfer Agreement and the transfer of Equity Interest with the applicable PRC company registration authorities;

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(ii) all existing mandates for the operation of the accounts of the Company shall be revoked and new mandates issued giving authority to those persons nominated by the Purchaser;

(iii) persons nominated by the Purchaser for appointment as directors, legal representative of the Company shall be so appointed; and

(iv) auditors nominated by the Purchaser (if any) for appointment as auditors of the Company shall be so appointed to replace the existing auditors;

(c) the Purchaser shall deliver or cause to be delivered to Seller:

(i) a copy of such necessary bank document evidencing the wire transfer of the payments in an amount equal to RMB10,000,000 in US$ equivalent as provided under Section 2.02(a)(i);

(ii) certified copies of resolutions duly adopted by the board of directors of the Purchaser authorizing and approving the execution of the Equity Transfer Agreement, and the performance and completion of the transactions contemplated under the Equity Transfer Agreement; and

(iii) other completion documents as provided under the Equity Transfer Agreement (if any);

(d) the Purchaser shall procure persons or nominees which are qualified as eligible persons to be holders of the Equity Interest under relevant law and regulations in PRC.

2.03B The Optic Closing.

The closing for the transfer of the Related Entity Equity Interest and the assignment of the Remaining Optic Debt (the “Optic Closing”) shall take place on the Optic Closing Date at the offices of the Purchaser in Hong Kong or at such other time, date and place as the Parties may agree in writing. At or before the Optic Closing:

(a) the Seller shall procure to be delivered to the Purchaser the respective completion documents as provided under the Related Entity Equity Transfer Agreement and the Assignment of Remaining Optic Debt, including but not limited to the followings:

(i) certified copies of board or other necessary resolutions of the Related Entity for the implementation of the matters referred to in Section 2.03B(b) below;

(ii) certified copies of board or other necessary resolutions of the Creditor for the implementation of the matters referred to in Section 2.03B(c) below;

(iii) the approvals of the Ministry of Information Industry of the PRC and the State Administration of Industry and Commerce of the PRC in relation to the transfer of Related Entity Equity Interest from the Seller to the Purchaser or its nominee(s);

(iv) the relevant documentation evidencing the assignment of total debts in the aggregate amount of RMB 193,983,973 in favour of the Creditor on or before the Optic Closing Date;

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(v) written confirmation from the Related Entity confirming the remaining amount of debt owed by the Related Entity to the Creditor as of the Optic Closing Date; and

(vi) such other PRC governmental and regulatory approvals in relation to the transfer of the Related Entity Equity Interest (if any);

2.03B (a)(iii) and (vi) are not applicable if the approvals are not obtained due to either the lack of qualification of the Purchaser or its nominees or any actions on their parts;

(b) the Seller shall procure that the following businesses be approved by the sole director and legal representative of the Related Entity:

(i) the directors of the Related Entity to approve the transfer of the Related Entity Equity Interest and the registration of the Related Entity Equity Transfer Agreement with the applicable PRC registration authorities;

(ii) all existing mandates for the operation of the accounts of the Related Entity shall be revoked and new mandates issued giving authority to those persons nominated by the Purchaser;

(iii) persons nominated by the Purchaser for appointment as directors, legal representative of the Related Entity shall be so appointed; and

(iv) auditors nominated by the Purchaser (if any) for appointment as auditors of the Related Entity shall be so appointed to replace the existing auditors;

(c) the Seller shall procure the directors of the Creditor to approve the assignment of the Remaining Optic Debt;

(d) the Purchaser shall deliver or cause to be delivered to Seller:

(i) a copy of such necessary bank document evidencing the wire transfer of the payments in an amount equal to RMB30,000,000 as provided under Section 2.02(a)(ii);

(ii) certified copies of resolutions duly adopted by the board of directors of the Purchaser authorizing and approving the execution of the Related Entity Equity Interest Agreement and the Assignment of Remaining Optic Debt and the performance and completion of the transactions contemplated under the Related Entity Equity Transfer Agreement and the Assignment of Remaining Optic Debt, respectively; and

(iii) other completion documents as provided under the Related Entity Equity Transfer Agreement and the Assignment of Remaining Optic Debt (if any);

(d) the Purchaser shall procure persons or nominees which are qualified as eligible persons to be holders of the registered capital of the Related Entity under relevant law and regulations in PRC.

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2.03C Post-Closing.

The Purchaser will make, and will cause the Company and the Related Entity (after the respective Closing) to cooperate with the Seller as promptly as practicable to make, filings as may be required with the Ministry of News and Publishing of the PRC and the Ministry of Culture of the PRC in relation to the transfer of the Equity Interest or the Related Entity Equity Interest from the Seller to the Purchaser or its nominee(s).

Section 3. Representations and Warranties of the Seller.

3.01A The Seller represents, warrants and undertakes to the Purchaser that the warranties set out in Section 3.01 to 3.26 (the “Warranties”) contained are true and correct in all material respects as at the date of this Agreement. Each of the Warranties shall be deemed to be repeated as at Closing with reference to the facts and circumstances then subsisting.

3.0lB The Warranties set out below shall be separate and independent and none of the Warranties shall be limited or restricted by reference to or inference from the terms of any other Warranties or any other term of this Agreement.

3.0IC The Warranties are and shall be given subject to the matter disclosed or referred to in this Agreement or in the Disclosure Schedule and to matters arising in the ordinary course of business of the relevant entity which do not or is unlikely to cause a Material Adverse Effect, to the intent that the Seller shall not be liable by reason of any of the Warranties being untrue or misleading or breached to the extent that the same has been disclosed in this Agreement or the Disclosure Schedule and to the extent that the same has arisen in the ordinary course of the related entity’s business which do not or is unlikely to cause a Material Adverse Effect.

3.01 Authority.

(a) The Seller has full legal capacity, power and authority to enter into, execute and deliver this Agreement and, where applicable, the Transaction Documents to which it is a party, and to perform each of its obligations hereunder, thereunder and under each of the other documents required to be entered into pursuant hereto. This Agreement and each applicable Transaction Document to which the Seller is a party have been duly and validly executed and delivered by the Seller and will constitute a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms subject to bankruptcy, reorganization, insolvency, moratorium, restructuring or similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity. No meeting has been convened or resolution proposed, or petition presented, and no order has been made, for the winding-up of the Seller. No voluntary arrangement has been proposed or reached with any creditors of the Seller. The Seller is able to pay its debts as and when they fall due and is solvent.

3.02 Organization of the Company.

(a) The Company is a wholly owned foreign enterprise duly organized and validly existing under the Laws of the PRC, and has full corporate power and authority to conduct its business as and to the extent now conducted and to own, use and lease its assets and properties.

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(b) The Company is duly qualified, licensed or admitted to do business in each of such jurisdiction to the extent that such qualification, licensure or admission is required by that jurisdiction’s laws. The Company has full corporate power to own its properties, assets and business and to carry on its business operations and has done everything necessary to do business lawfully in the aforementioned jurisdictions.

(c) The name of each director and officer of the Company on the date hereof, and the position with the Company held by each, are listed in Section 3.02(c) of the Disclosure Schedule.

(d) Prior to the Effective Date, the Seller and the Company have made available to the Purchaser true copies of the Constitution and Records of the Company as in effect on the Effective Date. The Records are: (i) true and accurate in all material respects;

(ii) as far as is relevant, have been prepared in accordance with applicable Law; and

(iii) are in the possession of the Company in their original form.

(e) The Company and the Related Entity have filed and/or registered all annual returns and other Records as and where required to be filed and/or registered.

3.03 Total Equity.

(a) The total paid and verified registered capital of the Company is USD1,210,000. The Seller is the registered owner of the entire registered capital of the Company.

(b) The Equity Interest is being transferred to the Purchaser by the Seiler free and clear of any Lien or other interests of any other third party whatsoever.

(c) There are no contractual commitments in place under which the Company is obligated at any time to increase its registered capital as of the WOFE Closing Date unless otherwise specifically required by the Purchaser and agreed by the Seller.

(d) There are no outstanding options with respect to the Company.

(e) There will be at the WOFE Closing no restriction(s) on the transfer of the Equity Interest to the Purchaser whatsoever.

3.04 Related Entity.

(a) Related Entity is a limited liability company duly organized and validly existing under the Laws of the PRC and has full corporate power and authority to conduct its businesses, including but not limited to online games, wireless and research and development studio business, as and to the extent now conducted and to own, use and lease its assets and properties. Section 3.04(a) of the Disclosure Schedule sets forth the business scope of the Related Entity as specified in its business license and its ICP license. Each such business scope is sufficient for the relevant Related Entity to conduct its business to the extent it has been and is currently conducted.

(b) The Related Entity has full legal capacity, power and authority to enter into, execute and deliver the Transaction Documents to which it is a party, and to perform each of its obligations thereunder and under each of the other documents required to be entered into pursuant hereto. Each applicable Transaction Document to which the Related Entity is a party have been duly and validly executed and delivered by the Related Entity and will constitute a legal, valid and binding obligation of the Related Entity enforceable against the Related Entity in

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accordance with its terms subject to bankruptcy, reorganization, insolvency, moratorium, restructuring or similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity. No meeting has been convened or resolution proposed, or petition presented, and no order has been made, for the winding-up of the Related Entity. No voluntary arrangement has been proposed or reached with any creditors of the Related Entity. The Related Entity is able to pay its debts as and when they fall due and is solvent.

(c) The name of each beneficial holder of the Related Entity and the respective share ownership percentage position of the Related Entity held by each, are listed in Section 3.04(c) of the Disclosure Schedule.

(d) The name of each director and officer of the Related Entity on the date hereof, and the position with each respective Related Entity held by each, are listed in Section 3.04(d) of the Disclosure Schedule.

(e) Prior to the execution of this Agreement, the Seller and the Company have made available to the Purchaser true and complete (in all material respects) copies of the Constitution and Records of the Related Entity as in effect on the date hereof. The Records are: (i) complete, true and accurate in all material respects; (ii) as far as is relevant, have been prepared in accordance with the applicable Law; and (iii) are available to the Company in their original form.

(f) The registered capital of the Related Entity has been fully paid according to the capital payment schedule stipulated in the articles of association of the Related Entity approved by PRC relevant authorities and the equity interest in the Related Entity is not subject to any preemptive rights, put or call rights or obligations, rights of first refusal, anti-dilution rights or liquidation rights or other rights to subscribe for the registered capital of the Related Entity. The equity interest in the Related Entity is owned, beneficially and of record, by the shareholders identified in Section 3.04(f) of the Disclosure Schedule free and clear of all Liens. The Related Entity has properly reserved from its after-tax profits (if any) in each fiscal year the amounts required by applicable Law in the PRC to the reserve fund and staff bonus and welfare fund.

(g) There are no other corporations, partnerships, joint ventures, associations or other entities in which the Related Entity owns, of record or beneficially, any direct or indirect equity or other interest or any right (contingent or otherwise) to acquire the same.

(h) The Creditor is the sole beneficial owner of the Debt and the Remaining Optic Debt to the exclusion of the previous assignors of parts of the Debt and the Remaining Optic Debt.

3.05 No Conflicts.

To the best knowledge of the Seller, the execution and delivery by the Seller, the Company and the Related Entity of this Agreement and the Transaction Documents to which they are parties do not, and the performance by the Sellers and the Company of their respective obligations under this Agreement and such Transaction Documents and the consummation of the transactions contemplated hereby will not breach any laws or contracts, will not require the consent of any third party and will not give rise to any third party having any enforceable right against the Company or the Related Entity which would not have arisen but for the execution and performance of this Agreement and the Transaction Documents.

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3.06 Governmental Approvals and Filings.

No consent, approval or action of, filing with or notice to any applicable Governmental or Regulatory Authority on the part of the Seller, the Company or the Related Entity is required in connection with the execution of this Agreement and the Transaction Documents.

3.07 Legal Proceedings.

Save for recovery actions for receivables incurred in the ordinary course of business of the Company and the Related Entity, neither the Company nor the Related Entity is a party to any litigation, arbitration, prosecutions, claims, disputes, investigations or to any other legal or contractual proceedings (together “Proceedings”) and as far as the Seller is aware, there are no facts or circumstances subsisting which might give rise to such Proceedings and there are no unfulfilled or unsatisfied judgments or court orders against the Company and the Related Entity.

3.08 Compliance with Laws and Orders.

Each of the Company, the Related Entity and the Seller has complied in all material respects with applicable Law and Order and to the best knowledge of the Seller, none of the Company, the Related Entity or the Seller is or has at any time since their respective establishments been, or has received any notice that it is or has at any time been, in violation of or in default under, in any material respect, any Law or Order applicable to the Company or the Related Entity or any of their respective Assets which would cause a Material Adverse Effect.

3.09 [Intentionally Deleted]

3.10 No Bankruptcy or Insolvency.

(a) To the best knowledge of the Seller, no order has been made, or petition presented, or resolution passed for the winding-up of the Company or the Related Entity or the Seller. None of the Company or the Related Entity or the Seller has had:

(i) any petition or order for winding-up filed against it;

(ii) any appointment of a receiver over the whole or part of the undertaking of its assets;

(iii) any petition or order for administration against it;

(iv) any voluntary arrangement between any creditor and it;

(v) any distress or execution or other process levied in respect of it which remain undischarged; or

(vi) any unfulfilled or unsatisfied judgment or court order against it over the amount of US$100,000.

(b) None of the Company or the Related Entity or the Seller is insolvent and each can pay its debts as and when they fall due if and only if the Debt and the Remaining Optic Debt are disregarded.

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(c) To the best knowledge of the Seller, there are no circumstances which would entitle any Person to successfully present a petition for the winding-up or administration of the Company or the Related Entity or the Seller or to appoint a receiver over the whole or any part of the undertaking or assets of the Company or the Related Entity or the Seller.

3.11 Financial Representations.

(a) The Management Accounts (i) were prepared in accordance with the books of account and other financial records of the Company and the Related Entity; (ii) present fairly the financial condition and results of operations of the Company and the Related Entity as at the dates thereof or for the respective periods covered thereby; (iii) have been prepared in accordance with generally accepted accounting principles of Hong Kong applied on a basis consistent with the past practices of the Company and the Related Entity; and (iv) include all adjustments that are necessary for a fair presentation of the financial condition of the Company and the Related Entity and the results of the operations of the Company and the Related Entity as of the dates thereof or for the periods covered thereby. As at 31 May 2007, there are no Liabilities of the Company, or the Related Entity, other than Liabilities that are reflected or reserved against on the Management Accounts as at May 31, 2007.

(b) The books of account and other financial records of the Company and the Related Entity: (i) reflect all items of income and expense and all assets and Liabilities required to be reflected therein in accordance with generally accepted accounting principles of PRC applied on a basis consistent with the past practices of the Company and the Related Entity, respectively; (ii) are in all material respects complete and correct, and do not contain or reflect any material inaccuracies or discrepancies; and (iii) have been maintained in accordance with good business and accounting practices.

(c) Section 3.11(c) of the Disclosure Schedule sets forth each and every account maintained by each of the Company and the Related Entity at a bank or other financial institution, including the name of such bank or financial institution, account number and the amount of balance on such account.

(d) All forecasts and projections of any future financial results of the Company and the Related Entity provided to the Purchaser by or on behalf of the Company, any of the Company’s or the Related Entity’s management or the Seller were prepared in good faith.

3.12 No Undisclosed Indebtedness.

As at 31 May 2007, other than the Remaining Optic Debt , the Debt and those set forth in Section 3.12 of the Disclosure Schedule, neither the Company nor the Related Entity has any undisclosed Indebtedness in excess of US$100,000.

3.13 Taxes.

Subject to Section 3.13A below,

(a) The Company and the Related Entity have duly filed all tax returns for any period on or before the Closing Date and the same have been made or given in good faith within the requisite periods and on a proper basis and when made were true and

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accurate in all material respects and are up to date and none of them contains any statement that is false or misleading in any material respects or omits to refer to any material matter which is required to be included or without which the statement is false or misleading. None of such tax return is or is likely to be the subject of any dispute with any tax authority.

(b) The Company and the Related Entity have paid when due, and have withheld, deducted and accounted to the relevant authorities for, all Taxes which they have become liable to pay, withhold, deduct or account for on or before the date hereof. For the purposes of this Section 3.13(b) “a liability to pay” includes a liability to pay any penalty or interest.

(c) The Company and the Related Entity have complied in all material respects with all legislation, regulations, executive orders and directions relating to or associated with any Taxes.

(d) Save for the tax implications which may arise as a result of the transactions contemplated under the Transaction Documents and those disclosed in the financial statements, there are no outstanding or likely disputes or questions or demands between the Company and the Related Entity, on the one hand, and any Governmental or Regulatory Authority or agent thereof, on the other hand, concerning any Tax liability. There are no Tax liens on any of the Assets of the Company or the Related Entity. Neither the Company nor the Related Entity has received any claim from any taxing authority in a jurisdiction in which the Company or the Related Entity is or may be subject to taxation and in which the Company or the Related Entity has failed to file tax returns required by that jurisdiction. The Seller have made available to the Purchaser correct and complete copies of all tax returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company and the Related Entity since the Inception Date.

(e) Other than pursuant to this Agreement, neither the Company nor any Related Entity has ever been a party to or bound by any Tax indemnity, Tax sharing or similar agreement and neither the Company nor the Related Entity has any material liability for any Taxes of any other person.

3.13A The warranties given under Section 3.13 do not cover, and the Seller shall not be held liable in respect of, any Tax or Tax Claim:

(a) to the extent that provision has been made for such Tax or Tax Claim in the unaudited accounts of the Company and/or the Related Entity or any of them for an accounting period ended on or before 31 May 2007;

(b) falling on the Company and/or the Related Entity in respect of any accounting period commencing on or after 31 May 2007 unless liability for such Tax or Tax Claim would not have arisen but for some act or omission of, or transaction entered into by, the Seller, the Company and/or the Related Entity or any of them (whether alone or in conjunction with some other act, omission or transaction, whenever occurring), otherwise than in the ordinary course of business, or otherwise than in the ordinary course of acquiring or disposing of capital assets, on or before the WOFE Closing Date and the Optic Closing Date, whichever is later;

(c) to the extent that such Tax or Tax Claim arises or is incurred as a consequence of any change in the law, rules or regulations, or the interpretation or practice

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thereof by the PRC Tax Bureau or any other statutory or governmental authority (in the PRC, Hong Kong or elsewhere) having retrospective effect coming into force after the Effective Date or to the extent that such Tax or Tax Claim arises or is increased by an increase in rates of Tax after the Effective Date with retrospective effect;

(d) to the extent that such Tax or Tax Claim is discharged by person other than the Company and/or the Related Entity and that none of the Company and/or the Related Entity is required to reimburse such person in respect of the discharge of the Tax;

(e) to the extent of any provision or reserve made for Tax or Tax Claim in the unaudited accounts referred to in 3.13A(a) above which is finally established to be an over-provision or an excessive reserve; or

(f) to the extent that such Tax or Tax Claim arises or is incurred as a consequence of the transactions contemplated hereunder or of matters otherwise approved or confirmed by the Purchaser.

3.14 Employment and Benefits.

(a) Section 3.14(a) of the Disclosure Schedule contains a list of the key employees of the Company and summary of key terms including the expiration of their current term of employment as at Closing (the “Key Employees”).

(b) Section 3.14(b) of the Disclosure Schedule contains an accurate list of each Benefit Plan of the Company and the Related Entity and none of the Company or the Related Entity has made any commitments to establish new or to expand Benefit Plans as set forth therein.

(c) To the best knowledge of the Seller, the Company and the Related Entity have complied with all applicable Laws relating to each Benefit Plan. All contributions or payments required to be made by the Company or the Related Entity with respect to each Benefit Plan (including proper allocation of after-tax profit to the reserve fund and staff bonus and welfare fund each year put to the PRC law) have been made on or before their due dates. All such contributions and payments required to be made by any employees of the Company or any Related Entity with respect to the relevant Benefit Plan have been fully deducted and paid to the relevant Governmental or Regulatory Authorities on or before their due dates, and no such deductions have been challenged or disallowed by any Governmental or Regulatory Authority or any employee of the Company or any Related Entity.

(d) With respect to each agreement with employees and contractors of the Company and the Related Entity, the Company and the Related Entity have duly performed and complied with all of their obligations (including, but not limited to, the making all payments for services rendered and other benefits). The Company and the Related Entity have duly complied with applicable employment regulations in all material respects. Each of the contracts entered into with employees, consultants or contractors of the Company and the Related Entity is enforceable against the parties to it and there is no party in breach of, or in default under, such contract which would have a Material Adverse Effect.

(e) No employee or contractor has any rights to the Company’s or the Related Entity^’s Intellectual Property and IP Assets, including the right to receive royalties or other payments from the Company or the Related Entity. The contractors do not have access to the Intellectual Property in a manner that could materially impair or jeopardize the business of the Company and the Related Entity.

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(f) None of the Company or the Related Entity or the Seller has offered, promised or agreed for the future any material variation in any employment or contractor/service agreement of the Company or the Related Entity, as the case may be, in the ordinary course of its business. Without limiting the generality of the preceding sentence, there has been no material change in the remuneration or benefits of any executives, directors, officers of the Company or the Related Entity within the past 6 months.

(g) No loans or other advances have been made to any director, officer, employee or contractor of the Company or the Related Entity, other than for travel allowances and other expenses in the ordinary course of business.

3.15 Real Property and Business Premises.

(a) Neither the Company nor the Related Entity owns any real property whatsoever.

(b) All of the commercial leases and subleases executed by the Company or the Related Entity are in full force and effect, and neither the Company nor the Related Entity has received notice of any claim of any sort that is cur^rently outstanding and that has been asserted by anyone adverse to the rights of the Company or the Related Entity under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or the Related Entity to the continued possession of the commercial leased or subleased premises under any such commercial lease or sublease.

(c) Section 3.15(c) of the Disclosure Schedule accurately in all material respects describes all the business premises leased or occupied by the Company or the Related Entity (the “Business Premises”). The Company and the Related Entity, as the case may be, has exclusive occupation of the Business Premises. Neither the Company nor the Related Entity is in breach of any term or obligation of any leases or licenses relating to the Business Premises. Neither the Company nor the Related Entity has been in default with respect to any payments required by it nor has it failed to comply with the terms of each of the leases and/or licenses relating to the Business Premises, except for any default or failure as would not have a Material Adverse Effect. There are no current disputes relating to any of the Business Premises or their use.

3.16 Tangible Personal Property and Plant & Equipment.

(a) Each of the Company and the Related Entity is in possession of and has good title to, or has valid leasehold interests in or valid rights under contract to use, all tangible personal property including all plant and equipment used in the conduct of its business, including all tangible personal property reflected on the balance sheets of the Management Accounts as at May 3 I, 2007 other than property disposed of since such date in the ordinary course of business. All such tangible personal property including all plant and equipment that is owned or leased by the Company and the Related Entity is free and clear of all Liens.

(b) Section 3.16(b) of the Disclosure Schedule is a complete list of all material Equipment Leases. The Company and the Related Entity have made all payments required by and have otherwise complied with the terms of each of the Equipment Leases, except for such failure thereof as would not have a Material Adverse Effect.

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3.17 Intellectual Property.

(a) Each of the Company and the Related Entity owns or has the right to use pursuant to license, sublicense, agreement or permission all the Intellectual Property set out in Section 117(c) and 117(d) of the Disclosure Schedule, The Company and the Related Entity have taken all necessary, proper and reasonable steps and actions to maintain and protect their own Intellectual Property.

(b) To the best knowledge of the Seller, neither the Company nor the Related Entity has, on its own behalf or through an agent, infringed upon, misappropriated, or used without a required license, any Intellectual Property of third parties, or received any written charge, complaint, claim, demand, or notice alleging any such infringement, misappropriation, or misuse that has not been finally resolved (including any claim that the Company or the Related Entity must license or refrain from using any Intellectual Property of any third party) which would have a Material Adverse Effect. To the best knowledge of the Seller, no third party has infringed upon, misappropriated, or otherwise misused any Intellectual Property of the Company or the Related Entity.

(c) Section 3.17(c) of the Disclosure Schedule identifies each registered/unregistered (as indicated) Intellectual Property that is materially related to the core business of, and is owned by, the Company or the Related Entity and identifies each license, agreement, or other permission currently in effect pursuant to which the Company or the Related Entity has granted to any third party rights with respect to any of such Intellectual Property other than in the ordinary course of business. The Company has delivered to the Purchaser correct and complete copies of all written documentation evidencing ownership and prosecution (if any) of rights of each such Intellectual Property that is in the possession of the Company. With respect to each item of Intellectual Property which is registered and identified in Section 3.17(c) of the Disclosure Schedule:

(i) the Company and the Related Entity possess all right, title, and interest in and each item, or has the valid right to use each item, free and clear of any Liens and none of the Company or any Related Entity has assigned or in any way disposed of any right, title or interest in any item;

(ii) each item is not subject to any outstanding injunction, judgment, order, decree, ruling, or charge;

(iii) to the best knowledge of the Seller, no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand has been filed or is threatened which challenges the legality, validity, enforceability, use, or ownership of each item; and

(iv) the Company and the Related Entity has taken all commercially reasonable steps to maintain appropriate registrations (if applicable) for each item and to protect and defend each item.

(d) Section 3.17(d) of the Disclosure Schedule lists the items of Intellectual Property that any third party owns and that the Company and the Related Entity use pursuant to applicable licenses, sublicenses, agreements, or permission (other than pursuant to shrink-wrap software licenses, shareware/open source or site licenses). With respect to each item of Intellectual Property identified on

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Section 3.17(d) of the Disclosure Schedule, the license, sublicense, agreement, or permission is and will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms immediately following the consummation of the transactions contemplated hereby; and to the best knowledge of the Seller, neither the Company nor the Related Entity has received any notice to the effect (or is otherwise aware) that the use by the Company or the Related Entity of the Intellectual Property conflicts with or allegedly conflicts with or infringes the rights of any Person.

(e) To the best knowledge of the Seller, there has not been:

(i) misuse or unauthorized disclosure of the Company’s or the Related Entity’s confidential information in any material respect; or

(ii) other act which may affect the validity or enforceability of the Intellectual Property rights of the Company or the Related Entity in any material respect.

(f) The Seller is not aware, having made due and proper inquiries, of any inappropriate, improper, unpermitted or infringing use by any other person of any of the business names or the trade marks owned or used by the Company or the Related Entity which would have a Material Adverse Effect.

3.18 Contracts.

(a) There are no contracts or obligations, agreements or arrangements involving the Company or the Related Entity and no practices in which the Company or the Related Entity is engaged, which are void, illegal, unenforceable, registerable or under which contravene in any material respect, any fair competition legislation or regulations of any applicable Governmental or Regulatory Authority, nor has the Company or the Related Entity received any threat or complaint or request for information or investigation in relation to or in connection with any such legislation or regulations which would have a Material Adverse Effect.

(b) The Company and the Related Entity have duly performed and complied in all material respects with its obligations under all Material Contracts. Neither the Company nor the Related Entity has made any offers, tenders or quotations which are still outstanding and capable of giving rise to a contract by the unilateral act of a third party, other than in the ordinary course of business and on customary terms.

(c) With respect to the Material Contracts:

(i) each Material Contract is valid and binding on the parties thereto and is in full force and effect;

(ii) upon consummation of the transactions contemplated by this Agreement and the Transaction Documents, each Material Contract shall continue in full force and effect without penalty or Material Adverse Effect; and

(iii) neither the Company nor the Related Entity has received any notice of termination, cancellation, breach or default under any Material Contract and, no party to any Material Contract is in breach thereof or default thereunder.

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(d) Section 3.18(d) of the Disclosure Schedule contains a true and correct list of all material agreements, instruments, written contract or other arrangement, together with any related amendments, waivers, supplements, schedules, exhibits, work orders, notices as to termination or change thereunder, to which the Company and the Related Entity or the Seller (as it relates to the Company) is a party (the “Material Contracts”) which are material for the Business or Condition of the Company and the Related Entity.

3.19 Licenses.

(a) Section 3.19(a) of the Disclosure Schedule contains a true and complete list of all Governmental Licenses used in and material to the business or operations of the Company or any Related Entity, setting forth the owner, the function and the expiration and renewal date of each. Prior to the execution of this Agreement, the Company has made available to Purchaser true and complete copies of all such Governmental Licenses. Except as disclosed in Section 3.19(a) of the Disclosure Schedule:

(i) The Company and the Related Entity owns or validly holds all Governmental Licenses that are material to its business or operations;

(ii) each Governmental License listed in Section 3.19(a) of the Disclosure Schedule is valid, binding and in full force and effect; and

(iii) to the best knowledge of the Seller, neither the Company nor the Related Entity is, or has received any notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) under any such Governmental Licenses.

(b) Without limiting the generality of paragraph (a) above, all Governmental Licenses required under PRC law which are material for both due and proper establishment and operation of businesses of the Company and the Related Entity and the conduct of the business of the Company and the Related Entity have been duly obtained from the relevant PRC authorities and are in full force and effect. Filings and registrations with the relevant PRC authorities required in respect of Company and the Related Entity and its operations, including but not limited to registration with the Ministry of Information Industry of the PRC, Ministry of Foreign Trade and Economic Cooperation of the PRC, the State Administration of Industry and Commerce of the PRC, the State Administration of Foreign Exchange of the PRC or their respective authorized local agencies, and the relevant tax bureau, customs authorities and product registration authorities, have been duly completed in accordance with the relevant PRC rules and regulations in all material aspects.

3.20 Insurance.

The Related Entity has maintained valid and currently effective insurance policies as required by applicable Law or regulations as disclosed in Section 3.20 of the Disclosure Schedule.

3.21 Disclosure and Information.

(a) No representation or warranty contained in this Agreement or in any other Transaction Document and given by, or on behalf of, any Seller, the Company, or the Related Entity and no statement contained in the Disclosure Schedule, contains any

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material misstatement or omits to state a material fact necessary in order to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading.

(b) To the best knowledge of the Seller, there are no material facts or circumstances that could adversely affect the Equity Interest, the Company, the Related Entity, or the Seller (as it relates to the Company), any of the Assets or the condition (financial or otherwise), operations, profitability or prospects of the Company or the Related Entity as a whole which have not been fully and properly disclosed to the Purchaser.

(c) The Constitution, minute books and other similar records of the Company and the Related Entity as made available to the Purchaser prior to the Effective Date contain true and all material record, of actions taken at meetings and by written consents in lieu of meetings of the shareholders, the boards of directors and committees of the boards of directors of the Company and the Related Entity. The records of the Company and the Related Entity as made available to the Purchaser prior to the Effective Date accurately reflect all record transfers prior to such date in the registered capital of the Company and the Related Entity, except as those maintained by the Company’s registration agent or the relevant Government and Regulatory Authorities.

3.22 Absence of Changes.

From January 1, 2007 to the Effective Date, except as set forth in Section 3.22 of the Disclosure Schedule there has not been any change in the Business or Condition of the Company that would result in a Material Adverse Effect and each of the Company and the Related Entity has been conducting its business only in the ordinary course and in a manner consistent with past practice. Without limiting the generality of the foregoing, from January 1, 2007 to the Effective Date, neither the Company nor the Related Entity has:

(a) amended, terminated, canceled or compromised any material claims of, or waive any other rights of substantial value to, the Company or the Related Entity;

(b) sold, transferred, leased, subleased, licensed or otherwise disposed of any properties or assets, real, personal or mixed, with a value in excess of US$20,000 individually or US$50,000 in the aggregate (including, without limitation, leasehold interests and intangible property);

(c) issued or sold any share capital, equity interests, notes, bonds or other securities, or any option, warrant or other right to acquire the same, of the Company or the Related Entity;

(d) made any capital expenditure or commitment for any capital expenditure in excess of US$50,000 individually or US$100,000 in the aggregate;

(e) incurred any Indebtedness in excess of US$50,000 individually or US$100,000 in the aggregate outside the ordinary course of business and not consistent with past practices;

(f) granted any increase, or announce any increase, in the wages and salaries payable by the Company or the Related Entity to any of its employees in excess of 5% of the wage and salaries;

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(g) amended, modified or consented to the termination of any Material Contract or the Company’s or the Related Entity’s rights thereunder;

(h) amended or restated the Constitution of the Company or the Related Entity, or

(i) changed content of the Books and Records in any material aspects

3.23. Powers of Attorney.

There are no outstanding powers of attorney executed on behalf of the Company or any Related Entity or comparable delegations of authority outstanding.

3.24 [Intentionally Deleted.]

3.25 [Intentionally Deleted.]

3.26 Related Party Transactions.

Other than the Debt, the Remaining Optic Debt and the receivables and payables incurred in the ordinary course of business on an arm’s-length basis, (i) there are no intercompany Liabilities between the Company or the Related Entity, on the one hand, and the Seller, or officer, director, Affiliate or Associate of Seller or any Associate of any such officer, director or Affiliate (other than the Company or the Related Entity), on the other, (ii) neither Seller nor any such officer, director, Affiliate or Associate provides or causes to be provided any assets, services or facilities to the Company or any Related Entity. All transactions engaged in by the Company or the Related Entity, the Seller and any Associate or Affiliate thereof, was incurred or engaged in, as the case may be, on an arm’s-length basis. Since December 31, 2006, all settlements of intercompany Liabilities between the Company or the Related Entity, on the one hand, and the Seller or any officer, director, Affiliate or Associate of the Seller, on the other, have been made, and all allocations of intercompany expenses have been applied, in the ordinary course of business consistent with past practice.

Section 4. Representations and Warranties of the Purchaser.

The Purchaser represents and warrants to and for the benefit of the Seller the following:

4.01 Organization of the Purchaser

The Purchaser is a corporation duly organized validly existing and in good standing under the laws of the British Virgin Islands and has all requisite power and authority to enter into and perform its obligations under this Agreement. Once executed by the Purchaser, this Agreement and the Transaction Documents required to be executed by the Purchaser have been duly and validly executed and delivered by the Purchaser and when duly executed will constitute a legal, valid and binding obligation of the Purchaser enforceable against such Purchaser subject to bankruptcy, reorganization, insolvency, moratorium, restructuring or similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity.

4.02 No Conflicts.

The execution and delivery by the Purchaser of this Agreement, and the performance by the Purchaser of its agreements and obligation contemplated hereunder and thereunder will not, (i) conflict with any of, or require the consent of any Person under, the terms, conditions or provisions of the organizational documents of the Purchaser; (ii) violate any provisions of

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applicable Law, or require any consent of any Governmental Authority having jurisdiction over the Purchaser, or any of its Affiliates; (iii) conflict in any way with, result in a beach of, constitute a default under (whether with the giving of notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or require any consent under, any indenture, mortgage, lien, lease agreement or instrument to which the Purchaser is a party or by which it is bound or to which any of its property is subject or (iv) result in the creation of any Lien upon the assets of the Purchaser under any such indenture, mortgage, lien, lease, agreement or instrument, which failure to obtain such consent, or which violation, conflict, breach or default with respect to the matters specified in clauses (iii) through (iv) of this Section 4.02 would materially and adversely affect the ability of the Purchaser to perform its obligations under, or prevent, prohibit or enjoin the consummation of the transactions contemplated by this Agreement.

4.03 Litigation.

There are no claims, actions, suits, proceedings or orders pending or, to the Purchaser’s knowledge, threatened against or affecting the Purchaser or its assets or properties, at law or in equity, before or by any Governmental Authority that would reasonably be expected to materially delay or impair the ability of the Purchaser to consummate the transactions contemplated hereby, and the Purchaser is not subject to any material order, writ, injunction, judgment or decree of any court or any Governmental Authority rendered against the Purchaser.

4.04 Authority.

The Purchaser has full legal capacity, power and authority to enter into, execute and deliver this Agreement and, where applicable, the Transaction Documents to which it is a party, and to perform each of its obligations hereunder, thereunder and under each of the other documents required to be entered into pursuant hereto. This Agreement and each applicable Transaction Document to which the Purchaser is a party have been duly and validly executed and delivered by the Purchaser and will constitute a legal, valid and binding obligation of the Purchaser and/or CDC enforceable against them in accordance with its terms subject to bankruptcy, reorganization, insolvency, moratorium, restructuring or similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity. No meeting has been convened or resolution proposed, or petition presented, and no order has been made, for the winding-up of the Purchaser. No voluntary arrangement has been proposed or reached with any creditors of the Purchaser. The Purchaser is able to pay its debts as and when they fall due and is solvent.

Section 5. Covenants of the Seller.

The Seller covenants and agrees with the Purchaser that, at all times from and after the Effective Date until the WOFE Closing (for covenants in relation to the Company) and the Optic Closing (for covenants in relation to the Related Entity) and, with respect to any covenant, agreement or appointment by its terms to be performed in whole or in part after the relevant Closing, for the period specified herein, the Seller will comply, cause the Company and procure the Related Entity (as the case may be) to comply with all covenants and provisions of this Section, except to the extent the Purchaser otherwise consent in writing:

Access to Information.

5.01 The Company and the Related Entity (as the case may be) shall cause its officers, directors, employees, agents and representatives to (a) provide the Purchaser and its officers,

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directors, employees, agents, counsel, accountants, financial advisors, consultants and other representatives (together “Representatives”) with full access, upon reasonable prior notice and during normal business hours, to all officers, directors, employees, agents, accountants, customers and suppliers of the Company and the Related Entity (as the case may be) and their Assets and Books and Records, and (b) furnish the Purchaser and such other Persons with all such information and data (including without limitation copies of Material Contracts, Benefit Plans, Constitutions and Records) concerning the business and operations of the Company and the Related Entity as the Purchaser or any of such other Persons may reasonably request. The Purchaser shall be responsible for all reasonable costs and expenses incurred in connection with such investigation.

5.02 Fulfillment of Conditions.

The Seller, the Company and the Related Entity (as the case may be) will execute and deliver at the Closing each instrument that such Seller, or the Company or the Related Entity (as the case may be) is required to execute and deliver hereunder as a condition to the Closing, shall take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy all other conditions to the obligations of the Purchaser contained in this Agreement and shall not permit the Company or the Related Entity (as the case may be) to take, or fail to take, any action that could reasonably be expected to result in the non-fulfillment of any such condition. Without limiting the generality of the foregoing, the Seller shall not take or omit to take any reasonable action, or permit such action or omission if it reasonably can be expected that as a result of such action or omission, any representation or warranty made by the Seller shall not be true and correct in all respects at and as of the Closing Date as if made on that date.

5.03 Notice and Cure.

The Seller shall notify the Purchaser promptly in writing of, and contemporaneously, shall provide true copies of all material information or documents relating to, and will use all commercially reasonable efforts to cure before the relevant Closing, any event, transaction or circumstance occurring after the Effective Date that causes or shall cause any covenant or agreement of the Seller under this Agreement to be breached or that renders or shall render untrue any representation or warranty of such party contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance. At any time until the relevant Closing, the Seller shall notify the Purchaser promptly in writing of, and shall use all commercially reasonable efforts to cure, before the relevant Closing, any violation or breach of any representation, warranty, covenant or agreement made by such party in this Agreement, whether occurring or arising before, on or after the Effective Date. No notice given pursuant to this Section 5.03 shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit the right of the Purchaser to seek indemnity under this Agreement.

5.04 Conduct of Business in Ordinary Course.

The Seller will cause the Company and the Related Entity (as the case may be) not to, take any actions inconsistent with Section 3.22 or which will lead to a Material Adverse Effect occurring. With the exception of the provisions set forth in this Agreement and the transactions contemplated hereby, the Seller shall cause the Company and the Related Entity (as the case may be) to carry on its business in the ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent with such business, use efforts consistent with past practice and policies to preserve intact their respective present business organization, keep available the services of their respective present officers, consultants and employees and preserve their relationships with customers,

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suppliers and distributors and others having business dealings with them. The Seller shall cause the officers of the Company and the Related Entity (as the case may be) to confer at such times as the Purchaser may reasonably request with representatives of the Purchaser to report operational matters of a material nature and to report the general status of the ongoing operations of the business of the Company and the Related Entity (as the case maybe).

5.05 Indebtedness.

Save for the receivables and payables incurred in the ordinary course of business of the Company and the Related Entity (as the case may be), the Seller shall cause the Company or procure the Related Entity (as the case may be) to refrain from: (a) incurring any Indebtedness in excess of US$50,000 in aggregate; and (b) causing any existing debt facility to be drawn down in excess of US$50,000 in aggregate, unless prior written consent of the Purchaser is obtained.

5.06 Regulatory and Other Approvals.

The Seller will, and will cause the Company and the Related Entity (as the case may be) to (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental or Regulatory Authorities or any other Person required of Seller, the Company, or the Related Entity (as the case may be) to consummate the transactions contemplated hereby and by the Transaction Documents; (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as Purchaser or such Governmental or Regulatory Authorities or other Persons may reasonably request for the purposes of giving effect to the transactions contemplated under the Transaction Documents; (c) cooperate with the Purchaser as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental or Regulatory Authorities or other Persons required of the Purchaser to consummate the transactions contemplated hereby and by the Transaction Documents; and (d) execute all documents, papers, forms, authorizations, declarations or oaths required of the Seller, the Company, or the Related Entity to consummate the transactions contemplated hereby and by the Transaction Documents. The Seller will provide prompt notification to the Purchaser when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise the Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement or any of the Transaction Documents. The Seller shall not be held liable for not completing the transactions contemplated under the Transaction Documents if the nominees so nominated by the Purchaser is not qualified as an eligible person to succeed the Business and government permits under law and regulations in PRC. For avoidance of doubt, the Purchaser has the obligations to procure persons or nominees which are qualified as eligible persons to succeed the Business and government permits under law and regulations in PRC.

5.07 Insurance.

The Seller will procure the Company and the Related Entity (as the case may be) to maintain in force up to the relevant Closing Date policies of insurance of the same character and coverage as those described in Section 3.20 of the Disclosure Schedule, and the Seller will promptly notify the Purchaser in writing of any changes in such insurance coverage occurring prior to the relevant Closing Date.

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5.08 No Solicitation.

The Seller will not take, nor will it permit the Company or any Affiliate of the Seller to take, between the Effective Date and the relevant Closing, directly or indirectly, any action to initiate, assist, solicit, receive, negotiate, encourage or accept any offer or inquiry from any Person (a) to engage in any Business Combination with the Company or the Related Entity (as the case may be); (b) to reach any agreement or understanding (whether or not such agreement or understanding is absolute, revocable, contingent or conditional) for, or otherwise attempt to consummate, any Business Combination with the Company or the Related Entity (as the case may be); or (c) to furnish or cause to be furnished any information with respect to the Company or the Related Entity (as the case may be) to any Person (other than as contemplated by Section 5.02) who the Seller, the Company or any Related Entity (as the case may be) or such Affiliate (or any such Person acting for or on their behalf) knows or has reason to believe is in the process of considering any Business Combination with the Company or the Related Entity (as the case may be).

5.09 Employee Matters.

(a) Unless the Purchaser’s prior consent is obtained, effective from the Effective Date until the relevant Closing, except as may be required by Law or with prior agreement with the Purchaser, the Seller will refrain, and will cause the Company and procure the Related Entity (as the case may be) to refrain, from directly or indirectly:

(i) making any representation or promise, oral or written, to any officer, employee or consultant of the Company or any Related Entity concerning any Benefit Plan, except for statements as to the rights or accrued benefits of any officer, employee or consultant under the terms of any existing Benefit Plan;

(ii) making any material increase in the salary, wages or other compensation of any officer, employee or consultant of the Company or any Related Entity;

(iii) adopting, entering into, amending, modifying or terminating (partially or completely) any Benefit Plan except to the extent required by applicable Law and, in the event compliance with legal requirements presents options, only to the extent that the option which the Company or any Related Entity reasonably believes to be the least costly is chosen;

(iv) establishing or modifying any (i) targets, goals, pools or similar provisions in respect of any fiscal year under any Benefit Plan, employment contract or other employee compensation arrangement or (ii) salary ranges, increase guidelines or similar provisions in respect of any Benefit Plan, employment contract or other employee compensation arrangement; or

(v) entering into, amending, modifying or terminating (partially or completely), any employment contract that is, or had it been in existence on the date of this Agreement would have been required to be, disclosed to the Purchaser;

(b) Prior to the relevant Closing, the Seller will cause the Company and procure the

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Related Entity (as the case may be) to administer each Benefit Plan, or cause the same to be administered, in all material respects in accordance with applicable Laws. The Seller will cause the Company and procure the Related Entity (as the case may be) to promptly notify Purchaser in writing of each receipt by the Company or any Related Entity (as the case may be), and furnish Purchaser with copies of any notice of investigation or administrative proceeding involving any Benefit Plan. Prior to the relevant Closing, the Seller will cause the Company and procure the Related Entity (as the case may be) to provide for, or to pay, applicable social and other employee benefits to applicable employees and consultants of the Company and the Related Entity(as the case may be) , in the manner as required by applicable Law.

5.10 [Intentionally Deleted.]

5.11 [Intentionally Deleted.]

5.12 [Intentionally Deleted.]

5.13 Dividends.

Prior to relevant Closing, the Seller will not permit the Company to, and will procure the Related Entity (as the case may be) not to, declare or distribute dividends or profits of the Company or Related Entity (as the case may be).

5.14 HABBO

The Seller will procure (prior to the Optic Closing) and cooperate with the Purchaser (after the Optic Closing) with the aim to complete the legal separation of the assets of HABBO from the Related Entity and/or the Business by August 23, 2007 (or such other date mutually agreed to by the Parties in writing) provided that Seller, the Related Entity and the Company (as the case may be) will have made all necessary provisions, write-offs or accruals related to the disposal of HABBO prior to the Optic Closing. Any proceeds received by the Related Entity upon legal separation of HABBO assets shall be for the account of the Seller or its nominees. The Seller undertakes to indemnify the Purchaser against any liability incurred by HABBO prior to the legal separation of its assets from the Related Entity and/or the Business.

5.15 [Intentionally Deleted.]

Section 6. Covenants of the Purchaser.

6.01 Notice and Cure.

From and after the Effective Date until the WOFE Closing and the Optic Closing, whichever is later, the Purchaser shall notify the Company in writing of, and contemporaneously, shall provide true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the WOFE Closing and the Optic Closing, whichever is later, any event, transaction or circumstance occurring after the Effective Date that causes or shall cause any covenant or agreement of the Purchaser under this Agreement to be breached or that renders or shall render untrue any representation or warranty of such party contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance. The Purchaser shall notify the Company promptly in writing of, and shall use all commercially reasonable efforts to cure, before the WOFE Closing and the Optic Closing, whichever is later, any violation or breach of any representation, warranty, covenant or

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agreement made by such party in this Agreement, whether occurring or arising before, on or after the Effective Date. No notice given pursuant to this Section 6.01 shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit the right of the Company or the Sellers to seek indemnity under this Agreement.

6.02 Fulfillment of Conditions.

From and after the Effective Date until the WOFE Closing and the Optic Closing, whichever is later, the Purchaser will execute and deliver at the WOFE and the Optic Closing (as the case may be) each instrument that the Purchaser is required to execute and deliver as a condition to the WOFE and Optic Closing (as the case may be), shall take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy all other conditions to the obligations of the Seller and the Company contained in this Agreement and shall not permit the Company to take, or fail to take, any action that could reasonably be expected to result in the non-fulfillment of any such condition.

6.03 Regulatory and Other Approvals.

The Purchaser will (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental or Regulatory Authorities or any other Person required of Purchaser to consummate the transactions contemplated hereby and by the Transaction Documents; (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as a designated Seller or such Governmental or Regulatory Authorities or other Persons may reasonably request; (c) cooperate with the Seller as promptly as practicable in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental or Regulatory Authorities or other Persons required of Seller to consummate the transactions contemplated hereby and by the Transaction Documents; and (d) execute all documents, papers, forms, authorizations, declarations or oaths required of Purchaser to consummate the transactions contemplated hereby and by the Transaction Documents. The Purchaser will provide prompt notification to a designated Seller when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise a designated Seller of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement or any of the Transaction Documents.

6.04 Guarantee

(a) In consideration of the Seller agreeing to sell the Equity Interest, procure the transfer of the Related Entity Equity Interest and assign the Remaining Optic Debt to the Purchaser on the terms set out in the Equity Transfer Agreement, the Related Entity Equity Transfer Agreement and the Assignment of the Remaining Optic Debt, respectively, CDC unconditionally and irrevocably guarantees to the Seller the due and punctual discharge by the Purchaser of all of its obligations of whatever nature (which shall, for the avoidance of doubt, include its liabilities to pay damages and satisfy any indemnity, agreed or otherwise) under this Agreement and the other Transaction Documents to which the Purchaser is a party (the “Guaranteed Obligations”) and promises to pay on demand each sum (including any interest charges thereon up to and

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including such charges arising from the date of demand hereof until the date of payment hereunder) which the Purchaser is liable to pay under this Agreement and the other Transaction Documents to which the Purchaser is a party.

(b) Without prejudice to the rights of the Seller against the Purchaser as primary obligor, CDC shall be deemed a principal debtor in respect of its obligations under this Agreement and not merely a surety and accordingly CDC shall not be discharged nor shall its liability hereunder be affected by any act or thing or means whatsoever by which its said liability would not have been discharged if it had been a primary debtor.

(c) CDC’s obligations shall be a continuing guarantee. The Seller may make claims and demands of CDC without limit of number.

(d) CDC’s obligations shall be in addition to and not in substitution for, and shall not be prejudiced by, any rights which the Seller may have pursuant to any other agreement or security which the Seller may enter into or obtain in relation to this Agreement and the other Transaction Documents to which the Purchaser is a party or the Guaranteed Obligations, and CDC’s obligations may be enforced against it without first having recourse to any such rights or security.

6A. Covenants of Purchaser and Seller

6A.01 Financial Statements

Prior to the WOFE and the Optic Closing, whichever is later, the Purchaser at its own expenses will engage KPMG to reconcile the 2005 Financial Statements and 2006 Financial Statements to US GAAP. The Purchaser and the Seller will, and the Seller will cause the Company and procure the Related Entity to, assist KPMG and provide KPMG with all information it deems necessary to prepare the financial statements.

6A.02 Assignment of Licenses

From the Effective Date, the Seller will use its best reasonable commercial efforts, and procure the Related Entity to use its best reasonable commercial efforts, to assist the Purchaser in obtaining the assignment of all licenses covering the online games operated by the Related Party, including but not limited to, the games Shaiya and Legend of Mir III, to the Company or to a wholly owned foreign enterprise designated by Purchaser. For the avoidance of doubt, the Seller shall not be obligated to cause the assignment of the aforesaid licenses and would not accept any responsibility in relation thereto.

6A.03 Retention of Key Employees

Prior to the WOFE and Optic Closing, whichever is later, the Seller and Purchaser will use their best efforts to retain key employees of the Business.

Section 7. Conditions to Obligations of the Purchaser.

The obligations of the Purchaser under this Agreement are subject to the fulfillment, at or before the WOFE Closing and the Optic Closing (as the case may be) of each of the following conditions (all or any of which may be waived in whole or in part by the Purchaser in its sole discretion):

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7.01 Representations and Warranties.

The representations and warranties made by the Seller in this Agreement and representations and warranties of the Seller, the Company or the Related Entity in the Transaction Documents shall be true and correct in all material respects in which they are given as of the WOFE Closing Date (in respect of the Company at the WOFE Closing) and the Optic Closing Date (in respect of the Related Entity at the Optic Closing) and if specified on any other date, on such date.

7.02 Performance.

The Seller, the Company and the Related Entity shall have performed and complied with, each agreement, covenant and obligation required by this Agreement and the Transaction Documents to be so performed or complied with by the Company, any Related Entity or the Seller at or before the WOFE Closing (in respect of the Company at the WOFE Closing) and the Optic Closing (in respect of the Related Entity at the Optic Closing).

7.03 Renewal of Licence.

The licence for Mir III shall have been renewed with Wemade Entertainment Co., Ltd. in respect of the Optic Closing.

7.04 [Intentionally Deleted.]

7.05 [Intentionally Deleted.]

7.06 Legal Action.

As of the Closing Date, the Seller has not received any actual written threats or any action, proceeding or other application pending before any court or Governmental or Regulatory Authority brought by any Person or Governmental or Regulatory Authority which are not disclosed by the Seller to the Purchaser on or prior to the Closing Date: (i) challenging or seeking to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or seeking to obtain any material damages from any of the Parties or their Affiliates as a result of such transactions; (ii) seeking to prohibit or impose any limitations on the Purchaser’s ownership or operation of all or any portion of the Equity Interest or the underlying assets of the Company, or to compel the Purchaser to dispose of or hold separate all or any portion of the Equity Interest, or the Company’s business or assets as a result of the transactions contemplated by the Agreement, or to compel the Company to dispose of or hold separate all or any portion of the Subsidiaries and or the Related Entity; or (iii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation.

7.07 No Material Adverse Change.

From the Effective Date to the WOFE Closing Date (in respect of the Company at WOFE Closing)and the Optic Closing Date (in respect of the Related Entity at the Optic Closing), there shall not have occurred any Material Adverse Effect on the Equity Interest, any of the Assets or Business or Condition of the Company and the Related Entity as a whole.

7.08 Investment Certificates.

The Purchaser shall have received an investment certificate showing the executed transfer of the Equity Interest in its favor.

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7.09 [intentionally Deleted.]

7.10 Closing Documents.

Relevant closing documentation as set out in Section 2.03A (for the WOFE Closing), 2.03B (for the Optic Closing) of this Agreement, and relevant Sections of the Equity Transfer Agreement, the Related Entity Equity Transfer Agreement and the Assignment of Remaining Optic Debt must be received by the Purchaser or its Affiliates upon the WOFE Closing and the Optic Closing (as the case may be).

7.11 [Intentionally Deleted.]

7.12 [Intentionally Deleted.]

7.13 [Intentionally Deleted.]

7.14 Financial Statements.

The Seiler shall have provided the Management Accounts of the Company and the Related Entity to the Purchaser upon the WOFE Closing and the Optic Closing (whichever is earlier).

7.15 Intra-company Debt.

her than the Remaining Optic Debt, the Debt ,and the receivables and payables incurred in the ordinary course of business on an arms length basis, all debt obligations of the Related Party or any other entity that comprises the Business owed to the Seller or its Associates shall have been forgiven, capitalized or assigned to the Purchaser.

Section 8. Conditions to Obligations of the Seller and the Company.

The obligations of the Seller hereunder are subject to the fulfillment, at or before the WOFE Closing and the Optic Closing, whichever is later, of each of the following conditions (all or any of which may be waived in whole or in part by the Seller in their sole discretion):

8.01 Representations and Warranties.

Each of the representations and warranties made by the Purchaser and CDC shall be true and correct in all respects in which they are given on and as of the WOFE Closing Date and the Optic Closing Date as though such representation or warranty was made on and as of the WOFE Closing Date and the Optic Closing Date, respectively.

8.02 Performance.

The Purchaser shall have performed and complied with each agreement, covenant and obligation required by this Agreement to be so performed or complied with by such Purchaser at or before the WOFE Closing and the Optic Closing (as the case may be).

8.03 Consents and Approvals.

All consents, approvals and actions of, filings with and notices to any third party Governmental or Regulatory Authority necessary to permit the Purchaser to perform its obligations under this Agreement and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given, and shall be in full force and effect.

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8.04 Approval of the Purchaser’s Board of Directors or Delegated Subcommittee.

The board of directors of the Purchaser or its delegated subcommittee shall have authorized and approved each of: (i) the terms and conditions of this Agreement and each Transaction Document; and (ii) the execution and performance of this Agreement and each Transaction Document by a duly authorized officer or director of the Purchaser and the transactions contemplated herein and therein.

8.05 [Intentionally Deleted.]

Section 9. Representations, Warranties and Indemnities.

Unless otherwise expressly provided for in this Agreement:

(a) All representations and warranties in connection with the transactions contemplated by this Agreement or the Transaction Documents (the “Warranties”) shall survive for one year from the WOFE Closing Date and the Optic Closing Date, whichever is earlier.

(b) Each Party acknowledges that it has made and given the Warranties with the intention of inducing the other Parties to enter into this Agreement and the Purchaser has entered into this Agreement in full reliance on the Warranties given hereunder.

(c) Each of the Warranties shall be construed as a separate warranty.

(d) The Seller or the Purchaser (as the case may be), shall indemnify the other party in respect of, and hold each of them harmless from and against, any and all Loss or liability suffered, incurred or sustained by any of them, resulting from, arising out of or associated with any material misrepresentation, inaccuracy in or breach of any representation or warranty or the nonfulfillment of, or failure to perform, any covenant or agreement contained in this Agreement or the Transaction Documents; or

(e) The total liability of the Seller under this Agreement and other Transaction Documents shall not exceed the Consideration (less all reasonable costs and expenses incurred or to be incurred by the Seller in connection with the transactions contemplated under the Transaction Documents).

(f) The Seller shall have no liability under this Agreement and other Transaction Documents :

(i) unless, in the case of any particular claim, the amount thereof shall exceed RMB200,000; or

(ii) until the aggregate amount of all valid claims which could otherwise be made under this Agreement shall exceed RMBI,000,000 at which time all such valid claims shall become payable.

(g) If any claim for breach of Warranties is brought under this Agreement and other Transaction Documents in relation to any liability of the Seller, the Company or the Related Entity which is contingent only, the Seller shall not be liable to make any payment in respect thereof until such contingent liability becomes an actual liability.

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(h) The Seller shall not be liable for breach of any Warranty to the extent that such liability arises by reason of any act or omission effected by the Purchaser or by reason of any retrospective change in the law or practice of relevant tax authorities coming into force after the date hereof or to the extent such liability arises or is increased by an increase in rates of taxation after the date hereof with retrospective effect.

(i) To the extent that the Purchaser shall have been compensated in respect of any facts or circumstances for any breach of any of the Warranties or under any terms of this Agreement, the Purchaser shall not be entitled to claim under any other of the Warranties or other term of this Agreement in respect of the same facts or circumstances.

(j) If the Seller pays any amount to the Purchaser by way of damages for breach of the Warranties (a “Damages Payment”) and the Purchaser subsequently receives any amount (the “Repaid Amount”) from any third party otherwise than from the Seller which payment would not have been received but for the circumstances giving rise to the claim in respect of which the Damages Payment was made, the Purchaser shall, once it has received such amount, as soon as reasonably practicable repay to the Seller the Repaid Amount.

(k) If the assignment of total debts in the aggregate amount of RMB193,983,973 in favour of the Creditor on or before the Optic Closing Date is rescindable under PRC law and the creditor(s) of the such debts before this assignment formally registered a claim with PRC court against the Related Entity ( a “Registered Claim”), the Seller shall, within 5 Business Days after receiving a payment notice, pay the Purchaser for the same amount claimed by the creditors under such Registered Claim.

(l) Nothing in this clause restricts or limits any general obligation at law of each of the Seller and the Purchaser to mitigate any loss or damage which it may suffer or incur as a consequence of any breach of any warranty.

Section 10. [Intentionally Deleted.]

Section 11. Termination

11.01 Termination.

This Agreement may be terminated, and the transactions contemplated hereby may be abandoned at any time before the WOFE Closing and the Optic Closing (as the case may be), by the Seller or the Purchaser, in the event (i) of a material breach hereof by any non-terminating party if such non-terminating party fails to cure such breach within twenty (20) Business Days following notification thereof by the terminating party or (ii) upon notice to the non-terminating party by the terminating party that the satisfaction of any material condition to the terminating party’s obligations under this Agreement becomes impossible or impracticable with the use of commercially reasonable efforts if the failure of such condition to be satisfied is not caused by a material breach hereof by the terminating party (but not otherwise).

11.02 Effect of Termination.

If this Agreement is validly terminated pursuant to Section 11.01, this Agreement will forthwith become null and void, and there will be no liability or obligation on the part of the

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Seller or the Purchaser (or any of their respective officers, directors, employees, agents or other representatives or Affiliates), except that the provisions with respect to the representations and warranties, and indemnities in Section 9, expenses in Section 12.02, and confidentiality in Section 12.12 shall continue to apply following any such termination.

Section 12. Miscellaneous

12.01 Notices.

(a) A notice (including any approval, consent or other communication) in connection with this Agreement and the documents referred to in it:

must be in writing;

must be left at the address of the addressee or sent by pre-paid first class post (airmail if posted to or from a place outside Hong Kong) to the address of the addressee or sent by facsimile to the facsimile number of the addressee in each case which is specified in this clause in relation to the party to whom the notice is addressed, and marked for the attention of the person so specified, or to such other address or facsimile number in Hong Kong and/or marked for the attention of such other person, as the relevant party may from time to time specify by notice given in accordance with this clause.

The relevant details of each party at the date of this Agreement are:

Seller
Address:	32/F CITIC Tower, I Tim Mei Avenue, Central, Hong Kong
Facsimile:	(852) 2918 4838
Attention:	Stella Chan
CDC
Address:	33/F, Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong
Facsimile:	(852) 2571 2552
Attention:	Peter Yip
Purchaser
Address:	33/F, Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong
Facsimile:	(852) 2571 2552
Attention:	Peter Yip

(iii) for the avoidance of doubt, must not be sent by electronic mail.

(b) In the absence of evidence of earlier receipt, any notice shall take effect from the time that it is deemed to be received in accordance with clause (c) below.

(c) Subject to clause (d) below, a notice is deemed to be received:

(i) in the case of a notice left at the address of the addressee, upon delivery at that address;

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(ii} in the case of a posted letter, on the third day after posting or, if posted to or from a place outside Hong Kong, the seventh day after posting; and

(iii) in the case of a facsimile, on production of a transmission report from the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient.

(d) A notice received or deemed to be received in accordance with clause (c) above on a day which is not a Business Day or after 5p.m. on any Business Day, according to local time in the place of receipt, shall be deemed to be received on the next following Business Day.

(e) Each party undertakes to notify the other parties by notice served in accordance with this clause if the address specified herein is no longer an appropriate address for the service of notices.

12.02 Expenses.

The Parties shall pay for their own costs and expenses relating to the negotiation, execution and closing of this Agreement and the Transaction Documents and the transactions contemplated hereby.

12.03 [Intentionally Deleted]

12.04 Waiver.

Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.

12.05 Amendment.

This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.

12.06 No Third Party Beneficiary.

The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Section 9.

12.07 Assignment; Binding Effect.

Subject always to the subsequent sentence, neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except for assignments and transfers by operation of Law and except where the Purchaser transfers or assigns this Agreement or its rights and obligations under this Agreement to its subsidiary or affiliated company or to an entity within the group of CDC. At any time after the execution of this Agreement, the Purchaser may assign any or all of its rights, interests and obligations

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hereunder (including without limitation its rights under Section 9) provided that, each such assignee agrees in writing to be bound by all of the terms, conditions and provisions contained herein. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns.

12.08 Invalid Provisions.

If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby: (a) such provision will be fully severable; (b) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom; and (c) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

I2.08A Set-off.

All amounts due under this Agreement and other Transaction Documents by either party shall be paid in full on the due date (without any restriction, condition, deduction or withholding, except as required by law for any taxation) and neither party shall be entitled to assert any credit, set-off, counterclaim or similar claim against the other party in order to justify withholding part or all of such amount.

12.09 Governing Law.

(a) This Agreement shall be governed by and construed in accordance with the laws of Hong Kong, SAR without giving effect to the conflicts of laws principles thereof.

(b) Each party submits to the non-exclusive jurisdiction of the courts of Hong Kong for all purposes relating to this Agreement. Nothing contained in this clause shall limit the right of any party to take proceedings against any other in any other court of competent jurisdiction, nor shall the taking of proceedings in one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not, to the extent permitted by the law of such other jurisdiction.

(c) Each of the parties named below irrevocably appoint as its process agent the person named below to receive, for it and on its behalf, service of process in proceedings in Hong Kong:

Seller:
Process Agent: Stella Chan
Address:	32/F CITIC Tower, I Tim Mei Avenue, Central, Hong Kong
Purchaser / CDC:
Process Agent: Peter Yip
Address:	33/F, Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong

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Such service shall be deemed completed on delivery to the process agent (whether or not it is forwarded to and received by the relevant party). If for any reason the process agent ceases to be able to act as such or no longer has an address in Hong Kong, the relevant party irrevocably agrees to appoint a substitute process agent within 30 days.

12.10 Arbitration.

(a) Any dispute, controversy or claim arising out of or relating to this Agreement shall be resolved at the first instance through consultation between the highest ranking corporate officers of the relevant Parties. Such consultation shall begin immediately after one Party has delivered to the other Parties a written request for such consultation. If, within thirty (30) days following the date on which such notice is given, the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any Party to the dispute with notice to the other Parties.

(b) Any dispute, controversy or claim arising out of or relating to this contract, or the breach termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force and as may be amended by the rest of this clause.

(c) The appointing authority shall be Hong Kong International Arbitration Centre.

(d) The place of arbitration shall be in Hong Kong at Hong Kong International Arbitration Centre (HKIAC).

(e) There shall be only one arbitrator.

(f) The arbitration proceedings shall be conducted in English and Chinese.

(g) Each Party to an arbitration hereunder shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on such Party.

(h) The award of the arbitration tribunal shall be final and binding upon the disputing Parties, and the prevailing Party may apply to a court of competent jurisdiction for enforcement of such award.

(i) Any Party to the dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

12.11 Counterparts.

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

12.12 Confidentiality.

Each party hereto will hold, and will use its reasonable endeavors to cause its Affiliates to hold, in strict confidence from any Person (other than any such Affiliate, unless: (i) compelled to disclose by judicial or administrative process (including without limitation

39

in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law; or (ii) disclosed in any action, suit, proceeding, inquiry, investigation either before or brought by Governmental or Regulatory Authority or otherwise, brought by a party hereto in pursuit of its rights or in the exercise of its remedies hereunder, all documents and information concerning the other party or any of its Affiliates furnished to it by the other party in connection with this Agreement or the transactions contemplated hereby, including, without limitation, the terms and conditions of this Agreement except to the extent that such documents or information can be shown to have been: (a) previously known by the party receiving such documents or information; (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party; or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential. In the event the transactions contemplated hereby are not consummated, upon the request of the other party, each party hereto shall, and shall cause its Affiliates to, promptly redeliver or cause to be redelivered all copies of documents and information furnished by the other party in connection with this Agreement or the transactions contemplated hereby and destroy or cause to be destroyed all notes, memoranda, summaries, analyses, compilations and other writings related thereto or based thereon prepared by the party furnished such documents and information.

12.13 Exercise of Rights.

A party may exercise a right, power or remedy at its discretion, and separately or concurrently with another right, power or remedy. A single or partial exercise of a right, power or remedy by a party does not prevent a further exercise of that or of any other right, power or remedy. Failure by a party to exercise or delay in exercising a right, power or remedy does not prevent its exercise. The rights, powers and remedies provided in this Agreement are cumulative with and not exclusive of the rights, powers or remedies provided by law independently of this Agreement.

12.14 Rule of Construction.

As each of the parties has reviewed this Agreement and has had the opportunity to make revisions, the parties agree that any rule of construction to the effect that any ambiguities are to be construed against the drafting party shall not apply in the interpretation of this Agreement or any of the Transaction Documents.

12.15 Further Assurances.

Each party agrees, at its own expense, on the request of any other party, to do everything reasonably necessary to give effect to this Agreement and the transactions contemplated by it (including, without limitation, the execution of documents) and to use all reasonable endeavours to cause relevant third parties to do likewise.

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto, and shall be effective as of the date first above written

SIGNED for and on behalf of BONARICH ENTERPRISES LTD in the presence of:	) ) )
SIGNED for and on behalf of CDC CORPORATION in the presence of:	) ) )
SIGNED for and on behalf of in the presence of:

EX-4.(A)18

Exhibit 4(a).18

Execution Copy

DATED 1 August, 2007

ASSETS PURCHASE AGREEMENT

By and Among

CHINADOTCOM STRATEGIC, INC.

CDC SOFTWARE CORPORATION

and

CARAT KOREA CO., LTD.

Jones Day

Solicitors and International Lawyers

29^th Floor, Edinburgh Tower

The Landmark

15 Queen’s Road Central

Hong Kong

Telephone No.: (852) 2526-6895

CAM No.:113437-615014

TABLE OF CONTENTS

Clause		Page
1.	INTERPRETATION	1
2.	SALE AND PURCHASE OF PURCHASED ASSETS	6
3.	PURCHASE PRICE	8
4.	CONDITIONS	9
5.	ACTION PENDING CLOSING	12
6.	CLOSING	12
7.	ASSIGNMENT OF CONTRACTS AND INTELLECTUAL PROPERTY RIGHTS	14
8.	WARRANTIES BY SELLER AND CDC	16
9.	INDEMNIFICATION – GENERAL AND TAX	21
10.	BUYER’S RIGHTS	25
11.	GUARANTEE AND INDEMNITY BY CDC	25
12.	WARRANTIES BY BUYER	26
13.	MISCELLANEOUS	28
14.	CONFIDENTIALITY OF INFORMATION RECEIVED	29
15.	COSTS	29
16.	NOTICES	29
17.	GOVERNING LAW AND ARBITRATION	31

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THIS AGREEMENT is made on 1 August, 2007

BY AND AMONG:

(1) CHINADOTCOM STRATEGIC, INC., a company incorporated under the laws of British Virgin Islands with its registered office as at the date hereof at Offshore Incorporations Limited, P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands (the “Seller”);

(2) CDC SOFTWARE CORPORATION, a company incorporated under the laws of the Cayman Islands with its registered office as at the date hereof at P. O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands (“CDC”); and

(3) CARAT KOREA CO LTD., a company incorporated under the laws of The Republic of Korea with its registered office as at the date hereof at 5^th Floor Dongnam Building, 997-11 Daechi-Dong, Gangnam-Gu, Seoul, The Republic of Korea (the “Buyer”).

RECITALS:

A. The Seller is the legal and beneficial owner of the Purchased Assets (as hereinafter defined).

B. The Seller has agreed to sell and the Buyer has agreed to purchase the Purchased Assets on the terms and conditions hereinafter contained.

C. CDC is the Affiliate of the Seller and has agreed to guarantee the performance of the Seller’s obligations hereunder set forth in Clause 11.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 In this Agreement and in the Schedules, the following definitions are used:

“Acquisition Agreements”

means (i) the assets purchase agreement dated the date of this Agreement and made by and among Ion Global Limited, CDC and wwwins Consulting Hong Kong Limited; (ii) the assets purchase agreement dated the date of this Agreement and made by and among Ion Global (California), Inc., CDC and Molecular, Inc.; and (iii) the share purchase agreement dated the date of this Agreement and made by and among Ion Global (BVI) Ltd., CDC and Group Carat (Nederland) BV.

“Aegis Group”

means the group of companies comprising the Aegis Group plc and its subsidiaries. The expression “member of the Aegis Group” shall be construed accordingly.

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“Affiliates”	in respect of any specified person or entity, means a person that directly or indirectly controls, is controlled by or is under common control with such specified person or entity or with which such specified person or entity may be connected or may become connected as an officer, director, executive, principal, agent, representative, consultant or otherwise.
“Agreed Form”	means, in relation to any document, such document in the terms agreed between the parties and signed by or on behalf of them for the purposes of identification.
“Agreement”	has the meaning ascribed to such term in the heading of this Agreement.
“Business Day”	means a day (not being a Saturday) on which banks are open for general banking business in Korea.
“Buyer”	has the meaning ascribed to such term in the heading of this Agreement.
“Buyer Disclosure Letter”	means the letter of even date herewith by the Buyer to the Seller (and acknowledged by the Seller) on the execution and delivery of this Agreement.
“Buyer Indemnified Persons”	has the meaning set forth in Clause 9.1.2.
“Buyer Warranties”	has the meaning set forth in Clause 12.1.
“Claim”	means any claim, demand, dispute, action, suit, investigation or legal or analogous proceedings.
“Closing”	means the completion of the purchase by the Buyer from the Seller of the Purchased Assets in accordance with Clause 6.
“Closing Date”	means 11 September, 2007 or such other date as is determined by the Seller and Buyer.
“Companies Ordinance”	means the Companies Ordinance, Chapter 32 of the laws of Hong Kong.
“control”	means, in relation to any person at any time, the power (whether directly or indirectly and whether by ownership of share capital,

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	possession of voting power, contract or otherwise) to appoint the majority of the members of the governing body or management, or otherwise to control the affairs and policies of that other person.
“Disclosed”	means referred to in the Disclosure Letter or the Buyer Disclosure Letter (as the case may be).
“Disclosure Letter”	means the letter of even date herewith by the Seller to the Buyer (and acknowledged by the Buyer) on the execution and delivery of this Agreement.
“Encumbrance”	means any mortgage, charge (fixed or floating), pledge, lien, hypothecation, trust, right of set off or other third party right or interest (legal or equitable) including any right of pre-emption, assignment by way of security, reservation of title or any other security interest of any kind however created or arising or any other agreement or arrangement (including a sale and repurchase arrangement) having similar effect.
“General Event of Indemnification”	has the meaning set forth in Clause 9.1.1(a).
“Hong Kong”	means the Hong Kong Special Administrative Region of the PRC.
“ICC Rules”	has the meaning set forth in Clause 17.2.1.
“Intellectual Property”	means (a) all the trademarks, service marks, logos, trade names, Internet domain names and corporate names as listed in Part I of Schedule 1 including all translations, adaptations, derivations and combinations thereof; (b) all registrations, applications and renewals for any of the foregoings; (c) all copies and tangible embodiments of the foregoing (in whatever form or medium); and (d) all goodwill associated with the foregoing.
“Korea”	means The Republic of Korea.
“Losses”	means all losses, liabilities, costs (including, without limitation, reasonable attorney’s fees), charges and expenses.

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“Payment Account Details”	means, in relation to any payment to be made under or pursuant to this Agreement, the name, account number, account location and other details specified by the payee and necessary to effect payment by wire transfer to the payee.
“Purchase Price”	has the meaning set forth in Clause 3.1.
“Purchased Assets”	has the meaning set forth in Clause 2.1 of this Agreement.
“Seller”	has the meaning ascribed to such term in the heading of this Agreement.
“Seller Indemnified Persons”	has the meaning set forth in Clause 9.1.2.
“Special Event of Indemnification”	has the meaning set forth in Clause 9.1.1(b).
“Subsidiaries”	means any Affiliate of a company whose shares of more than fifty percent (50%) are owned by such company.
“Tax Authority”	means any local, municipal, governmental, state, federal or fiscal, revenue, customs or excise authority, body, agency or official anywhere in the world having or purporting to have power or authority in relation to Tax, including without limitation the National Tax Service of The Republic of Korea.
“Tax Event”	has the meaning set forth in Clause 9.2.1(a).
“Taxation” or “Tax”	means all taxes, charges, duties, imposts, fees, levies or other assessments, and all estimated payments thereof, including without limitation income, business profits, branch profits, excise, property, sales, use, value added (VAT), environmental, franchise, customs, import, payroll, transfer, gross receipts, withholding, social security, unemployment taxes, as well as stamp duties and other costs, imposed by any Tax Authority, or any subdivision or agency thereof, and any interest and penalty relating to such taxes, charges, fees, levies or other assessments.
“US$”	means the lawful currency of the United States of America.
“Warranties”	has the meaning set forth in Clause 8.1.

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1.2 In this Agreement, words and expressions defined in the Companies Ordinance shall bear the same meaning as in that Ordinance.

1.3 In this Agreement, save where the context otherwise requires:

1.3.1 a reference to a statute or statutory provision shall include a reference:

(a) to that statute or provision as from time to time consolidated, modified, re-enacted or replaced by any statute or statutory provision; and

(b) any subordinate legislation made under the relevant statute;

1.3.2 words in the singular shall include the plural, and vice versa;

1.3.3 the masculine gender shall include the feminine and neutral and vice versa;

1.3.4 a reference to a person shall include a reference to a firm, a body corporate, an unincorporated association or to a person’s executors or administrators;

1.3.5 a reference to a clause, sub-clause, Schedule and Exhibit shall be a reference to a clause, sub-clause, schedule and exhibit (as the case may be) of or to this Agreement;

1.3.6 if a period of time is specified and commences from a given day or the day of an act or event, it shall be calculated inclusive of that day;

1.3.7 references to any legal term for any action, remedy, method or judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than Hong Kong be deemed to include what most nearly approximates in that jurisdiction to the Hong Kong legal term;

1.3.8 references to writing shall include any modes of reproducing words in a legible and non-transitory form;

1.3.9 a reference to a balance sheet or profit and loss account shall include a reference to any note forming part of it;

1.3.10 where any of the Warranties is qualified in this Agreement or in the Disclosure Letter by the expression “to the Seller’s knowledge” or “so far as the Seller is aware” or any similar expression, that Warranty shall be deemed to include an additional statement that it has been made after due, diligent and careful enquiry to ensure that all information given in the Warranty is true, complete and accurate in all respects;

1.3.11 any reference herein to “including” shall be construed as a reference to “including but not limited to”;

1.3.12 the headings in this Agreement are for convenience only and shall not affect the interpretation of any provision of this Agreement; and

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1.3.13 references to this Agreement include this Agreement as amended or supplemented in accordance with its terms.

1.4 The designations adopted in the recitals and introductory statements preceding this clause apply throughout this Agreement and the Schedules.

2. SALE AND PURCHASE OF PURCHASED ASSETS

2.1 The Buyer, relying on the agreements, covenants, representations, warranties, undertakings and indemnities of the Seller herein, hereby agrees to purchase from the Seller and the Seller as legal and beneficial owner hereby agrees to sell, assign and transfer to the Buyer on the Closing Date free and clear of all Encumbrances, all rights, title, benefits and interests of the Seller in:

2.1.1 all the Intellectual Property;

2.1.2 all claims, benefits, rights and entitlements under all contracts, contract rights, agreements, licenses, commitments and other instruments (whether uncompleted or pending) in relation to the Intellectual Property including, without limitation, those set out in Part II of Schedule 1 (collectively, the “Contracts”) and including all deposits received prior to the Closing Date in respect of the same; and

2.1.3 all income, royalties, damages and payments due or payable at Closing or thereafter including, without limitation, damages and payments for past or future infringements, passing off, misappropriations, breach or similar claims in respect of the Intellectual Property and the Contracts, the causes of action, rights of set-off against third party, right to sue for and to recover damages and other remedies in respect of any past infringements or misappropriations, breach or similar claim in respect of the Intellectual Property and the Contracts, and any and all corresponding rights that, now or hereafter, may be secured throughout the world;

(collectively, “the Purchased Assets”).

2.2 Required Consent

2.2.1 Without prejudice to Clause 4, in the event that the Seller is unable to transfer to the Buyer a Contract on the Closing Date because consent from the relevant party to the Contract (other than the Seller) for such transfer has not been obtained on or before that date, the Seller shall use its reasonable efforts to obtain such consent and transfer the full benefit and legal title of such Contract to the Buyer within 30 days from the Closing Date.

2.2.2 The Buyer shall use its reasonable efforts to assist the Seller in obtaining the consent for the purpose of Clause 2.2.1. Without prejudice to Clause 4, the Buyer may at its absolute discretion waive any of the requirements under Clause 2.2.1.

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No assumption of liabilities

2.3 Save as herein provided to the contrary, the Buyer is not assuming any obligation or liability of any kind or nature whatsoever of the Seller, whether or not related to the Purchased Assets, including, without limitation, the following liabilities and obligations of the Seller:

2.3.1 all Claims, demands, obligations or liabilities for Tax for all periods prior to, on or after the Closing Date and all Claims, demands, obligations or liabilities for the payment of any transfer tax, stamp duty or recording or filing fees, if any, imposed upon the sale, transfer, assignment and conveyance of the Purchased Assets;

2.3.2 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever, whether or not accrued, absolute, contingent, determined or determinable, actual or threatened, known or unknown which are based on or related to the operation of the business of the Seller or ownership or use of its assets (other than the Purchased Assets) for all periods prior to, on or after the Closing Date;

2.3.3 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever, whether or not accrued, absolute, contingent, determined or determinable, actual or threatened, which are based on or related to the ownership or use of the Purchased Assets and which arose or were incurred on or before the Closing Date, or which are based on events occuring on or before the Closing Date, notwithstanding that the date on which the Claim, demand, liability or obligation is asserted is after the Closing Date;

2.3.4 any obligation or liability of the Seller for fees, costs and expenses relating to the negotiation, execution and delivery of this Agreement and the consummation of the transactions contemplated thereby, including, without limitation, any broker’s or finder’s fees or legal, accounting and other professional or consulting fees and expenses;

2.3.5 any obligation or liability of the Seller arising out of or resulting from the Seller’s noncompliance with any applicable law or regulation;

2.3.6 any liability, obligation or performance of the Seller under this Agreement;

2.3.7 any Claim, demand, liability or obligation of the Seller arising out of or resulting from the Seller’s acts or omissions occurring before, on or after the Closing Date;

2.4 The Seller shall promptly pay and discharge in full when due or required to be discharged, or contest in good faith, all liabilities and Claims referred to in Clause 2.3.

2.5 Save as provided herein to the contrary, after the Closing, any regular periodic charges with respect to the Purchased Assets, including amounts payable with respect to personal property Taxes relating to the Purchased Assets, which become due and payable on or after the Closing Date and relate to periods that begin before and end after the Closing Date, shall be prorated and adjusted between the Seller and the Buyer as of the Closing Date on a per diem basis, and the Seller shall be responsible for and pay to the Buyer the portion of such amounts allocable to the period prior to the Closing Date

7

for which payment is due on or after the Closing Date within five Business Days of demand from the Buyer upon presentation of the relevant invoice(s) relating to such charges; provided, however, that Seller shall not be required to pay to Buyer any amounts it intends to dispute in good faith and shall provide Buyer written notice of its intention to dispute such amounts within such five (5) Business Day period.

2.6 From and after the Closing, the Buyer shall have the right and authority to collect for its own account all receivables and other related items that are included in the Purchased Assets. To the extent that, after the Closing, (i) the Buyer or any of its Affiliates receive any payment that is for the account of the Seller according to the terms of this Agreement, or the Seller makes a payment on behalf of the Buyer, the Buyer shall deliver such amount to the Seller or (ii) the Seller or any of its Affiliates receives any payment that is for the account of the Buyer or any of its Affiliates according to the terms of this Agreement, or the Buyer makes a payment on behalf of the Seller, the Seller shall deliver such amount to the Buyer. All amounts due and payable under this Clause 2.6, if any, shall be due and payable by the applicable party in immediately available funds, by wire transfer to an account designated in writing by the other party and shall be delivered to the other party within ten (10) Business Days of receipt thereof.

3. PURCHASE PRICE

3.1 As consideration for the purchase of the Purchased Assets, in reliance upon the representations and warranties, covenants, agreements and undertakings of the Seller made herein, and subject to the terms and conditions of this Agreement, the Buyer shall pay to the Seller (or where applicable, the Buyer shall remit to the Seller), the sum of US$10,000 (the “Purchase Price”).

3.2 Any payments made to a party to this Agreement pursuant to this Agreement shall be made in cash in US$ and effected by crediting the account specified in the Payment Account Details of the payee(s) by way of wire transfer in immediately available funds on or before the due date for payment which shall be a good discharge of the party required to make payment in respect of its obligations to make such payment.

3.3 Each of Buyer and Seller acknowledge and agree that the consummation of the purchase and sale transaction contemplated hereby could result in the obligation of Seller to pay, under the laws of Korea, a royalty income tax of 27.5% of the Purchase Price (the “Royalty Tax”) in the amount of US$2,750. The Buyer shall be entitled to deduct or withhold from the Purchase Price, the Royalty Tax (at the rates mentioned in this Clause 3.3 or at such other rates as may be applicable from the date of this Agreement until Closing) and such other amount as the Buyer may be required to deduct or withhold on account of any Tax under any applicable law or regulations (including those of Korea) and hereby covenants and agrees to promptly remit such applicable Taxes to the appropriate taxation authority in accordance with the applicable laws or regulations. The Buyer shall pay only the balance of the Purchase Price to the Seller and in such event, the payment of such balance of the Purchase Price (after the deduction or withholding as aforesaid) shall be deemed to be a good discharge of the Buyer’s obligations to make payment of the Purchase Price hereunder.

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4. CONDITIONS

4.1 Conditions Precedent of the Buyer

The obligations of the Buyer under this Agreement are subject to the Buyer’s satisfaction that the following conditions have been duly fulfilled:

4.1.1 completion of satisfactory (in Buyer’s sole and discretionary judgment) legal, commercial and financial due diligence by Buyer;

4.1.2 the completion of any formal internal corporate approvals as may be required by Aegis Group plc including approval by the board of directors and Chief Executive Office of Aegis Group plc;

4.1.3 the parties to the Contracts (other than the Seller) having given each of their respective consents to the assignments or novations of the same in favour of the Buyer;

4.1.4	(a	)	nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a breach of the Warranties;
	(a	)	no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the purchase of the Purchased Assets by the Buyer;
	(b	)	each of the Seller and CDC having performed or complied with, in all material respects, all covenants, obligations and agreements contemplated by this Agreement to be performed or complied with by it at or prior to Closing, including without limitations those set forth in Clause 5;
	(c	)	all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary or desirable for or in respect of the proposed sale of the Purchased Assets by the Seller to the Buyer having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies on terms satisfactory to the Buyer and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals remaining in full force and effect;

4.1.5 the Seller having certified in writing the matters mentioned under Clause 4.1.4;

4.1.6 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction to the Buyer and Seller.

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4.2 Conditions Precedent of the Seller

The obligations of the Seller under this Agreement are subject to the Seller’s satisfaction that the following conditions have been duly fulfilled:

4.2.1 the completion of any formal internal corporate approvals as may required by the Seller including approval by the Seller’s board of directors and stockholders;

4.2.2	(a	)	nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a breach of the Buyer Warranties;
	(b	)	no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the purchase of the Purchased Assets by the Buyer;
	(c	)	the Buyer having performed or complied with, in all material respects, all covenants, obligations and agreements contemplated by this Agreement to be performed or complied with by it at or prior to Closing;
	(d	)	all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary for or desirable for or in respect of the proposed sale of the Purchased Assets by the Seller to the Buyer having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies on terms satisfactory to the Seller and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals, remaining in full force and effect;

4.2.3 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction of the Seller and Buyer.

4.3 Responsibility for Satisfaction

4.3.1 The Seller undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.1.3 to 4.1.5 as soon as possible after the date of this Agreement and before the date of Closing, and shall promptly give notice to the Buyer upon satisfaction of the same.

4.3.2 The Buyer undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.2.2 (a) and (c) as soon as possible after the date of this Agreement and before Closing, and shall promptly give notice to the Seller upon satisfaction of the same.

4.3.3 Without prejudice to the foregoing, it is agreed that all requests and enquiries from any government, governmental, supranational or trade agency, court or

10

regulatory body shall be dealt with by the Seller and the Buyer in consultation with each other and each of the Seller and the Buyer shall upon mutual agreement promptly co-operate with and provide all necessary information and assistance reasonably required by such government, agency, court or body upon being requested to do so by the other.

4.3.4 The Buyer may at any time by notice in writing to the Seller, waive any of the conditions in Clause 4.1, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.1 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Buyer.

4.3.5 The Seller may at any time by notice in writing to the Buyer, waive any of the conditions in Clause 4.2, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.2 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Seller.

4.3.6 Should the Buyer or the Seller become aware of anything which will or may prevent any of the conditions set out in Clause 4.1 or Clause 4.2 from being satisfied by the time and date required by Clauses 4.4.1 and 4.4.2 the relevant party shall forthwith notify the other in writing.

4.4 Non-Satisfaction

4.4.1 If any of the conditions in Clause 4.1 is not satisfied or waived by the Buyer on or before 11 September, 2007 or such other date as the parties may agree or the Buyer becomes aware of any fact that would prevent any of the conditions in Clause 4.1 from being satisfied, the Buyer may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.1).

4.4.2 If any of the conditions in Clause 4.2 is not satisfied or waived by the Seller on or before 11 September, 2007 or such other date as the parties may agree or the Seller becomes aware of any fact that would prevent any of the conditions in Clause 4.2 from being satisfied, the Seller may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.2).

4.4.3 In the event that the Buyer or Seller shall terminate this Agreement in accordance with Clause 4.4.1 or Clause 4.4.2 (as the case may be) and without limiting the Buyer’s or Seller’s right to claim, all obligations of the Buyer and Seller under this Agreement shall, unless otherwise expressly stated, cease, but, for the avoidance of doubt, all rights and liabilities of the parties which have accrued before such termination shall continue to exist.

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5. ACTION PENDING CLOSING

5.1 Seller’s General Obligations

The Seller undertakes to procure that from the date of this Agreement until Closing:

5.1.1 the Buyer and its agents will, upon reasonable notice, be allowed access to the employees and premises of the Seller and shall also be allowed access to, and to take copies of, the books and records of the Seller including, without limitation, the statutory books, minute books, licences, contracts, Intellectual Property and Contracts in the possession or control of the Seller subject always to the applicable protections of confidentiality set forth in Clause 14 hereof;

5.1.2 the Seller shall take all commercially reasonable efforts consistent with past practices to maintain the present status of its Purchased Assets and their validity; and

5.1.3 save only as may be necessary to give effect to this Agreement, the Seller shall not commit, voluntarily permit or procure any act or omission which would render any of the Warranties untrue, inaccurate or misleading in any respect upon Closing.

5.2 Restrictions on the Seller

Without prejudice to the generality of Clause 5.1, except as may be expressly provided or contemplated in this Agreement or with the prior written consent of the Buyer (which consent shall not be unreasonably withheld), the Seller shall not between the date of this Agreement and Closing with respect to the Purchased Assets:

5.2.1 grant a licence of or assign or otherwise dispose of or create any Encumbrance over any Purchased Asset in favour of any third party (not being the Buyer); or

5.2.2 commence, compromise or discontinue any legal or arbitration proceedings relating to the Purchased Assets.

5.3 Exercise of Buyer’s Rights

It is hereby acknowledged (for the avoidance of doubt) that none of the provisions of this Clause 5 or the exercise or failure to exercise by the Buyer of its rights thereunder, shall give rise to any liability on the part of the Buyer or any of its employees, consultants or representatives or any person connected with it (except to the extent that any losses or damages to the Seller are caused by the Buyer’s gross negligence or wilful misconduct in respect of the exercise of the Buyer’s right under Clause 5.1.1.)

6. CLOSING

6.1 Closing shall take place at the offices of Jones Day at 29^th Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong or such other place as the parties may agree, on the Closing Date.

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6.2 On the Closing Date:

6.2.1 the Seller shall deliver or cause to be delivered to the Buyer:

(a) such conveyances, assurances, transfers, assignments, releases, novation agreements, consents and other documents duly executed by the relevant parties as the Buyer may require to vest in the Buyer the full benefit of valid legal title to the Purchased Assets and all other rights and assets hereby agreed to be sold and the full benefit of this Agreement including without limitation, duly executed assignments or novation agreements in the Agreed Form of the Contracts;

(b) all books, accounts, papers, records and other documents (including financial records) relating to the Purchased Assets;

(c) any other documents of title or transfer of ownership relating to any of the Purchased Assets;

(d) such other documents as may be required to give to the Buyer good title to the Purchased Assets, and to enable the Buyer or its nominees to become the registered owner thereof and to consummate the transactions contemplated by this Agreement;

(e) duly notarised power of attorney under which any document is executed on behalf of the Seller;

(f) certificate in the form set out in Part 1 of Schedule 2 duly executed by the Seller confirming the Warranties;

(g) certificate in writing duly executed by the Seller pursuant to Clause 4.1.5 confirming the matters mentioned thereunder;

(h) legal opinion from BVI and Cayman counsels in the Agreed Form and dated as of the Closing Date;

(i) reasonably current Certificate of Good Standing and Incumbency of the Seller;

(j) reasonably current Certificate of Good Standing and Incumbency of CDC;

(k) signed copies of the resolutions duly passed by:

(i) the board of directors and shareholder of the Seller; and

(ii) the board of directors of CDC, approving this Agreement, the transfer of the Purchased Assets and the transactions contemplated hereunder, and the execution, delivery and performance of this Agreement by the Seller and CDC, in form and substance satisfactory to the Buyer;

6.2.2 the Seller shall permit the Buyer to take possession of the Purchased Assets.

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6.3 Upon compliance by the Seller with the provisions of Clause 6.2 the Buyer shall at Closing pay the Purchase Price to the Seller in accordance with Clauses 3.2 and 3.3.

6.4 The Buyer shall provide Seller with a certificate in the form set out in Part 2 of Schedule 2 duly executed by the Buyer confirming the Buyer Warranties.

6.5 It is a condition to Closing that (and the Buyer and Seller shall have no obligation to complete the sale and purchase of the Purchased Assets hereunder unless) the transactions contemplated under all the Acquisition Agreements shall be completed simultaneously and successfully with the completion of the sale and purchase of the Purchased Assets hereunder.

7. ASSIGNMENT OF CONTRACTS AND INTELLECTUAL PROPERTY RIGHTS

7.1 This Agreement shall not constitute an agreement to assign any Contract or any claim, right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of the Buyer thereunder.

7.2 If any licenses, consents or agreements from third parties are required for the transfer, assignment or novation to or in favour of the Buyer of any Contracts under this Agreement, the Seller shall use its reasonable efforts (but without any payment of money by the Buyer) to obtain such license, consents or agreement from the other parties on or before the Closing Date or claim any right or any benefit arising thereunder for the assignment thereof to the Buyer as the Buyer may request.

7.3 Without prejudice to Clauses 2.2 and 4, if such license, consent or agreement is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of the Seller thereunder so that Buyer would not in fact receive or otherwise be entitled to the full benefit of all such rights, the Seller shall to the extent not prohibited under applicable agreements, enter into such arrangement with the Buyer at the Buyer’s reasonable direction under which the Buyer will obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or subleasing to the Buyer, or underwhich the Seller would enforce for the benefit of the Buyer, with the Buyer assuming Seller’s obligations, any and all rights of the Seller against a third party thereto. The Seller shall promptly pay to the Buyer when received all monies received by the Seller under any Purchased Asset or any claim, right or any benefit arising thereunder. The foregoing provisions do not affect Buyer’s rights and remedies against the Seller in respect of a Contract which they have warranted is assignable, or may-be performed by Buyer instead of the Seller without any novation or transfer agreement.

7.4 Subject to Clauses 7.1 to 7.3, with effect from Closing, the Buyer shall observe and perform the obligations and commitments of the Seller under the Contracts and the liabilities incurred from such obligations and commitments provided that nothing in this Agreement:

7.4.1 shall require the Buyer to perform any obligation falling due for performance or which should have been performed before the Closing Date; or

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7.4.2 shall make the Buyer liable for any act, neglect, default or omission in respect of any Contracts or for any claim, expense, loss or damage arising from any failure to obtain the consent or agreement of any third party to the entry into of this Agreement or from any breach of any of the Contracts caused by this Agreement or its Closing; or

7.4.3 shall impose any obligation on the Buyer for or in respect of any goods supplied by the Seller or any service performed by the Seller.

7.5 The Seller shall indemnify the Buyer against all actions, proceedings, costs, damages, claims and demands in respect of:

7.5.1 any act or omission on the part of the Seller in relation to the Contracts;

7.5.2 any alleged fault, defect or error of any kind arising from goods supplied, services provided by the Seller.

7.6 The Seller shall authorize and request each applicable intellectual property office to record the transfer of the Purchased Assets (if applicable). Any costs incurred for recording the transfer at the applicable intellectual property office shall be borne by the Buyer.

7.7 At the request of the Buyer, the Seller agrees to perform all reasonable acts and provide all available information necessary to enable the Buyer to duly submit documentation in each applicable jurisdiction to effect the assignment contemplated hereby and to defend and enforce the Purchased Assets and the Buyer’s rights and title therein.

7.8 The Seller covenants, agrees and undertakes to execute, whenever requested by the Buyer and without further consideration, all instruments that are necessary for securing to the Buyer or for maintaining for the Buyer all the Purchased Assets and to generally assist the Buyer in perfecting and recording titles to the Purchased Assets.

7.9 Save as required for the performance of their obligations as contemplated in this Agreement and except as otherwise directed by the Buyer,

7.9.1 after the date hereof, the Seller and CDC shall not and shall procure that none of their respective Affiliates or persons authorized by them or such Affiliates will register or apply for registration of any trademarks, service marks, logos, trade names, Internet domain names and corporate names forming part of the Purchased Assets (including without limitation “Ion Global , in any of their forms or spellings (or in forms or spellings similar to or resembling the same) in any jurisdiction;

7.9.2 immediately after closing, the Seller and CDC shall cease and shall procure that each of their respective Affiliates and other persons authorized by them or such Affiliates shall cease the use of all or any of the trademarks, service marks, logos, trade names, Internet domain names and corporate names forming part of the Purchased Assets (including without limitation “Ion Global , in any of their forms or spellings (or in forms or spellings similar to or resembling the same) for any purpose whatsoever.

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7.9.3 The obligations and liabilities of the Seller and CDC under this Clause 7.9 are the joint and several obligations and liabilities of the Seller and CDC.

8. WARRANTIES BY SELLER AND CDC

8.1 The Seller hereby warrants and represents to the Buyer that the matter set forth in Clauses 8.1.1 to 8.1.17 (“Warranties”) are true, accurate and correct (a) as of the date of this Agreement and (b) as of the Closing Date.

Intellectual Property Rights

8.1.1 Intellectual Property

(a) the Seller has good beneficial and legal title to all of the Purchased Assets, free and clear of all liens, licenses, security interests, Encumbrances and other restrictions. Upon the Seller’s transfer and sale of the Purchased Assets to the Buyer pursuant to this Agreement, the Buyer will have good and valid title to and full and unrestricted use of, all the Purchased Assets, free from and clear of any Encumbrances. The Seller does not hold or use any of the Purchased Assets pursuant to, and none of the Purchased Assets are subject to, any written contract, and/or written agreement or other commitment, including but not limited to, any franchise license or sublicense;

(b) none of the Purchased Assets constitute or will constitute any violation, infringement or misappropriation of the rights of any third party;

(c) save as Disclosed, to the Seller’s knowledge no claim by any third party contesting the validity, enforceability, use or ownership of any of the Purchased Assets has been made, is currently outstanding or, is threatened and to the Seller’s knowledge there are no grounds for the same, nor will any such claim be made in future;

(d) to the Seller’s knowledge no loss or expiration of any part of the Purchased Assets is pending or reasonably foreseeable;

(e) the Seller has not received any notices of, and is not aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to the Purchased Assets (including, without limitation, any demand or request that the Seller license any rights from a third party);

(f) the execution of this Agreement by the Seller will have no effect on the Seller’s right, title and interest in and to the Purchased Assets. The Seller has taken all necessary action, in its reasonable business judgment, to maintain and protect the Purchased Assets so as to not affect the validity or enforceability of the Purchased Assets; and

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(g) all the information and particulars of the Intellectual Property set out in Schedule 1 are true, accurate and complete.

Litigation

8.1.2 Legal proceedings

Save as Disclosed, with regard to the Purchased Assets, the Seller is not engaged or proposing to engage in any litigation, arbitration, prosecution or other legal proceedings, and there are no claims or actions (whether criminal or civil) in progress, outstanding, pending or threatened against the Seller, the Purchased Assets or to the Seller’s knowledge, against any of its directors or officers or in respect of which the Seller is liable to indemnify any party concerned.

8.1.3 Defaults by others

no party with whom the Seller has entered into any contract in relation to the Purchased Assets is in default under it, and there are no circumstances likely to give rise to such a default.

Corporate Organisation and Business

8.1.4 Corporate Status

(a) the Seller (including any of its representative office or branch) has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation;

(b) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Seller and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based;

(c) so far as the Seller is aware after making all due enquires, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Seller has been or is likely to be adversely affected; and

(d) neither the execution of this Agreement or the other documents hereunder, nor the performance by the Seller or CDC of their respective obligations hereunder or thereunder will (a) violate or conflict with the memorandum and articles of association of the Seller or any applicable law, (b) violate, conflict with or result in a breach or termination of, or otherwise give any person or entity additional rights or compensation under, or the right to terminate

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or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any note, deed, lease, instrument, security agreement, mortgage, commitment, contract, agreement, license or other instrument or oral understanding to which the Seller or any of its Affiliates is a party or by which any of the assets or the properties of the Seller are bound or (c) result in the creation or imposition of any Encumbrance with respect to, or otherwise have an adverse effect upon, any of the assets or properties of the Seller.

8.1.5 Memorandum and articles

the copies of the memorandum and articles of association and other constitutional documents of the Seller delivered to the Buyer are true and complete copies, and the Seller has complied with all the provisions of its memorandum and articles of association and constitutional documents and, in particular, has not entered into any ultra vires transaction.

8.1.6 Statutory books and registers

the statutory books and registers of the Seller and all current books of account are written up to date and all such documents and other necessary records, deeds, agreements and documents relating to its affairs are in its possession or under its control.

8.1.7 Compliance with applicable legislation

the Seller and its officers have complied with the provisions of all applicable legislation in its place of incorporation, and the places where it carries on its business.

8.1.8 Title to the Purchased Assets

(a) the Seller has valid title to, and is the exclusive legal and beneficial owner of the Purchased Assets, and, therefore, has the right to sell and transfer the Purchased Assets. All the Purchased Assets will be sold and transferred to the Buyer free and clear of any Encumbrance together with all accrued beneficial rights attached to them at the date of this Agreement or subsequently becoming attached to them; and

(b) save as Disclosed, no consent, approval, authorization permit or licence from any third party, government agency or regulatory body is necessary for the sale and transfer of the Purchased Assets by the Seller to the Buyer hereunder.

8.1.9 Powers of attorney

other than in the ordinary course of business, there are no powers of attorney given by the Seller in respect of any of the Purchased Assets.

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8.1.10 [Intentionally left blank].

Miscellaneous

8.1.11 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Seller and no petition has been presented and no meeting has been convened for the purpose of winding up the Seller;

(b) no receiver has been appointed in respect of the Seller or the Purchased Assets;

(c) the Seller is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Seller has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside the British Virgin Islands;

(e) no unsatisfied judgment is outstanding against the Seller.

8.1.12 Consents

save as Disclosed, all consents, permissions, approvals and agreements of third parties which are necessary for the Seller to obtain in order to enter into and perform this Agreement in accordance with its terms have been unconditionally obtained in writing and have been Disclosed to the Buyer.

8.1.13 Material information

all material information relating to the Seller and the Purchased Assets which is known or would on reasonable enquiry be known to the Seller and which should be known by a reasonable Buyer for value of the Purchased Assets has been Disclosed or provided to the Buyer.

8.1.14 Recitals and disclosures

the recitals, Exhibits and Schedules to the Agreement and all information and documents relating to the Purchased Assets supplied by the Seller or any agent of any of them to the Buyer, its solicitors, accountants or other agents or advisers during or with a view to the negotiations leading up to the Agreement, are true and accurate in all respects, and there is no fact not Disclosed which would render any such information or document inaccurate or misleading or which, if Disclosed, might reasonably affect the willingness of the Buyer to purchase the Purchased Assets for the consideration or otherwise on the terms specified in the Agreement. Neither the Seller nor CDC has withheld from the Buyer any material facts relating to the assets,

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properties, liabilities, business operations, financial condition, results of operations or prospects of the Seller or the Purchased Assets. Neither this Agreement (including the Exhibits, Schedules, certificates and other documents delivered hereto) nor any other agreement, document, certificate or written statement furnished to the Buyer by or on behalf of the Seller in connection with this Agreement, the other documents or the transactions contemplated hereunder or thereunder contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.

Authority of the Seller and CDC

8.1.15 Each of the Seller and CDC has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Seller and CDC, in accordance with its terms;

8.1.16 the execution and delivery of, and the performance by each of the Seller and CDC of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Seller or CDC is a party or by which it is bound;

8.1.17 neither the Seller nor any of its respective agents or advisers is aware of any fact or matter which would or may constitute a breach of any of the Warranties and which failure to disclose by such agents or advisers is deemed fraudulent.

8.2 The Seller acknowledges that, in entering into this Agreement and in purchasing the Purchased Assets, the Buyer has relied and will rely upon the Warranties given herein and the Warranties as confirmed by the Seller according to Clause 6.2.1(f).

8.3 The Warranties are given subject to the matters Disclosed in the Disclosure Letter but no other information relating to the Purchased Assets and the Seller of which the Buyer has knowledge (actual or constructive) and no investigation by or on behalf of the Buyer shall prejudice any claim made by the Buyer in respect of the Warranties or operate to reduce any amount recoverable and it shall not be a defence to any claim against the Seller that the Buyer knew or ought to have known or had constructive knowledge of any information (other than as Disclosed in the Disclosure Letter) relating to the circumstances giving rise to such claim.

8.4 Each of the Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Warranty or any other term of this Agreement.

8.5 The Seller shall procure that the Warranties are true, accurate and correct at the date of this Agreement and, for this purpose the Warranties shall be deemed to be repeated at the Closing Date and any express or implied reference therein to the date of this Agreement shall be replaced by a reference to the Closing Date. Subject to Clause 9.1.7, the Warranties shall remain in full force and effect notwithstanding Closing.

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8.6 Except as may be provided herein, the rights and remedies of the Buyer in respect of a breach of any of the Warranties shall not be affected by Closing, by any investigation made by or on behalf of the Buyer into the affairs of the Seller and the Business, by the giving of any time or other indulgence by the Buyer to any person, by the Buyer rescinding or not rescinding this Agreement, or by any other cause whatsoever except a specific waiver or release by the Buyer in writing; and any such waiver or release shall not prejudice or affect any remaining rights or remedies of the Buyer.

8.7 All representations and warranties made by any party contained in this Agreement, any Exhibit, Schedule, certificate or other instrument specifically referred to in the Warranties pursuant hereto or made in writing by or on behalf of a party in connection with the transactions contemplated by this Agreement, and all indemnification obligations under this Agreement shall survive the execution and delivery of this Agreement and the Closing of the transactions contemplated hereunder until the expiration of the applicable statute of limitations or, if Clause 9.1.7 (subject to Clause 9.1.8) is applicable, until the expiry of a period of eighteen months (18) after the date of this Agreement.

8.8 The Seller undertakes with the Buyer that it will before and after Closing promptly notify the Buyer in writing of any event or circumstance of which they become aware which is or may be inconsistent with any of the Warranties or which might make any of the Warranties untrue or misleading if given at Closing.

9. INDEMNIFICATION – GENERAL AND TAX

9.1 General Indemnification

9.1.1 As used in this Clause 9.1, the following terms shall have the following meanings:

(a) “General Event of Indemnification” with respect to:

(i) the Seller shall mean:

any breach of any representation or Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation, indemnity or covenant of the Seller contained in this Agreement (including the Exhibits and Schedules) or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach;

(ii) any Claims, liabilities or obligations of any kind or nature relating to the Purchased Assets arising from, relating to or in connection with operations or affairs of the Seller or any of the assets, properties, interests in assets or properties or rights of the Seller which were existing at or as of Closing or arising in whole or in part out of any acts, transactions, conditions, circumstances or facts which occurred or existed on or prior to Closing, and which were not Disclosed on or before the execution of this Agreement;

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(iii) any Claims, liabilities or obligations of any kind or nature relating to the assets of the Seller (other than the Purchased Assets) or the liabilities and Claims referred to in Clause 2.3 whether existing at or as of Closing or at any time thereafter; and

(iv) the Buyer shall mean any breach of any representation, Buyer Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation, indemnity or covenant of the Buyer contained in this Agreement or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach.

(b) “Special Event of Indemnification” with respect to :

(i) the Seller shall mean any Claims, liabilities or obligations of any kind or nature arising from, relating to or in connection with any of the events set out in Schedule 3 whether existing at or as of Closing or at any time thereafter, and whether Disclosed or not on or before the execution of this Agreement; and

(ii) the Buyer shall mean any Claims, liabilities or obligations arising from the Buyer’s failure to pay the applicable Taxes to the appropriate tax authority in accordance with Clause 3.3 after deducting or withholding such payment from the Purchase Price.

(c) “Losses” under this Clause 9 shall mean any and all Losses (as defined in Clause 1.1) sustained, suffered or incurred by any Indemnified Person.

9.1.2 “Buyer Indemnified Persons” shall mean and include the Buyer and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns; and “Seller Indemnified Persons” shall mean and include the Seller and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns.

9.1.3 The Seller shall indemnify, defend and hold harmless the Buyer Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification except to the extent such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Buyer Indemnified Persons.

9.1.4 The Buyer shall indemnify, defend and hold harmless the Seller Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification, except to the extent any such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Seller Indemnified Person.

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9.1.5 This indemnity is to be a continuing security to the Buyer and Seller for all representations, Warranties, agreements, undertakings, commitments obligations, indemnities or covenants on the part of the Seller or Buyer (as the case may be) under or pursuant to this Agreement notwithstanding settlement of account or other matter or thing whatsoever.

9.1.6 This indemnity is in addition and without prejudice to and not in substitution for any rights or security which the Buyer and Seller may now or hereafter have or hold for performance and observance of any agreement, undertaking, commitment, obligation, indemnity or covenant on the part of the Seller or the Buyer (as the case may be) under or in connection with this Agreement.

9.1.7 Limitation of Liability in respect of the Warranties or the Buyer Warranties

Notwithstanding anything contained herein to the contrary but subject to Clause 9.1.8, (i) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 9 or Clause 11.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) for Losses the amount of which is less than US$2,500 (“Minor Losses”) even if such Minor Losses in the aggregate exceed the Basket (as defined below); (ii) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 9 or Clause 11.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) unless and until Losses in an aggregate amount (excluding the Minor Losses) exceed US$5,000 (the “Basket”) in which case the Buyer or the Seller may make such claim(s) for indemnification for any and all Losses (excluding the Minor Losses) and not merely for the excess of the Basket; and (iii) in no event shall the aggregate liability of (a) the Buyer or the Seller pursuant to this Clause 9.1 or (b) CDC pursuant to Clause 11.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) exceed one hundred percent (100%) of the Purchase Price; and (iv) the period during which claims for any breach of a Warranty and/or indemnification pursuant to this Agreement in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) may be made shall commence from the date of this Agreement to the expiry of the period of eighteen (18) months after the date of this Agreement.

9.1.8 None of the limitations regarding any Loss or Claim in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) whether as to the amount or time set forth in Clause 9.1.7 shall apply if in any case the Losses and Claims have arisen from or in connection with:

(a) any Special Event of Indemnification; or

(b) any breach of the Warranties set out in Clauses 8.1.1(a), (b), (f) and (g), 8.1.4(a) and 8.1.8.

For avoidance of doubt, no claim for any Loss or Claim arising from or in connection with items (a) or (b) of this Clause 9.1.8 above shall be brought after the expiry of the applicable statute of limitation.

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9.2 Covenant in Respect of Tax

9.2.1 In this Clause unless the context otherwise requires:

(a) “Tax Event” includes (without limitation) any omission, event, action or transaction whether or not the Seller is a party thereto, the death of any person, a change in the residence of any person for any Tax purpose, a failure to make sufficient dividend payments to avoid an apportionment or deemed distribution of income and the entering into and Closing of this Agreement and references to the result of events on, before or after Closing shall include the combined result of two or more events one or more of which shall have taken place on, before or after Closing; and

(b) reference to income or profits or gains earned, accrued or received shall include income or profits or gains deemed to have been or treated as or regarded as earned, accrued or received for the purposes of any legislation.

9.2.2 Subject as hereinafter provided, the Seller hereby covenants with and undertakes to indemnify the Buyer (at its election, for itself, its Affiliates and as trustee for its successors in title) against:

(a) any Tax liability of the Seller or in relation to its assets (other than the Purchased Assets) or its business resulting from or by reference to any income, profits or gains earned accrued or received before, on or after the Closing Date or any Tax Event relating thereto before, on or after such date whether alone or in conjunction with other circumstances and whether or not such Tax is chargeable against or attributable to any other person;

(b) any Tax liability of the Seller or in relation to the Purchased Assets resulting from or by reference to any income, profits or gains earned accrued or received on or before the Closing Date or any Tax Event relating thereto on or before such date whether alone or in conjunction with other circumstances and whether or not such Tax is chargeable against or attributable to any other person;

(c) any Tax liability of the Seller or in relation to the Purchased Assets that would not have been payable had there been no breach of any Warranties and which is not the subject of the covenants in sub-clauses (a) and (b) above; and

(d) all costs and expenses which are incurred by the Buyer or any of its Affiliates or the Seller in connection with any of the matters referred to in this Clause 9.2.2 or in taking or defending any action under the covenants contained in this Clause 9.2.2 (including, without prejudice to the generality of the foregoing, all legal and other professional fees and disbursements).

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9.2.3 The Purchase Price shall be allocated among the Purchased Assets in accordance with their values as determined by the Buyer as set forth in column (B) of Part 1 of Schedule 1. Each of the parties hereto shall (i) report the purchase and sale of the Purchased Assets in accordance with the allocations determined by the Buyer for all Tax purposes, (ii) not take a Tax position which is inconsistent with such allocation, and (iii) cooperate with each other in preparing statements, Tax returns or reports required by any Tax Authority.

10. BUYER’S RIGHTS

10.1 Without prejudice to any other right or remedy of the Buyer hereunder, if before Closing the Buyer becomes aware that any of the Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Seller or CDC are in breach of any term of this Agreement, the Buyer shall be entitled to rescind this Agreement without incurring liability to the Seller or CDC.

10.2 Without prejudice to any other right or remedy of the Seller hereunder, if before Closing the Seller becomes aware that any of the Buyer Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Buyer is in breach of any term of this Agreement, the Seller shall be entitled to terminate this Agreement without incurring liability to the Buyer.

10.3 The rights, including rights of rescission, conferred on the Buyer and Seller by this Agreement are in addition and without prejudice to all other rights and remedies available to the Buyer and Seller; and no exercise or failure to exercise a right under this Agreement or otherwise or to invoke a remedy shall constitute a waiver of that right or remedy by the Buyer or Seller.

11. GUARANTEE AND INDEMNITY BY CDC

11.1 In consideration of the Buyer entering into this Agreement, CDC hereby unconditionally and irrevocably guarantees to the Buyer the due and punctual performance and observance by the Seller of all the Seller’s obligations, commitments, undertakings, warranties, indemnities and covenants under or pursuant to this Agreement and subject to the provisions of Clauses 9.1.7 and 9.1.8 agrees to indemnify the Buyer and its Affiliates against all Losses, damages, costs and expenses (including reasonable legal costs and expenses) which the Buyer or any of its Affiliates may suffer through or arising from any breach by the Seller of such obligations, commitments, warranties, undertakings, indemnities or covenants. The liability of CDC as aforesaid shall not be released or diminished by any arrangements or alterations of terms (whether of this Agreement or otherwise) or any forbearance, neglect or delay in seeking performance of the obligations hereby imposed or any granting of time for such performance.

11.2 If and whenever the Seller defaults for any reason whatsoever in the performance of any obligation or liability undertaken or expressed to be undertaken by the Seller under or pursuant to this Agreement, CDC shall forthwith upon demand unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction of) the obligation or liability in regard to which such default has been made in the manner prescribed by this Agreement and so that the same benefits shall be conferred on the Buyer and its Affiliates as they would have received if such obligation or liability had

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been duly performed and satisfied by the Seller. CDC hereby waives any right which it may have to require the Buyer to proceed first against or claim payment from the Seller to the intent that as between the Buyer and CDC the latter shall be liable as principal debtor as if CDC had entered into all undertakings, agreements and other obligations jointly and severally with the Seller.

11.3 This guarantee and indemnity is to be a continuing security to the Buyer for all obligations, commitments, warranties, undertakings, indemnities and covenants on the part of the Seller under or pursuant to this Agreement notwithstanding any settlement of account or other matter or thing whatsoever.

11.4 This guarantee and indemnity is in addition to and without prejudice to and not in substitution for any rights or security which the Buyer may now or hereafter have or hold for the performance and observance of the obligations, commitments, undertakings, covenants, indemnities and warranties of the Seller and CDC under or in connection with this Agreement.

11.5 CDC shall not, after any claim has been made pursuant to this Clause 11, claim from the Seller any sums which may be owing to them from the Seller or have the benefit of any set-off counter-claim or proof against or dividend, composition or payment by the Seller until all sums owing to the Buyer in respect hereof shall have been paid in full.

11.6 As a separate and independent stipulation, CDC agree that any obligation expressed to be undertaken by the Seller under this Agreement (including, without limitation, any moneys expressed to be payable under this Agreement) which may not be enforceable against or recoverable from the Seller by reason of any legal limitation, disability or incapacity of any of them or any other fact or circumstance shall nevertheless be enforceable against or recoverable from CDC as though the same had been incurred by CDC and CDC was sole or principal obligor in respect thereof and shall be performed or paid by CDC on demand.

12. WARRANTIES BY BUYER

12.1 The Buyer hereby warrants and represents to the Seller that the matter set forth below (“Buyer Warranties”) are true and accurate (a) as of the date of this Agreement and (b) as of the Closing Date:

12.1.1 Corporate Status

(a) the Buyer has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation;

(b) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Buyer and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based; and

(c) so far as the Buyer is aware after making all due enquires, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Buyer has been or is likely to be adversely affected.

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12.1.2 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Buyer and no petition has been presented and no meeting has been convened for the purpose of winding up the Buyer;

(b) no receiver has been appointed in respect of the Buyer;

(c) the Buyer is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Buyer has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside Hong Kong;

(e) no unsatisfied judgment is outstanding against the Buyer.

12.1.3 Authority of the Buyer

(a) the Buyer has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Buyer, in accordance with its terms;

(b) the execution and delivery of, and the performance by the Buyer of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Seller or CDC is a party or by which it is bound.

12.1.4 The Buyer acknowledges that, in entering into this Agreement and in selling the Purchased Assets, the Seller has relied and will rely upon the Buyer Warranties given herein and the Buyer Warranties as confirmed by the Buyer according to Clause 6.4 upon Closing.

12.1.5 The Buyer Warranties are given subject to the matters Disclosed in the Buyer Disclosure Letter.

12.1.6 Each of the Buyer Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Buyer Warranty.

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12.1.7 The Buyer represents that the Buyer Warranties are true, accurate and complete at the date of this Agreement and, for this purpose, such Buyer Warranties shall be deemed to be repeated at the Closing Date.

13. MISCELLANEOUS

13.1 Where in this Agreement, any liability is undertaken by two or more persons, the liability of each of them shall be joint and several.

13.2 No party may assign or transfer, or purport to assign or transfer, any of its rights or obligations under this Agreement without prior written consent of the other parties (except for an assignment or transfer by the Buyer to any of its Affiliates) and this Agreement shall be binding on and enure for the benefit of the parties’ successors, permitted assigns and personal representatives. In the event that an Affiliate of the Buyer to whom the Buyer’s rights or obligations under this Agreement have been assigned, ceases to be an Affiliate of the Buyer, the Buyer shall promptly procure such entity to assign or transfer such rights or obligations back to the Buyer (as the case may be).

13.3 This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.

13.4 This Agreement represents the entire understanding, and constitutes the whole agreement, in relation to its subject matter and supersedes any previous agreement between the parties with respect thereto and, without prejudice to the generality of the foregoing, excludes any warranty, condition or other undertaking implied at law or by custom.

13.5 Each party confirms that, except as provided in this Agreement, no party has relied on any representation or warranty or undertaking which is not contained in this Agreement, without prejudice to any liability for fraudulent misrepresentation, no party shall be under any liability or shall have any remedy in respect of misrepresentation or untrue statement unless and to the extent that a claim lies under this Agreement.

13.6 Subject to the terms hereof so far as it remains to be performed this Agreement shall continue in full force and effect notwithstanding Closing.

13.7 The Seller shall after Closing execute all such deeds and documents and do all such things as the Buyer may require for perfecting the transactions intended to be effected under or pursuant to this Agreement and for vesting in the Buyer the full benefit of the Purchased Assets. Furthermore, the parties hereto hereby agree to be bound by the provisions set forth in this Agreement even in the event that any provision set forth herein were determined to be unenforceable or ineffective vis-à-vis third parties.

13.8 In the case that any provision or part of a provision of this Agreement is declared invalid, not binding or not enforceable, then, such declaration shall be effective only in connection with such provision or part of a provision and therefore shall not impair the validity, binding effects and enforceability of the other parts of such provision and/or the other provisions of this Agreement.

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13.9 The transfer of any Purchased Assets pursuant to this Agreement shall be together with all rights and benefits attached thereto as at the date of transfer and shall be free from all liens, charges and Encumbrance.

13.10 This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Facsimile or electronic signatures shall be treated as original signatures.

14. CONFIDENTIALITY OF INFORMATION RECEIVED

14.1 The parties undertake with each other that they shall treat as strictly confidential all proprietary, non-public information received or obtained by them or their employees, agents or advisers as a result of entering into or performing this Agreement including information relating to the provisions of this Agreement, the negotiations leading up to this Agreement, the subject matter of this Agreement or the business or affairs of the Seller, the Buyer or any member of Aegis Group and that it will not at any time hereafter make use of or disclose or divulge to any person any such information without the consent of the other parties and shall use its best endeavours to prevent the publication or disclosure of any such information.

14.2 The restrictions contained in Clause 14.1 shall not apply so as to prevent the parties from making any disclosure required by law or by any securities exchange or supervisory or regulatory or governmental body pursuant to rules to which the parties are subject or from making any disclosure to any professional adviser for the purposes of obtaining advice (providing always that the provisions of this Clause 14 shall apply to and the parties shall procure that they apply to and are observed in relation to, the use or disclosure by such professional adviser of the information provided to them) or from making any disclosure for the purpose of exercising their rights or performing their obligations hereunder, nor shall the restriction apply in respect of any information which comes into the public domain otherwise than by a breach of this Clause 14 by any party.

15. COSTS

(a) The parties shall pay their own costs in connection with the preparation, negotiation, execution and completion of this Agreement. Notwithstanding the foregoing, the Buyer agrees to pay 50% of the costs for preparation of the legal opinion by BVI and Cayman counsels required to be delivered by the Seller pursuant to Clause 6.2.1(h).

(b) Any stamp or transfer duty or similar tax of and incidental to this Agreement and the transfer of the Purchased Assets hereunder shall be borne by the Seller absolutely. The Buyer shall be entitled to deduct or withhold from the Purchase Price on account of such tax according to Clause 3.3.

16. NOTICES

16.1 A notice, approval, consent or other communication in connection with this Agreement:

16.1.1 must be in writing; and

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16.1.2 must be left at the address of the addressee, or sent by prepaid registered post (airmail if posted to or from a place outside Hong Kong) to the address of the addressee or sent by facsimile to the facsimile number of the addressee which is specified in this clause or if the addressee notifies another address or facsimile number in Hong Kong then to that address or facsimile number.

The address and facsimile number of each party is:

The Seller
Address	:	c/o CDC Corporation
		33rd Floor, Citicorp Centre
		18 Whitfield Road
		Causeway Bay, Hong Kong
Facsimile	:	852-2893-5245
Attn	:	Legal Department
CDC
Address	:	2 Concourse Parkway
		Ste 800
		Atlanta GA 30328
Facsimile	:	678-259-8737
Attn	:	General Counsel
The Buyer
Address	:	5th Floor Dongnam Building,
		997-11 Daechi-Dong, Gangnam-Gu,
		Seoul 135-502, Korea
Facsimile	:	82 2 2017 9299
Attention	:	Representative Director
With a copy to	:
Address	:	152 Beach Road, #36-05 Gateway East, Singapore 189721
Facsimile	:	(65) 6396 5945
Attn	:	Chief Financial Officer, Asia Pacific, Aegis Media
and
Address	:	Three Park Avenue, 32nd Floor, New York, NY 10016 USA
Facsimile	:	1 310 907 1345
Attn	:	Head of Legal Affairs, Aegis Media

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16.2 A notice, approval, consent or other communication shall take effect from the time it is received (or, if earlier, the time it is deemed to be received in accordance with Clause 16.3) unless a later time is specified in it.

16.3 A letter or facsimile is deemed to be received:

16.3.1 in the case of a posted letter, unless actually received earlier, on the third (seventh, if posted to or from a place outside Hong Kong) day after posting; and

16.3.2 in the case of facsimile, on production of a transmission report from the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient.

17. GOVERNING LAW AND ARBITRATION

17.1 This Agreement shall be governed by, and construed in accordance with, Hong Kong law.

17.2 Arbitration

17.2.1 Any and all disputes arising out of or in connection with the negotiation, execution, interpretation, performance or non-performance of this Agreement shall be solely and finally settled in accordance with the Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”) by one or more arbitrators appointed in accordance with the ICC Rules. The parties agree that the award of the arbitrators shall be the sole and exclusive remedy between them regarding any claims, counterclaims, issues or accountings presented to the arbitrators, irrespective of the magnitude thereof.

17.2.2 All arbitration proceedings shall be conducted in the English language pursuant to the ICC Rules. The arbitration shall take place in Hong Kong or such other place as the parties may mutually agree in writing. The parties hereto agree to facilitate the arbitration by (i) making available to each other and to the arbitrators all documents, books, records and personnel under their control as the arbitrators shall determine to be relevant to the dispute; (ii) conducting arbitration hearings to the greatest extent possible on successive, contiguous days; and (iii) observing strictly the time periods established by the ICC Rules or by the arbitrators for the submission of evidence and briefs.

17.2.3 Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereby waive to the fullest extent permitted by law any rights to appeal or to review such award by any court or tribunal. The parties agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgement on the arbitration award may be entered in any court having jurisdiction over the parties or their assets.

17.2.4 Notwithstanding anything herein contained, either party shall be entitled to seek injunctive relief, if possible, from any court of competent jurisdiction to protect its rights under this Agreement pending the constitution of the arbitral tribunal pursuant to this Clause 17.2.

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be signed on their behalf in the places and on the date hereinafter written.

The Seller
SIGNED by /s/ Mike Latimore	)	Mike Latimore for and on behalf of
on behalf of CHINADOTCOM STRATEGIC, INC.	)	Babington Services Limited, Director
in the presence of:	)	of chinadotcom Strategic, Inc.
The Buyer
SIGNED by /s/ Yunsang Oh	)
on behalf of CARAT KOREA CO., LTD.	)
in the presence of: /s/ Yunsang Oh	)
CDC
SIGNED by	)	/s/ Simon Wong
on behalf of CDC SOFTWARE CORPORATION	)
in the presence of:    /s/ Nicole Lo	)

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EX-4.(A)19

Exhibit 4(a).19

Execution Copy

DATED 1 August, 2007

SHARE PURCHASE AGREEMENT

By and Among

ION GLOBAL (BVI) LTD.

CDC SOFTWARE CORPORATION

and

GROUP CARAT (NEDERLAND) BV

TABLE OF CONTENTS

Clause		Page
1.	INTERPRETATION	1
2.	SALE AND PURCHASE OF SALE SHARES	9
3.	PURCHASE PRICE	9
4.	CONDITIONS	10
5.	ACTION PENDING CLOSING	13
6.	CLOSING	16
7.	WARRANTIES BY SELLER	20
8.	INDEMNIFICATION – GENERAL AND TAX	50
9.	BUYER’S RIGHTS	55
10.	PROTECTION OF THE BUYER’S INTERESTS	56
11.	GUARANTEE AND INDEMNITY BY CDC	58
12.	WARRANTIES BY BUYER	59
13.	MISCELLANEOUS	61
14.	CONFIDENTIALITY OF INFORMATION RECEIVED	62
15.	COSTS	62
16.	NOTICES	62
17.	GOVERNING LAW AND ARBITRATION	64

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THIS AGREEMENT is made on 1 August, 2007

BY AND AMONG:

(1) ION GLOBAL (BVI) LTD., a company incorporated under the laws of the British Virgin Islands with its registered office as at the date hereof at P.O. Box 9570, O.I.C. Roadtown, Tortola, the British Virgin Islands (the “Seller”);

(2) CDC SOFTWARE CORPORATION, a company incorporated under the laws of the Cayman Islands with its registered office as at the date hereof at P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands (“CDC”); and

(3) GROUP CARAT (NEDERLAND) BV, a company incorporated under the laws of the Netherlands with its registered office as at the date hereof at 55 Piet Heinkade 1019 GM Amsterdam, The Netherlands (the “Buyer”).

RECITALS:

A. Ion Global Korea Ltd. (the “Company”) is a company established under the laws of The Republic of Korea with its registered office as at the date hereof at JS Tower 9^th Fl., 144-19 Samsung-dong, Kangnam-gu, Seoul, The Republic of Korea engaging in the business of interactive web development and digital consultancy for on-line and mobile services (“Business”). As at the date hereof, the Company has an authorized share capital of KRW 200,000,000 divided into 40,000shares of KRW 5,000 each of which 10,000 shares have been issued and are fully paid up. The particulars of the Company are set out in Schedule 1.

B. The Seller is the registered and beneficial owner of the 10,000 issued and fully paid up shares with a par value of KRW5,000 each in the Company comprising the entire issued share capital of the Company (“Sale Shares”).

C. The Seller has agreed to sell and the Buyer has agreed to purchase, the Sale Shares, on the terms and conditions hereinafter contained.

D. CDC is an Affiliate of the Seller and has agreed to guarantee the performance of the Seller’s obligations hereunder as set forth in Clause 11.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 In this Agreement and in the Schedules, the following definitions are used:

“Accounts” means the unaudited financial statements of the Company (comprising a balance sheet, profit and loss statement and cash flow statement together in each case with the notes thereon) made up to the

1

	Accounts Date and for the financial period from 1 January 2006 to the Accounts Date prepared in accordance with South Korea GAAP and in manner consistent with past practice, copies of which are annexed hereto as Exhibit A.
“Accounts Date”	means 31 December 2006.
“Acquisition Agreements”	means, collectively, (i) the assets purchase agreement dated the date of this Agreement and made by and among Ion Global Limited, CDC and wwwins Consulting Hong Kong Limited; (ii) the assets purchase agreement dated the date of this Agreement and made by and among Ion Global (California), Inc., CDC and Molecular, Inc.; and (iii) the assets purchase agreement dated the date of this Agreement and made by and among chinadotcom Strategic, Inc., CDC and Carat Korea Co., Ltd.
“Aegis Group”	means the group of companies comprising the Aegis Group plc and its Subsidiaries. The expression “member of the Aegis Group” shall be construed accordingly.
“Affiliates”	in respect of any specified person or entity, means a person that directly or indirectly controls, is controlled by or is under common control with such specified person or entity or with which such specified person or entity may be connected or may become connected as an officer, director, executive, principal, agent, representative, consultant or otherwise.
“Agreed Form”	means, in relation to any document, such document in the terms agreed between the parties and signed by or on behalf of them for the purpose of identification.
“Agreement”	has the meaning ascribed in the heading of this Agreement.
“Borrowing”	has the meaning set forth in Clause 7.1.15.
“Business”	has the meaning ascribed to such term in Recital A of this Agreement.

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“Business Day”	means a day (not being a Saturday) on which banks are open for general banking business in The Republic of Korea.
“Buyer”	has the meaning ascribed to such term in the heading of this Agreement.
“Buyer Disclosure Letter”	means the letter of even date herewith by the Buyer to the Seller (and acknowledged by the Seller) on the execution and delivery of this Agreement.
“Buyer Indemnified Persons”	has the meaning set forth in Clause 8.1.2.
“Buyer Warranties”	has the meaning set forth in Clause 12.1.
“Claim”	has the meaning set forth in Clause 8.1.1(a).
“Closing”	means the completion of the purchase by the Buyer from the Seller of the Sale Shares in accordance with Clause 6.
“Closing Accounts”	means the unaudited financial statements of the Company (comprising a balance sheet, profit and loss statement and cash flow statement together in each case with the notes thereon) made up to the Closing Date and for the financial period from 1 July, 2007 to the Closing Date prepared in accordance with South Korea GAAP and in manner consistent with past practice.
“Closing Date”	means 11 September, 2007 or such other date as is determined by the Seller and the Buyer.
“Closing Net Asset Value”	means the Net Asset Value of the Company as at the Closing Date as determined in accordance with Clause 6.3.
“Company”	has the meaning ascribed to such term in Recital A of this Agreement.
“control”	means, in relation to any person at any time, the power (whether directly or indirectly and whether by ownership of share capital, possession of voting power, contract or otherwise) to appoint the

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	majority of the members of the governing body or management, or otherwise to control the affairs and policies of that other person.
“Disclosed”	means referred to in the Disclosure Letter or the Buyer Disclosure Letter (as the case may be).
“Disclosure Letter”	means the letter of even date herewith by the Seller to the Buyer (and acknowledged by the Buyer) on the execution and delivery of this Agreement.
“Encumbrance”	means any mortgage, charge (fixed or floating), pledge, lien, hypothecation, trust, right of set off or other third party right or interest (legal or equitable) including any right of pre-emption, assignment by way of security, reservation of title or any other security interest of any kind however created or arising or any other agreement or arrangement (including a sale and repurchase arrangement) having similar effect.
“Environment”	means the natural and man-made environment and all or any of the following media namely air, water and land including air within buildings and air within other natural or man-made structures above or below ground.
“Environmental Law”	means all laws, regulations, directives, statutes, subordinate legislation, common law and other national and local laws, all judgments, orders, instructions or awards of any court or competent authority and all codes of practice and guidance notes which relate to the Environment or human health or the health of animals or plants.
“External Auditors”	means such international auditing firm as may be nominated by the Buyer.
“General Event of Indemnification”	has the meaning set forth in Clause 8.1.1(b).
“Hong Kong”	means the Hong Kong Special Administrative Region of the PRC.
“ICC Rules”	has the meaning set forth in Clause 17.2.1.

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“Independent Advisor”

KPMG International (Seoul office), or in the event that either the Seller or the Buyer is engaging the services of KPMG International (Seoul office) at the time of the request made under Clause 6.3.3, an independent firm of chartered accountants agreed by the parties in writing or, failing such agreement, the partner or firm of chartered accountants, appointed, on the application of either party, by the President of the Korean Institute of Certified Public Accountants for the time being.

“Intellectual Property”

means all of the following which is owned by, issued to or licensed to the Company, along with all income, royalties, damages and payments due or payable from time to time including, without limitation, damages and payments for past or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world: patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissue, continuation, continuation-in-part, revision, extension or re-examination thereof; trademarks, service marks, logos, trade names, Internet domain names and corporate names together with all goodwill associated therewith, including, without limitation the use of the current corporate name and all translations, adaptations, derivations and combinations of the foregoing; copyrights and copyrightable works (including without limitation, web sites); and all registrations, applications and renewals for any of the foregoing; trade secrets and confidential information (including, without limitation, ideas, know-how, drawings, specifications, plans, proposals, financial, business and marketing plans, sales and promotional literature, and customer and supplier lists and related information); information technologies (including, without limitation, software programs, data and related documentation); and all copies and tangible embodiments of the foregoing (in whatever form or medium).

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“KRW”	means the lawful currency of The Republic of Korea.
“Leased Properties”	means all the real properties leased by the Company, particulars of which are set out in the Disclosure Letter.
“Losses”	means all losses, liabilities, costs (including, without limitation, reasonable attorney’s fees), charges and expenses.
“Management Accounts Date”	means 30 June 2007.
“Management Accounts”	means the unaudited consolidated balance sheet of the Company as at the Management Accounts Date and the unaudited consolidated statements of profit and loss and cash flow of the Company for the period commencing from 1 January 2007 and ended on the Management Accounts Date prepared in accordance with South Korea GAAP and in a manner consistent with past practice.
“Material Adverse Change”	means any material adverse change in the business, assets or position (financial, trading or otherwise), profits or prospects of the Company or any event or circumstance that may result in such a material adverse change. Without prejudice to the generality of the foregoing and to the extent that any adverse change or series of adverse change can be quantified, any adverse change to the extent of more than US$65,000 or series of adverse change to the aggregate extent of more than US$65,000 shall be deemed to be a material adverse change.
“Net Asset Value”	means the amount by which the assets of the Company (excluding (i) the Properties and (ii) account receivables and unbilled work-in-progress due from Pantech & Curitel) exceed the liabilities of the Company subject to Clause 6.3.5.
“Owned Properties”	means all the properties beneficially owned by the Company, particulars of which are set out in the Disclosure Letter.
“Payment Account Details”	means, in relation to any payment to be made under or pursuant to this Agreement, the name, account

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	number, account location and other details specified by the payee necessary to effect payment by wire transfer to the payee.
“Permit”	means any licence, consent, authorisation, certification or permit required under Environmental Law.
“Properties”	means the Leased Properties and Owned Properties.
“Purchase Price”	has the meaning set forth in Clause 3.1.
“Relief”	has the meaning set forth in Clause 8.2.1(b).
“Sale Shares”	has the meaning set forth in Recital B of this Agreement.
“Seller Indemnified Persons”	has the meaning set forth in Clause 8.1.2.
“Service Agreement”	has the meaning set forth in Clause 6.2.1(i).
“South Korea GAAP”	means the general accepted accounting principles applicable in The Republic of Korea, consistently applied.
“Special Event of Indemnification”	has the meaning set forth in Clause 8.1.1(c).
“Subsidiaries”	means any Affiliate of a company whose shares of more than fifty percent (50%) are owned by such company.
“Tax Authority”	means any local, municipal, governmental, state, federal or fiscal, revenue, customs or excise authority, body, agency or official anywhere in the world having or purporting to have power or authority in relation to Tax, including without limitation the National Tax Service of The Republic of Korea.
“Tax Event”	has the meaning set forth in Clause 8.2.1(a).
“Tax Legislation”	means all statutes, statutory instruments, orders, enactments, laws, by-laws, directives and regulations, whether domestic or foreign decrees, providing for or imposing any Tax.

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“Taxation” or “Tax”	means all taxes, charges, duties, imposts, fees, levies or other assessments, and all estimated payments thereof, including without limitation income, business profits, branch profits, excise, property, sales, use, value added (VAT), environmental, franchise, customs, import, payroll, transfer, gross receipts, withholding, social security, unemployment taxes, as well as stamp duties and other costs, imposed by any Tax Authority, or any subdivision or agency thereof, and any interest and penalty relating to such taxes, charges, fees, levies or other assessments.
“US$”	means the lawful currency of the United States of America.
“Warranties”	has the meaning set forth in Clause 7.1.

1.2 In this Agreement, save where the context otherwise requires:

1.2.1 a reference to a statute or statutory provision shall include a reference:

(a) to that statute or provision as from time to time consolidated, modified re-enacted, or replaced by any statute or statutory provision; and

(b) any subordinate legislation made under the relevant statute;

1.2.2 words in the singular shall include the plural, and vice versa;

1.2.3 the masculine gender shall include the feminine and neutral and vice versa;

1.2.4 a reference to a person shall include a reference to a firm, a body corporate, an unincorporated association or to a person’s executors or administrators;

1.2.5 a reference to a clause, sub-clause, Schedule and Exhibit shall be a reference to a clause, sub-clause, schedule and exhibit (as the case may be) of or to this Agreement;

1.2.6 if a period of time is specified and commences from a given day or the day of an act or event, it shall be calculated inclusive of that day;

1.2.7 references to any legal term for any action, remedy, method or judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than The Republic of Korea be deemed to include what most nearly approximates in that jurisdiction to Korean legal term;

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1.2.8 references to writing shall include any modes of reproducing words in a legible and non-transitory form;

1.2.9 a reference to a balance sheet or profit and loss account shall include a reference to any note forming part of it;

1.2.10 where any of the Warranties is qualified in this Agreement or in the Disclosure Letter by the expression “to the Seller’s knowledge” or “so far as the Seller is aware” or any similar expression, that Warranty shall be deemed to include an additional statement that it has been made after due, diligent and careful enquiry to ensure that all information given in the Warranty is true, complete and accurate in all respects;

1.2.11 any reference herein to “including” shall be construed as a reference to “including but not limited to”;

1.2.12 the headings in this Agreement are for convenience only and shall not affect the interpretation of any provision of this Agreement; and

1.2.13 references to this Agreement include this Agreement as amended or supplemented in accordance with its terms.

1.3 The designations adopted in the recitals and introductory statements preceding this clause apply throughout this Agreement and the Schedules.

2. SALE AND PURCHASE OF SALE SHARES

Subject to the terms and conditions herein set forth, the Buyer, relying on the agreements, covenants, representations, warranties, undertakings and indemnities of the Seller herein, hereby agrees to purchase from the Seller and the Seller as legal and beneficial owner hereby agrees to sell and transfer to the Buyer the Sale Shares on the Closing Date.

3. PURCHASE PRICE

3.1 As consideration for the purchase of the Sale Shares, in reliance upon the representations and warranties, covenants, agreements and undertakings of the Seller made herein, and subject to the terms and conditions of this Agreement, the Buyer shall pay to the Seller (or where applicable, the Buyer shall remit to the Seller), the sum of US$7,490,000 (the “Purchase Price”).

3.2 Any payments made to a party to this Agreement pursuant to this Agreement shall be made in cash in US$ and effected by crediting the account specified in the Payment Account Details of the payee(s) by way of wire transfer in immediately available funds on or before the due date for payment which shall be a good discharge of the party required to make payment in respect of its obligations to make such payment.

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3.3 Each of Buyer and Seller acknowledge and agree that the consummation of the purchase and sale transaction contemplated hereby will result in the obligation of Seller to pay, under the laws of The Republic of Korea: (i) a transfer income tax of 10% of the Purchase Price (the “Transfer Tax”); (ii) an inhabitant tax of 10% of the Transfer Tax amount (the “Inhabitant Tax”); and (iii) a security transaction tax in the amount of 0.5% of the Purchase Price (the “Security Transaction Tax” and together with the Transfer Tax and the Inhabitant Tax, collectively, the “Transactional Taxes”). Transactional Taxes calculated are set out in Exhibit C hereto. The Buyer shall be entitled to deduct or withhold from the Purchase Price , the Transactional Taxes (at the rates mentioned in this Clause 3.3 or at such other rates as may be applicable from the date of this Agreement until Closing) and such other amount as the Buyer may be required to deduct or withhold on account of any Tax under any applicable law or regulations (including those of The Republic of Korea) and hereby covenants and agrees to promptly remit such applicable Taxes to the appropriate taxation authority in accordance with the applicable laws or regulations. The Buyer shall pay only the balance of the Purchase Price to the Seller and in such event, the payment of such balance of the Purchase Price (after the deduction or withholding as aforesaid) shall be deemed to be a good discharge of the Buyer’s obligations to make payment of the Purchase Price hereunder.

4. CONDITIONS

4.1 Conditions Precedent

The obligations of the Buyer under this Agreement are subject to the Buyer’s satisfaction that the following conditions have been duly fulfilled:

4.1.1 completion of satisfactory (in Buyer’s sole and discretionary judgement) legal, commercial, IT, human resources, taxation, financial and clients due diligence by the Buyer;

4.1.2 the completion of any formal internal corporate approval by Aegis Group plc including approval by the board of directors and the Chief Executive Officer of Aegis Group plc;

4.1.3	(a)	there having occurred no Material Adverse Change in the period between the date of this Agreement and Closing;
	(b)	nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a material breach of the Warranties;
	(c)	no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the consummation of the transactions contemplated by this Agreement;
	(d)	each of the Seller and CDC having performed or complied with, in all material respects, all covenants, obligations and agreements

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contemplated by this Agreement to be performed or complied with by it at or prior to Closing, including without limitations those set forth in Clause 5;

(e)

all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary for or in respect of the proposed sale of the Sale Shares by the Seller to the Buyer, including, without limitation, the acceptance of the business combination report by the Korean Fair Trade Commission under the Monopoly Regulation and Fair Trade Act, having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals, remaining in full force and effect.

4.1.4 the Seller having certified in writing the matters mentioned under Clause 4.1.3.

4.1.5 the consent or waiver from Pantech & Curitel (in such form and substance satisfactory to the Buyer) in connection with the transfer of the Sale Shares under this Agreement pursuant to the agreement between the Company and Pantech & Curitel dated 16^th June, 2006 shall have been obtained and be remained in full force and effect.

4.1.6 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction of the Seller and Buyer.

4.2 The obligations of the Seller under this Agreement are subject to the Seller’s satisfaction that the following conditions have been duly fulfilled:

4.2.1 the receipt of any requisite corporate approvals by the Seller, including approval by the board of directors of the Seller;

4.2.2	(a)	there having occurred no Material Adverse Change in the period between the date of this Agreement and Closing;
	(b)	nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a material breach of the Buyer Warranties;
	(c)	no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the consummation of the transactions contemplated by this Agreement;

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(d)

the Buyer having performed or complied with, in all material respects, all covenants, obligations and agreements contemplated by this Agreement to be performed or complied with by it at or prior to Closing;

(e)

all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary for or in respect of the proposed sale of the Sale Shares by the Seller to the Buyer, including, without limitation, the acceptance of the business combination report by the Korean Fair Trade Commission under the Monopoly Regulation and Fair Trade Act, having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals, remaining in full force and effect;

4.2.3 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction of the Seller and Buyer.

4.3 Responsibility for Satisfaction

4.3.1 The Seller undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.1.3 to 4.1.5 as soon as reasonably practicable after the date of this Agreement and before Closing, and shall promptly give notice to the Buyer upon satisfaction of the same.

4.3.2 The Buyer undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.2.2 (b) and (d) as soon as reasonably practicable after the date of this Agreement and before Closing, and shall promptly give notice to the Seller upon satisfaction of the same.

4.3.3 Without prejudice to the foregoing, it is agreed that all requests and enquiries from any government, governmental, supranational or trade agency, court or regulatory body shall be dealt with by the Seller and the Buyer in consultation with each other and each of the Seller and the Buyer shall upon mutual agreement, promptly co-operate with and provide all necessary information and assistance reasonably required by such government, agency, court or body upon being requested to do so by the other.

4.3.4 The Buyer may at any time by notice in writing to the Seller, waive any of the conditions in Clause 4.1, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.1 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Buyer.

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4.3.5 The Seller may at any time by notice in writing to the Buyer waive any of the conditions in Clause 4.2, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.2 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Seller.

4.3.6 Should the Buyer or the Seller become aware of anything which will or may prevent any of the conditions set out in Clause 4.1 or Clause 4.2 from being satisfied by the time and date required by Clause 4.4.1 and Clause 4.4.2 the relevant party shall forthwith notify the other in writing.

4.4 Non-Satisfaction

4.4.1 If any of the conditions in Clause 4.1 is not satisfied or waived by the Buyer on or before 11 September, 2007 or such other date as the parties may agree or the Buyer becomes aware of any fact that would prevent any of the conditions in Clause 4.1 from being satisfied, the Buyer may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.1).

4.4.2 If any of the conditions in Clause 4.2 is not satisfied or waived by the Seller on or before 11 September, 2007 or such other date as the parties may agree or the Seller becomes aware of any fact that would prevent any of the conditions in Clause 4.2 from being satisfied, the Seller may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.2).

4.4.3 In the event that the Buyer or Seller shall terminate this Agreement in accordance with Clause 4.4.1 or Clause 4.4.2 (as the case may be), and without limiting the Buyer’s or Seller’s right to claim, all obligations of the Buyer and Seller under this Agreement shall, unless otherwise expressly stated, cease, but, for the avoidance of doubt, all rights and liabilities of the parties which have accrued before such termination shall continue to exist.

5. ACTION PENDING CLOSING

5.1 Seller’s General Obligations

The Seller undertakes to procure that from the date of this Agreement until Closing:

5.1.1 the Company will carry on business only in the ordinary and usual course and in the manner and scope carried on as at the date of this Agreement save insofar as agreed in writing by the Buyer;

5.1.2 the Buyer and its agents will, upon reasonable notice, be allowed access to the clients, employees and premises of the Company and shall also be allowed

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access to, and to take copies of, the books and records of the Company including, without limitation, the statutory books, minute books, leases, licences, contracts, details of receivables, Intellectual Property, tax records, supplier lists and customer lists in the possession or control of the Company, subject always to the applicable protections of confidentiality set forth in Clause 14 hereof;

5.1.3 such representatives and advisers as the Buyer requests may be designated to work with the Seller with regard to the management and operations of the Company. The Seller will consult with such representatives and advisers with respect to any action which may materially affect the business of the Company taken as a whole. The Seller will furnish to such representatives and advisers such information as it may reasonably request for this purpose;

5.1.4 the Company shall take all commercially reasonable efforts consistent with past practices to maintain the present status of its property and assets and the validity of its Intellectual Property;

5.1.5 save only as may be necessary to give effect to this Agreement, neither the Seller nor the Company shall commit, voluntarily permit or procure any act or omission which would render any of the Warranties untrue, inaccurate or misleading in any respect upon Closing; and

5.1.6 the Company shall use its commercially reasonable efforts to promptly provide to the Buyer monthly management accounts in the usual form generated by the Company.

5.2 Restrictions on the Company

Without prejudice to the generality of Clause 5.1, the Seller shall procure that between the date of this Agreement and Closing and except as may be expressly provided or contemplated in this Agreement or with the prior written consent of the Buyer (which consent shall not be unreasonably withheld), the Company will not:

5.2.1 incur or enter into any agreement or commitment involving any capital expenditure in excess of US$65,000;

5.2.2 enter into or amend any contract or commitment: (i) which is not capable of being terminated without compensation at any time with one months’ notice or less; or (ii) which is not in the ordinary and usual course of business and on arms’ length terms or (iii) which involves or may involve total revenue or total expenditure in excess of US$65,000;

5.2.3 enter into any leasing, hire purchase or other agreement or arrangement for payment on deferred terms otherwise than in the ordinary course of business;

5.2.4 incur any indebtedness otherwise than in the ordinary and usual course of business;

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5.2.5 save as required by law, make any amendment to the terms and conditions of employment or engagement (including, without limitation, remuneration, pension entitlements and other benefits) of any employee, consultants or interns, provide or agree to provide any gratuitous payment or benefit to any such person or any of their dependants, or dismiss or terminate (except with good cause) the employment of any employee or engage or appoint any additional employee;

5.2.6 acquire or agree to acquire or sell, transfer, lease, assign or dispose of or agree to sell, transfer, lease, assign or dispose of any material asset or material stocks or enter into or amend any material contract or arrangement;

5.2.7 sell, convey, lease, assign or otherwise transfer or dispose of any interest in any debts or factor any notes or amounts receivable except in the ordinary course of business;

5.2.8 delay making payment to any trade creditors generally beyond the date on which payment of the relevant trade debt should be paid in accordance with credit periods authorised by the relevant creditors (or (if different) the period extended prior to the date of this Agreement by creditors in which to make payment);

5.2.9 amend, to any material extent, any of the terms on which goods, facilities or services are supplied, except where required to do so in order to comply with any applicable legal or regulatory requirement;

5.2.10 enter into any guarantee, indemnity or other agreement to secure any obligation of a third party or create or agree to create any Encumbrance over any of its assets or undertaking;

5.2.11 amend or discontinue any insurance contract, fail to notify any insurance claim in accordance with the provisions of the relevant policy or settle any such claim below the amount claimed;

5.2.12 allot, issue, redeem, vary or repurchase or agree to allot, issue, redeem, vary or repurchase any share or equity or loan capital (or option or right to subscribe for the same);

5.2.13 acquire or agree to acquire any share, shares, assets or other interest in any company, partnership or other venture or incorporate any subsidiary;

5.2.14 declare, make or pay any dividend or other distribution to shareholders;

5.2.15 make any change to its accounting practices or policies or accounting reference date or amend its memorandum or articles of association (or equivalent constitutional documents);

5.2.16 make any substantial change in the nature or organisation of its business;

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5.2.17 discontinue or cease to operate all or a material part of its business or resolve to be wound up;

5.2.18 change its residence for Taxation purposes;

5.2.19 pass any resolution (other than resolutions of a routine nature) in general meeting or by way of written resolutions of the shareholder;

5.2.20 grant a licence of or assign or otherwise dispose of any Intellectual Property owned by the Company to a third party;

5.2.21 commence, compromise or discontinue any legal or arbitration proceedings (other than in respect of the collection of debts which are not material in the context of its business in the ordinary and usual course of business); or

5.2.22 acquire or agree to acquire or dispose of or agree to dispose of any freehold or leasehold interest in land.

5.3 Exercise of Buyer’s Rights

It is hereby acknowledged (for the avoidance of doubt) that none of the provisions of this Clause 5 or the exercise or failure to exercise by the Buyer of its rights thereunder, shall give rise to any liability on the part of the Buyer or any of its employees, consultants or representatives or any person connected with it (except to the extent any losses or damages to the Seller or the Company are caused by the Buyer’s gross negligence or wilful misconduct in respect of the exercise of the Buyer’s rights under Clause 5.1.2) .

6. CLOSING

6.1 Closing shall take place at the offices of Jones Day at 29^th Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong or such other place as the parties may agree, on the Closing Date.

6.2 On the Closing Date:

6.2.1 the Seller shall deliver or cause to be delivered to the Buyer:

(a) duly executed instruments of transfer, including deed of share transfer, in respect of the Sale Shares in favour of the Buyer or its nominee together with definitive share certificates thereof (if issued) in the names of the relevant transferor;

(b) any waivers, consents or other documents (if applicable) required to vest in the Buyer or its nominee the full legal and beneficial ownership of the Sale Shares and enable the Buyer to procure them to be registered in the name of the Buyer or its nominee;

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(c) the certified copy of the corporate registry extract, corporate seal and corporate seal registration certificate and card, minute book, statutory register and share certificate books and register of shareholders of the Company;

(d) the title deeds, leases and documents (if applicable) relating to the Properties owned or occupied by the Company;

(e) the resignation of the auditors (if any) of the Company confirming that there are no circumstances connected with their resignation which should be brought to the attention of the members or creditors of the Company and that no fees are due to them;

(f) the resignation of all the directors and the statutory auditors of the Company, executed as a deed, and confirming that they have no claim against the Company whether for loss of office or otherwise;

(g) an acknowledgement from the Seller to the Buyer and the Company, executed as a deed, to the effect that there is no outstanding indebtedness or other liability owing at the Closing Date from the Company to the Seller or the Seller’s Affiliate;

(h) certificate in the form set out in Exhibit D1 duly executed by the Seller confirming the Warranties;

(i) the service agreement in Agreed Form duly executed by the Company and Lee Sun Young, Kim Jeong-Won, Kim Jung, Kim Hyun Jung, Seo Jong-Chul, Kim Jong-Su, Lee Sang-Han, Ahn Ji Suk;

(j) legal opinion from BVI counsel and Cayman counsel in the Agreed Form and dated as of the Closing Date;

(k) reasonably current Certificates of Good Standing and Incumbency of the Seller and CDC;

(l) signed copy of the resolutions duly passed by the directors of the Company approving the matters referred to in Clause 6.2.2;

(m) signed copy of the resolutions duly passed by the directors of each of the Seller and CDC approving this Agreement, the transactions contemplated hereunder, and the execution, delivery and performance of this Agreement by the Seller and CDC; and

(n) all other documents, records, correspondence, files and other papers in respect of the Company which are in the Seller’s possession or control.

6.2.2 The Seller shall procure that the following business is transacted at the meetings of the directors of the Company:

(a) the directors of the Company shall approve the transfers of the Sale Shares and the registration and entry of the transferee in the register of members of the Company;

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(b) all existing mandates for the operation of the bank accounts of the Company shall be revoked and new mandates issued giving authority to those persons nominated by the Buyer;

(c) the Service Agreement and such other documents as may be required to be executed by the Company hereunder shall be approved and executed by the Company;

(d) the persons nominated by the Buyer for appointment as directors and secretary of the Company shall be so appointed; and

(e) the External Auditors shall be appointed as auditors of the Company.

6.2.3 The Seller shall procure and undertake that as at the Closing Date:

(a) there are no sums owing to the Seller or the Seller’s Affiliate by the Company, whether or not such sums are due for repayment;

(b) the Company is released from any guarantee, indemnity, bond, letter of comfort or Encumbrance or other similar obligation given or incurred by it which relates in whole or in part to debts or other liabilities or obligations, whether actual or contingent, of any person other than the Company and prior to such repayment or release, the Seller shall keep the Company fully indemnified against any failure to make any such repayment or any liability arising under any such guarantee, indemnity, bond, letter of comfort or Encumbrance.

6.2.4 Upon compliance by the Seller with the provisions of Clauses 6.2.1 to 6.2.3 the Buyer shall, at Closing, pay the Purchase Price to the Seller in accordance with Clauses 3.2 and 3.3.

6.2.5 The Buyer shall provide Seller with a certificate in the form set out in Exhibit D2 hereto duly executed by the Buyer confirming the Buyer Warranties contained in Clause 12 hereof.

6.2.6 It is a condition to Closing that (and the Buyer and Seller shall have no obligation to complete the sale and purchase of the Sale Shares hereunder unless) the transactions contemplated under all the Acquisition Agreements shall be completed simultaneously and successfully with the completion of the sale and purchase of the Sale Shares hereunder.

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6.3 Closing Accounts

6.3.1 Within a period of two (2) months after Closing, the Buyer shall at its sole cost and expense prepare the Closing Accounts and provide the Seller with a written statement of its calculation (the “Calculation Statement”) of the Closing Net Asset Value according to the Closing Accounts. The Seller shall render reasonable assistance to the Buyer and provide such information as the Buyer may reasonably require in order to enable the Buyer to prepare the Closing Accounts at the Buyer’s sole cost and expense.

6.3.2 Upon receiving a Calculation Statement, the Seller shall within thirty (30) days either (i) notify the Buyer in writing that they agree with the Calculation Statement or (ii) notify the Buyer in writing that it does not agree with the Calculation Statement and stating the grounds of its disagreement and its own calculation of the Closing Net Asset Value together with a copy of any financial information used in making such calculation (the “Dispute Notice”). The Buyer shall give reasonable assistance to the Seller and its representatives and agents including without limitation access to the Company’s books and records necessary for the Seller to evaluate the Calculation Statement. If the Buyer does not receive any Dispute Notice from the Seller within such thirty (30) days period, the Seller shall be deemed to have agreed to the Calculation Statement and the Buyer’s calculation of the Closing Net Asset Value.

6.3.3 In the event a Dispute Notice is given by the Seller according to Clause 6.3.2, the Seller and the Buyer shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Seller and the Buyer are unable to reach an agreement within five (5) days after receipt of the Dispute Notice by the Buyer, either party may request an Independent Advisor to review the disputed items or amounts and compute the Closing Net Asset Value in question. In making its calculation, the Independent Advisor shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within fourteen (14) days after such request and shall be conclusive and binding on the parties. The fees, costs and expenses of the Independent Advisor shall be borne by the party whose calculation of the Closing Net Asset Value is furthest from the Independent Advisor’s calculation.

6.3.4 If the Closing Net Asset Value is less than the sum of US$1,000,000, the Seller shall forthwith pay to the Buyer the amount of the deficit. If the Closing Net Asset Value is greater than the sum of US$1,000,000, the Buyer shall forthwith pay to the Seller the amount by which the Closing Net Asset Value exceed US$1,000,000.

6.3.5 Without prejudice to Clause 6.2.3, the amount by which the account receivables from related party exceed the liabilities owing to related party shall not be included as assets of the Company for calculation of the Net Asset Value.

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6.3.6 The Buyer shall procure the Company to use commercially reasonable efforts, which efforts shall be at least equal to the efforts the Company used to collect its current accounts receivables, to collect the accounts receivables included in the calculation of the Closing Net Asset Value. Provided that the Buyer fulfills its obligations set forth in the preceding sentence, the Seller shall reimburse to the Buyer 85% of the amount of the account receivables included in the calculation of the Closing Net Asset Value which is not fully paid by the relevant debtor within a period of six (6) months after Closing (“Outstanding Accounts Receivables”). Upon the Seller’s reimbursement of the Outstanding Accounts Receivables to the Buyer, the Buyer shall procure the Company to assign the right for collection of the Outstanding Account Receivables from the Company to the Seller. The Company upon Seller’s request, shall use commercially reasonable efforts to assist Seller in collecting any Outstanding Accounts Receivables assigned to the Seller pursuant to the foregoing sentence for a period of six (6) months after the assignment of such Outstanding Accounts Receivables to the Seller.

6.3.7 After Closing, the Buyer shall procure the Company to assign the right for collection of the account receivables and unbilled work-in-progress due from Pantech & Curitel (“P&C Receivables”) to the Seller. The Buyer shall reimburse the Seller any amount of P&C Receivables paid by Pantech & Curitel after Closing within ten (10) Business Days of receipt of the P&C Receivables. For a period of one (1) year after Closing, the Company upon the Seller’s request, shall use commercially reasonable efforts to assist Seller in collecting the P&C Receivables.

7. WARRANTIES BY SELLER

7.1 The Seller hereby warrants and represents to the Buyer that the matters set forth in Clauses 7.1.1 to 7.1.89 (“Warranties”) are true, accurate and correct (a) as of the date of this Agreement and (b) as of the Closing Date.

GENERAL WARRANTIES

The Accounts

7.1.1 General

the Accounts and Management Accounts:

(a) have been prepared in accordance with South Korea GAAP;

(b) are accurate and show a true and fair view of the affairs of the Company as at the specified accounting date and of its results for the accounting reference period ended on that date;

(c) comply with the requirements of all relevant statutes;

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(d) are prepared on consistent bases and policies of accounting; and

(e) are not affected by any unusual or non-recurring items except as may be referenced in the notes associated therewith.

7.1.2 Provision for liabilities, capital commitments and bad debts

the Accounts and Management Accounts make adequate provisions or reserves for, or disclose, all liabilities (including contingent, deferred and disputed liabilities) and whether liquidated or unliquidated and all capital commitments of the Company as at the specified accounting date, indicate clearly which of those liabilities are not usually provided for or reserved, and make adequate provision or reserve for all bad and doubtful debts. All accounts and notes receivables of the Company are, individually and in the aggregate, collectible in full, net of reserves therefore. Save as Disclosed, all accounts and notes receivable of the Company represent sales actually made in the ordinary course of business or valid claims as to which full performance has been rendered by the Company. To the Seller’s knowledge, no counter claims, defences or offsetting claims with respect to the accounts or notes receivable of the Company are pending or threatened. All of the accounts and notes receivable of the Company relate solely to sales of goods or services to customers of the Company, none of whom are Affiliates of the Company or any of its Affiliates.

7.1.3 Valuation of inventory

in the Accounts and Management Accounts any slow moving inventory has been written down appropriately, all redundant or obsolete inventory has been wholly written off, and the value attributed to the remaining inventory does not exceed the lower of cost or net realisable value at the specified accounting date.

7.1.4 Valuation and depreciation as in previous accounts

the method of valuing inventory and work in progress adopted in the Accounts and Management Accounts and the basis of depreciation adopted in respect of fixed assets are the same as the corresponding accounts for the preceding years (if any).

7.1.5 Rate of depreciation

the rate of depreciation adopted in the Accounts and Management Accounts is sufficient for the value of each of the fixed assets of the Company to be written down to nil by the end of its useful working life.

7.1.6 Profits

the profits shown in the Accounts and Management Accounts have not been affected (except as disclosed in those accounts) by any extraordinary or exceptional event or circumstance or by any other factor rendering them unusually high or low except as may be referenced therein.

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7.1.7 Position since Accounts Date and Management Accounts Date

save as Disclosed, since the Accounts Date:

(a) no dividend or other distribution has been declared, paid or made by the Company;

(b) the business of the Company has been carried on in the ordinary course and so as to maintain it as a going concern;

(c) there has been no Material Adverse Change in the financial or trading position or prospects of the Company;

(d) there has been no reduction amounting to a Material Adverse Change in the value of the net tangible assets of the Company on the basis of the valuations adopted in the Accounts and the Management Accounts;

(e) the Company has not entered into any transaction which has given rise or shall give rise to a liability to Taxation on the Company (or would have done so or would or might do so but for the availability of any relief, allowance, deduction or credit) other than profits tax on actual income (and not chargeable gains or deemed income) of the Company arising from transactions entered into in the ordinary course of business;

(f) the business of the Company has not been affected by the loss of any important customer or source of supply or by any abnormal factor not affecting similar businesses to a similar extent and the Seller is not aware of any facts likely to give rise to any such effect whether before or after Closing;

(g) the Company has not acquired or disposed of or agreed to acquire or dispose of any business or any asset other than trading inventory in the ordinary course of business;

(h) no debtor has been released by the Company on terms that he pays less than the book value of any debt (subject to settlement discounts on the usual terms which have been Disclosed to the Buyer) and no debt has been written off or has proved to be irrecoverable to any extent;

(i) the Company has not paid any service, management or similar charges or any interest or amount in the nature of interest to any other person or incurred any liability to make such a payment other than in the ordinary course of business;

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(j) the Company has not issued or agreed to issue any share or grant any option or right to acquire or subscribe any of the shares in the Company;

(k) the Company does not have any known, material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, regardless of when asserted) arising out of transactions or events entered into prior to the date of this Agreement, or any action or inaction, or any state of facts existing, with respect to or based upon transactions or events occurring prior to the date of this Agreement, except (i) liabilities reflected in the Accounts or Management Accounts, (ii) liabilities that have arisen after the Accounts Date or Management Accounts Date in the ordinary course of business (none of which relates to breach of contract, breach of warranty, tort, infringement, legal violation or environmental liability); or (iii) as otherwise set forth in the Disclosure Letter; and

(l) The Disclosure Letter sets forth a true, accurate and complete list of the name and address of each bank with which the Company has an account or safe deposit box and the name of each person authorized to draw thereon or have access thereto.

Assets

7.1.8 Title to assets

save as Disclosed, the assets included in the Accounts and Management Accounts or acquired by the Company since the Accounts Date and Management Accounts Date (other than trading inventory disposed of since that date in the ordinary course of business) and all other assets used or employed by the Company are the property of the Company free from any mortgage, charge, lien, bill of sale or other Encumbrance and are not the subject of any leasing, hiring or hire-purchase agreement or agreement for payment on deferred terms or assignment or factoring or other similar agreement or any interests of the third parties, and all such assets are in the possession or under the control of the Company.

7.1.9 Condition of office equipment

the office equipment, computer systems and vehicles used by the Company are in good repair, regularly maintained and fully serviceable and comply in all material respects with any applicable legal requirement or restriction, and the vehicles are duly licensed and suitable for the purposes for which they are used.

7.1.10 Control of records and information

save as Disclosed, all records and information belonging to the Company (whether or not held in written form) are in its exclusive possession, under its direct control and subject to unrestricted access by it.

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7.1.11 Acquisition at arm’s length

the Company has not acquired any asset on terms which were not at arm’s-length basis.

7.1.12 Realisation of inventory

save as Disclosed, the present inventory of the Company shall, if disposed of within twelve months from the date of this Agreement, realise in total at least the amount at which it is included in its books.

7.1.13 Nature of debts

save as Disclosed, the Company is not owed any money other than trade debts incurred in the ordinary course of business and cash at bank.

7.1.14 Realisation of book debts

the book debts shown in the Accounts and Management Accounts have realised, or shall realise within twelve months from the date of this Agreement, their full nominal amount less any reserve for bad or doubtful debts included in the Accounts and Management Accounts; and the book debts of the Company which have arisen since the Accounts Date and Management Accounts Date shall realise within the same period.

7.1.14A Net asset value and Working Capital

the Company has a Net Asset Value of not less than US$1,000,000 on the Closing Date.

Borrowings, Grants and Loans to Directors

7.1.15 Borrowings

save as Disclosed:

(a) the Company does not have outstanding any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:

(i) monies borrowed or raised (whether from banks or its Affiliates or otherwise and including, without limitation, any revolving lines of credit or term loans);

(ii) any recourse to a company selling or discounting receivables in respect of receivables sold or discounted;

(iii) moneys raised under any bond, note, stock, or other security;

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(iv) moneys raised under or in respect of acceptance credit and documentary credit facilities;

(v) the acquisition cost of assets or services to the extent payable after the time of acquisition or possession;

(vi) rental payments under capital leases, chattel leases and hire purchase agreements; or

(vii) any guarantee, indemnity or other assurance against or arrangement intended to prevent or limit loss in respect of any obligation for the payment or repayment of money described in paragraphs (i) to (vi) above whether by the Seller, its Affiliates, shareholders, managers, officers, employees, agents, representatives or any other third party

(any such obligation being referred to under this Agreement as a “Borrowing”);

(b) save as Disclosed, the Company does not have subsisting over the whole or any part of its present or future revenues or assets any Encumbrance, mortgage, charge, pledge, lien or other security interest or any other agreement or arrangement having a similar effect.

(c) save as Disclosed, no Borrowing of the Company has become or is now due and payable, or capable of being declared due and payable, before its normal or originally stated maturity and no demand or other notice requiring the payment or repayment of money before its normal or originally stated maturity has been received by the Company.

(d) no event or circumstance has occurred, or may occur with the giving of notice or lapse of time determination of materiality or satisfaction of any other condition, such as to entitle any person to require the payment or repayment of any Borrowing before its normal or originally stated maturity or which is or shall be such as to terminate, cancel or render incapable of exercise any entitlement to draw money or otherwise exercise the rights of the Company under an agreement relating to Borrowing.

7.1.16 Grants and subsidies

the Company has not done or agreed to do anything as a result of which:

(a) any investment grant or other grant or any subsidy received by the Company is or may be liable to be refunded wholly or partly; or

(b) any application made by the Company for such a grant or subsidy shall or may be refused wholly or partly and neither the signature nor the performance of the Agreement shall have any such result.

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7.1.17 Loans to directors and connected persons

there is not outstanding:

(a) any loan made by the Company to, or debt owing to the Company by, the Seller or any director or officer or Affiliate of the Company or any person connected with any of them;

(b) any agreement or arrangement to which the Company is a party and in which the Seller or any director or officer or Affiliate of the Company or any person connected with any of them is interested;

(c) any agreement or arrangement between the Company and any company of which it is a subsidiary or another subsidiary of any such company (including, but not limited to, any such agreement or arrangement under which the Company is, or may in the future become, liable to pay any service, management or similar charge or to make any payment of interest or in the nature of interest).

Environment

7.1.18 the Company has complied in all material respects with Environmental Law and:

(a) there are no circumstances in relation to the Company which could reasonably be expected to give rise to, or to the Seller’s knowledge have given rise to any civil, criminal, administrative or other action, claim, suit, complaint, proceeding, investigation, decontamination, remediation or expenditure by any person or competent authority under Environmental Law in relation to any properties now owned or formerly owned by the Company;

(b) the Company has obtained and there are in full force and effect and the Company has at all times complied in all material respects with all environmental Permits necessary for the business of the Company, there are no circumstances which could reasonably be expected to lead to the revocation, cancellation, suspension, modification, variation or alteration of such environmental Permits and there are no circumstances which necessitate any works, remediation or expenditure (other than routine maintenance) in order to continue to comply with the environmental Permits;

(c) at no time has the Company received any notice alleging a breach of the terms of an environmental Permit or any other breach of Environmental Law;

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(d) all assessments, reviews, reports, returns, information and audits required by Environmental Law or any environmental Permit have been properly carried out and submitted to the appropriate authorities and their recommendations and requirements implemented where required by Environmental Law;

(e) to the Seller’s knowledge, there are no further environmental Permits to be obtained in connection with the current business of the Company which require works, remediation or additional expenditure to ensure compliance with such environmental Permits.

Intellectual Property Rights

7.1.19 Intellectual Property

(a) the Intellectual Property comprises all of the intellectual property rights necessary for the operation of the Company’s business as conducted by the Company prior to the date of this Agreement and the Closing Date;

(aa) Save as Disclosed, there is no other:

(i) patented or registered Intellectual Property and pending patent applications or other applications for registrations of Intellectual Property owned or filed by the Company;

(ii) trade names and unregistered trademarks, service marks and domain names owned or used by the Company;

(iii) copyrights and copyrightable works owned or used by the Company; and

(iv) licenses or similar agreements for the Intellectual Property to which the Company is a party, either as licensee or licensor;

(b) save as Disclosed, the Company owns and possesses all right, title and interest in and to, or has a valid and enforceable license to use, the Intellectual Property necessary for the operation of its business as conducted by it prior to the date of this Agreement and the Closing Date free and clear of all liens, licenses, security interests, encumbrances and other restrictions;

(c) to the Seller’s knowledge no claim by any third party contesting the validity, enforceability, use or ownership of any of the Intellectual Property has been made, is currently outstanding or is threatened and, to the Seller’s knowledge there are no grounds for the same;

(d) to the Seller’s knowledge, no loss or expiration of any part of the Intellectual Property is pending or reasonably foreseeable;

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(e) the Company has not received any notices of, and is not aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to the Intellectual Property (including, without limitation, any demand or request that the Company license any rights from a third party);

(f) save as Disclosed, the Company has not infringed, misappropriated or otherwise conflicted with any intellectual property rights or other rights of any third parties and the Company is not aware of any infringement, misappropriation or conflict which will occur as a result of the continued operation of its business as conducted by the Company prior to the date of this Agreement and the Closing Date; and

(g) the transactions contemplated by this Agreement will have no effect on the Company’s right, title and interest in and to the Intellectual Property. The Company has taken all necessary action, in its reasonable business judgment, to maintain and protect the Intellectual Property so as to not affect the validity or enforceability of the Intellectual Property.

7.1.20 Web site

save as Disclosed, with respect to the Company’s Web site, the Company has taken all commercially reasonable steps in connection with the creation and operation of the Web site, including, without limitation, the following:

(a) the Company (i) has obtained the following Universal Resource Locators (“URLs”): igk.co.kr, ionglobal.co.kr and ion-global.co.kr; (ii) has maintained adequate computer resources and system redundancies to ensure that no service outages will occur due to insufficient data-storage, memory, server or other related reasons at operations levels consistent with the Company’s business as currently conducted; and (iii) has in place a plan to permit and accommodate anticipated increases in traffic levels (e.g., additional servers, hardware, software and/or personnel); and

(b) to the Seller’s knowledge, the Company has complied in all material respects with all relevant laws of The Republic of Korea and current privacy standards regarding data collection of site visitors and customers, including without limitation, obtaining certification from eTrust and BBBOnline as applicable (if global—then must also be in compliance with the European Privacy Directive and register accordingly, as well as other countries’ privacy policies).

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Commercial Arrangements and Conduct

7.1.21 Material contracts

save as Disclosed, in relation to the Company, there is not outstanding:

(a) any contract of guarantee, indemnity or suretyship or any contract to secure any obligation of any person;

(b) any agreement or arrangement between the Company and a major distributor, supplier or customer of the Company which involves total revenue or total expenditure in excess of US$65,000;

(c) any joint venture, consortium or partnership agreement or arrangement to which the Company is a party;

(d) any sale or purchase option or similar agreement or arrangement affecting any assets owned or used by the Company or by which it is bound;

(e) any liability, obligation or commitment of any kind (other than those listed in (a) to (d) above) on the part of the Company (including a capital commitment) which:

(i) is incapable of complete performance within three months from Closing Date; or

(ii) has not been incurred in the ordinary course of business; or

(iii) is, or is likely to be, of major significance to the Company; or

(iv) exceeds, or is likely to exceed, in aggregate a sum of US$65,000.

7.1.22 Effect of Agreement on other agreements

save as Disclosed, there is no agreement or arrangement involving a total revenue or total expenditure in excess of US$65,000 between the Company and any other person which shall or may be terminated as a result of this Agreement or Closing or which shall be affected by it or which includes any provision with respect to a change in the control, management or shareholders of the Company.

7.1.23 Commercial position

(a) the list of the top 20 customers of the Company (as determined by the aggregate amounts invoiced by the Company to such customers during 2006) and the total amount of net sales to each of them during the last completed financial year are set out in the Disclosure Letter;

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(b) so far as the Seller is aware:

(i) there is no customer or supplier of the Company who has ceased purchasing or ordering from or supplying to it or who to the Seller’s knowledge is likely after the date of this Agreement or Closing to reduce substantially or terminate purchases or orders from or supplies to it;

(ii) there are no special circumstances which might lead to the supply by the Company or to it of any goods or services, being restricted or hindered.

7.1.24 Restrictive agreements and anti-competitive behaviour

(a) the Company does not infringe and has not infringed any legislation applicable in any jurisdiction relating to anti-competitive agreements or practices or behaviour or any similar matter;

(b) the Seller is not, in relation to the Company or business of the Company, bound by or party to any order or decision made or undertakings (binding or not) given to or any court or tribunal of competent jurisdiction or any similar authority in any jurisdiction, under or in any law, regulation or administrative process relating to unfair competition, anti-trust, monopolies, mergers or other similar matters;

(c) except as contemplated by this Agreement and the related agreements, the Seller is not, in relation to the Company or business of the Company, within the last two years been party to any merger, acquisition, reorganization or other similar arrangement which was capable of review by any anti-trust or similar authorities in any jurisdiction.

7.1.25 Notice of official action

the Company is not aware of any process, notice or communication, formal or informal, by or on behalf of any authority of any country having jurisdiction in anti-trust matters, in relation to any aspect of the business of the Company or the conduct of the Company or any agreement or arrangement to which the Company is or was, or is alleged to be or have been, a party, and so far as the Seller is aware the Company is not likely to receive any such process, notice or communication.

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Litigation, Defaults and Insurance

7.1.26 Legal proceedings

save as Disclosed, the Company is not engaged or proposing to engage in any litigation, arbitration, prosecution or other legal proceedings, and there are no claims or actions (whether criminal or civil) in progress, outstanding, pending or threatened against the Company, any of its assets or to the Seller’s knowledge, against any of its directors or officers or in respect of which the Company is liable to indemnify any party concerned.

7.1.27 Unlawful acts by Company

to the Seller’s knowledge, neither the Company nor any of its directors, or any of its Affiliates officers or employees has by any act or default committed:

(a) any criminal or unlawful act in connection with the business of the Company, other than minor road traffic offences;

(b) any breach of trust, fraud or other wilful misconduct or misappropriation or infringement of any Intellectual Property in relation to the business or affairs of the Company; or

(c) any breach of contract or statutory duty or any tortious act which could entitle any third party to terminate any contract to which the Company is a party or could lead to a claim against the Company for damages, compensation or an injunction.

7.1.28 Defaults by others

save as Disclosed, no party with whom the Company has entered into any contract is in default under it, and there are no circumstances likely to give rise to such a default.

7.1.29 Official investigations

to the Seller’s knowledge, no governmental or official investigation or inquiry concerning the Company is in progress or threatened and, so far as the Seller is aware, there are no circumstances which are likely to give rise to any such investigation or inquiry.

7.1.30 Adequacy of cover

the Company has, and at all times has had, valid insurance coverage in respect of its business and assets:

(a) against all risks (including product liability and loss of profits for a period of at least six months) normally insured against by companies carrying on the same type of business as the Company or of a similar size to the Company in The Republic of Korea;

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(b) for the full replacement value of its assets and for such amount in respect of its business as would in the circumstances be prudent for such a business; and

(c) from a well-established and reputable insurer.

7.1.31 Policies

all policies of insurance taken out in connection with the business or assets of the Company have been Disclosed to the Buyer, are written in the name of the Company and are in full force and effect; and the Company has not done or omitted to do or allowed anyone to do or not to do anything which might render any of those policies void or voidable and has complied with all conditions attached to them.

7.1.32 Claims

no claim under any policy of insurance taken out in connection with the business or assets of the Company is outstanding and, so far as the Seller is aware, there are no circumstances likely to give rise to such a claim.

Corporate Organisation and Business

7.1.33 Corporate Status

(a) the information set out in Schedule 1 are true and accurate in each and every respect and the Company has not entered into any material contracts with respect to its corporate organization otherwise than in the ordinary course of business;

(b) the Company (including any of its representative office or branch) has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation;

(c) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Company and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based;

(d) so far as the Seller is aware, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Company has been or is likely to be adversely affected;

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(e) save as Disclosed, neither the execution of this Agreement or the other documents hereunder, nor the performance by the Seller or CDC of their respective obligations hereunder or thereunder will (a) violate or conflict with the constitution or bylaws of the Seller or any applicable law, (b) violate, conflict with or result in a breach or termination of, or otherwise give any person or entity additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any note, deed, lease, instrument, security agreement, mortgage, commitment, contract, agreement, license or other instrument or oral understanding to which the Seller or any of its Affiliates is a party or by which any of the assets or the properties of the Seller are bound or (c) result in the creation or imposition of any Encumbrance with respect to, or otherwise have an adverse effect upon, any of the assets or properties of the Seller.

7.1.34 Memorandum and articles

the copies of the memorandum and articles of incorporation and other constitutional documents of the Company delivered to the Buyer are true and complete copies, and the Company has complied with all the provisions of its memorandum and articles of incorporation and constitutional documents and, in particular, has not entered into any ultra vires transaction.

7.1.35 Register of shareholders

the register of shareholders of the Company contains a complete and accurate record of the shareholders of the Company and the Company has not received any notice of any application or intended application for rectification.

7.1.36 Statutory books and registers

the statutory books and registers of the Company and all current books of account are written up to date and save as Disclosed, all such documents and other necessary records, deeds, agreements and documents relating to its affairs are in its possession or under its control.

7.1.37 Authority and compliance with applicable legislation

(a) the Company is duly organized and validly existing under the laws of The Republic of Korea and has the requisite corporate power and authority to carry on its business as now being conducted;

(b) the Company and its officers have complied in all material respects with the provisions of all applicable legislation in its place of incorporation, including the provisions as to filing of returns, particulars, resolutions and other documents with the relevant companies registry of The Republic of Korea or the other relevant authorities in its place of incorporation and the places where it carries on its business, and all

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legal requirements have been complied with in connection with the formation of the Company and with issues of its shares and other securities.

7.1.38 Issued shares and equity interest

(a) the Seller has a good and marketable title to, and is the exclusive legal and beneficial owner of all the Sale Shares, and, therefore, has an absolute right to sell and transfer such Sale Shares. All the Sale Shares will be sold and transferred to the Buyer free and clear of any Encumbrance together with all accrued beneficial rights attached to them at the date of this Agreement or that may be attached to them subsequent to the date hereof;

(b) the Sale Shares constitute the entire issued capital of the Company;

(c) all the issued shares of the Company are fully paid up and the Company has not exercised or purported to exercise or claimed any lien over any of them; and

(d) other than as set out in Schedule 1, there are not in issue any other shares, debentures, warrants, options, securities or registered capital of any description in respect of the Company.

7.1.39 Conduct in relation to capital

the Company has not at any time:

(a) repaid or redeemed or agreed to repay or redeem any shares of any class of its share capital or otherwise reduced or agreed to reduce any class of its issued share capital or purchased any of its own shares or carried out any transaction having the effect of a reduction of capital;

(b) made or resolved or agreed to make any issue of shares or other securities by way of capitalisation of profits or reserves; or

(c) given any financial assistance in contravention of all applicable legislation in its place of incorporation.

7.1.40 Conversion rights etc.

save as Disclosed, no person has the right to call for the issue of any share or loan capital of the Company by reason of any conversion rights or under any option or other agreement.

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7.1.41 Powers of attorney

other than in the ordinary course of business, there are no powers of attorney given by the Company except any given incidental to and for the purposes only of enforcement of any security.

7.1.42 Licences permissions or consents

all licences, permissions and consents required for the carrying on of the business of the Company have been obtained by it and are in full force and effect and the Seller is not aware of any circumstances indicating that any of those licences, permissions or consents is likely to be revoked or not renewed in the ordinary course.

7.1.43 Other aspects of carrying on business

the Company:

(a) does not use on its stationery or vehicles or otherwise carry on business under any name other than its corporate name; and

(b) has complied in all material respects with all requisite corporate powers, its memorandum and articles of association and legal requirements applicable to its business, whether in The Republic of Korea or in any other country or jurisdiction.

7.1.44 Existence of Subsidiaries

The Company does not have, and has never had, any Subsidiary save for the Business, the Company has not carried on any other business.

7.1.45 [intentionally left blank]

Employees

7.1.46 Disclosure of material facts

(a) the name and title of all existing employees of the Company are set out in the Disclosure Letter and all the information set out thereunder are true and accurate;

(b) all material facts and matters relating to the employment of all employees of the Company (including but not limited to their respective salaries, ages, length of service, notice periods, terms and conditions of employment, employment or benefits policies, share incentive schemes, share option schemes or profit-share schemes and entitlements under these schemes, all rights, and any other agreement or arrangement relating to the employment of the employees of the Company) have been provided to the Buyer;

35

(c) all facts and matters relating to all collective agreements, arrangements or other understandings with any trade union, staff association or other body representing the employees of the Company have been Disclosed to the Buyer.

7.1.47 Compliance with requirements

the Company has in relation to each of its employees and to each of its former employees:

(a) complied in all material respects with all legislation, regulations and codes of practice or employment rules relevant to its relations with the employee and with any recognised trade union representing him and all collective agreements from time to time in force relating to such relations or the conditions of service of the employee and has maintained adequate records regarding the service of the employee;

(b) discharged fully its obligations to pay or deduct, if applicable, all salaries, withholding wages, severance pay, commissions, bonuses, overtime pay, holiday pay, sick pay, accrued entitlement under incentive schemes and national insurance contributions and other benefits of or connected with employment;

(c) without prejudice to Clause 7.1.47(a) above, complied in all material respects with all its obligations under statute and otherwise concerning the health and safety at work of each of the employees and has not incurred any liability to any employee in respect of any accident or injury which is not fully covered by insurance.

7.1.48 Agreements

save as Disclosed, the Company has not entered into:

(a) any agreement or arrangement to make any payments (other than emoluments) to or on behalf of any of its directors or employees;

(b) any contract of service with any employee which is not terminable by the Company by one month’s notice or less without payment of compensation (except as provided by statute);

(c) any agreement or arrangement for the provision of services in return for remuneration;

(d) any agreement imposing an obligation on the Company to increase the rates of remuneration of, or to make any bonus or incentive payments or any benefits in kind or any payments under a profit-sharing scheme to or on behalf of, any of its employees at any future date;

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(e) any negotiation for a change in the emoluments or other terms of engagement of any grade of any of the Company’s employees and no change, negotiation or request for such a change is due or expected within 6 months from the date of this Agreement or Closing;

(f) any agreement or arrangement for the provision of compensation on the termination of employment of any employee of the Company beyond the minimum required by law.

7.1.49 Disputes

(a) to the Seller’s knowledge, there are no subsisting disputes between the Company and its employees or former employees and there are no present circumstances which are likely to give rise to any such dispute;

(b) to the Seller’s knowledge, there are no complaints pending or threatened against the Company of whatsoever nature in relation to any of its employees or former employees and there is no industrial action or dispute threatened or existing or anticipated in respect of or concerning any of the Company’s employees or former employees;

(c) no employee or former employee has any right to ownership of any Intellectual Property in any invention or improvement made or discovered by him in the course of employment with the Company or otherwise any compensation or payment in respect of or right to use any such invention or improvement;

(d) to the Seller’s knowledge, there are no enquiries or investigations existing, pending or threatened affecting the Company by any regulatory body or authority concerning any employee;

(e) save as Disclosed, no employee has given notice of termination of his contract of employment or is under notice of dismissal;

(f) the Company has not offered any contract of employment to any person, which offer remains outstanding; and

(g) save as Disclosed, there is no person employed or previously employed by the Company who is on maternity leave or absent on grounds of disability or illness and have a statutory or contractual right to return to work for the Company.

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Miscellaneous

7.1.50 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Company and no petition has been presented and no meeting has been convened for the purpose of winding up the Company;

(b) no receiver has been appointed in respect of the Company;

(c) the Company is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Company has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside The Republic of Korea; and

(e) no unsatisfied judgment is outstanding against the Company.

7.1.51 Consents

all consents, permissions, approvals and agreements of third parties which are necessary for the Seller or the Company to obtain in order for the Seller to enter into and perform this Agreement in accordance with its terms have been unconditionally obtained in writing and have been Disclosed to the Buyer.

7.1.52 Material information

all material information relating to the Company which is known or would on reasonable enquiry be known to the Seller and which should be known by a reasonable Buyer for value of the Sale Shares has been Disclosed or provided to the Buyer.

7.1.53 Brokers and Finders

No person or entity acting on behalf or under the authority of the Seller is or will be entitled to any broker’s, finder’s or similar fee or commission in connection with the transactions contemplated hereby.

7.1.54 Recitals and disclosures

the recitals, Exhibits and Schedules to the Agreement and all information and documents relating to the Company supplied by the Seller or the Company or any agent of any of them to the Buyer, its solicitors, accountants or other agents or advisers during or with a view to the negotiations leading up to the Agreement, are true and accurate in all respects, and there is no fact not Disclosed which would render any such information or document inaccurate or

38

misleading or which, if Disclosed, might reasonably affect the willingness of the Buyer to purchase the Sale Shares for the consideration or otherwise on the terms specified in the Agreement. All budgets and forecasts provided to the Buyer have been prepared using reasonable and customary assumptions. Neither the Seller nor CDC has withheld from the Buyer any material facts relating to the assets, properties, liabilities, business operations, financial condition, results of operations or prospects of the Company. Neither this Agreement (including the Exhibits, Schedules, certificates and other documents delivered hereto) nor any other agreement, document, certificate or written statement furnished to the Buyer by or on behalf of the Seller in connection with this Agreement, the other documents or the transactions contemplated hereunder or thereunder contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.

Authority of the Seller and CDC

7.1.55 each of the Seller and CDC has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Seller and CDC, in accordance with its terms;

7.1.56 the execution and delivery of, and the performance by each of the Seller and CDC of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Seller or CDC is a party or by which it is bound;

7.1.57 neither the Seller nor any of its respective agents or advisers is aware of any fact or matter which would or may constitute a breach of any of the Warranties and which failure to disclose by such agents or advisers is deemed fraudulent.

Others

7.1.58 [intentionally left blank]

TAX WARRANTIES

Accounts

7.1.59 save as Disclosed, the Company has no liability in respect of Taxation (whether actual or contingent) or any liability for interest, penalties or charges imposed in relation to any Taxation arising in any part of the world that is not adequately Disclosed or provided for in full in the Accounts and Management Accounts.

7.1.60 the amount of the provision for deferred Taxation contained in the Accounts and Management Accounts, if any, was, at the date the Accounts and Management Accounts were prepared in accordance with South Korea GAAP.

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Events since the Accounts Date

since the Accounts Date:

7.1.61 the Company has not been involved in any transaction outside the ordinary course of business which has given or may give rise to a liability to Taxation on the Company (or would have given or might give rise to such a liability but for the availability of any relief, allowance, deduction or credit).

7.1.62 no disposal has taken place or other event occurred which will or may have the effect of crystallising a liability to Taxation which should have been included in the provision for deferred Taxation contained in the Accounts and Management Accounts if such a disposal or other event had been planned or predicted at the date on which the Accounts and Management Accounts were drawn up.

7.1.63 no payment has been made by the Company which will not be deductible for profits tax purposes either in computing the profits of the Company or in computing the profits tax chargeable on the Company.

Returns, Disputes, Records, Claims, Clearances

7.1.64 save as Disclosed, the Company has within the time limits prescribed by the relevant Tax Legislation duly paid all Tax (including provisional tax), made all returns, given all notices, supplied all other information required to be supplied to the relevant Tax Authority (including any governmental authority of a foreign jurisdiction) and all such information was and remains complete and accurate in all respects and all such returns and notices were and remain complete and accurate in all respects and were made on a proper basis and do not, nor, are likely to, reveal any transactions which may be the subject of any dispute with the appropriate Tax Authorities and the Company is not and has not in the last three years been the subject of a Tax Authority investigation or a field audit or other dispute regarding Tax or duty recoverable from the Company or regarding the availability of any relief from Tax or duty to the Company and there are no facts which are likely to cause such an investigation or audit to be instituted or such a dispute to arise and all returns made by the Company are agreed with the appropriate Tax Authority.

7.1.65 save as Disclosed, neither the Company nor any director or officer of the Company (in his capacity as such) has paid or become liable to pay, and there are no circumstances by reason of which it is or they are likely to become liable to pay, any penalty, fine, surcharge or interest whether charged by virtue of the provisions of the relevant Tax Legislation or otherwise.

7.1.66 the Company has duly submitted all claims and disclaimers which have been assumed to have been made for the purpose of the Accounts and Management Accounts.

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7.1.67 all clearances obtained by the Company have been properly obtained and all information supplied to the appropriate Tax Authority in connection with such clearances was complete and accurate and any transaction for which such clearance was obtained has been carried out only in accordance with the terms of the clearance given therefor and the application on which the clearance was based and so as to satisfy any conditions attached thereto.

7.1.68 all transactions effected by any member of the Company in respect of which any consent or clearance from the relevant Tax Authorities or other government authority was required or sought have been fully Disclosed to the Buyer.

7.1.69 all material and/or unusual arrangements, agreements or undertakings, between the Company and any relevant Tax Authorities regarding or affecting the Taxation treatment of the Company have been fully Disclosed to the Buyer.

7.1.70 all Tax benefits available to the Company, Tax losses available for carry forward by the Company or any other special Tax treatment of the Company have been fully Disclosed to the Buyer in the Disclosure Letter.

Revenue Outgoings

7.1.71 all sums payable under any obligation incurred by the Company prior to Closing and which will continue to bind the Company after Closing have been and will continue to be deductible for profits tax purposes, either in computing the profits of the Company as the case may be or in computing the profits tax chargeable on the Company and such sums payable by the Company shall include, without limitation, all remuneration and other sums (including any payments made directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination of the holding of any office or employment) paid or payable and all benefits provided or agreed to be provided to employees or officers of the Company and all interest, rent, royalties, annuities and other annual payments paid or payable by the Company under any loan agreement, lease, contract, covenant or other commitment or arrangement.

Deductions or Withholdings

7.1.72 the Company has duly complied with all requirements to deduct or withhold Taxation from any payments it has made and has accounted in full to the appropriate Tax Authorities for all amounts so deducted or withheld.

Trading Assets

7.1.73 no liability to Taxation would be incurred (or would have been incurred but for the availability of any relief, allowance, deduction or credit) by the Company on a disposal by it of all or any of its assets for:

(a) in the case of each asset owned by it at the Accounts Date or Management Accounts Date a consideration equal to the value attributed to that asset in preparing the Accounts or the Management Accounts (as the case may be); or

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(b) in the case of any asset acquired since the Accounts Date or Management Accounts Date, a consideration equal to the consideration given for the asset.

7.1.74 the Company has not appropriated any trading stock to capital inventory or vice versa.

Capital Expenditure

7.1.75 all capital expenditures, other than expenditures on land and buildings which are not capable of qualifying for industrial buildings allowances, incurred by the Company or which may be incurred under any obligation established prior to Closing and that will continue after Closing has qualified or will qualify for depreciation allowances.

7.1.76 the Company has incurred no expenditure on the provision of machinery or plant for leasing.

Anti-Avoidance Provisions

7.1.77 the Company has neither been a party to nor otherwise involved in any transaction, scheme or arrangement:

(a) the sole or dominant purpose of which was to obtain a Tax benefit by the avoidance, postponement or reduction of a liability to Tax within the meaning of the applicable Tax Legislation.

(b) which reduces or would reduce the amount of Tax payable by any person and which is artificial or fictitious or in respect of which any disposition is not given effect to within the meaning of the applicable Tax Legislation.

Stamp Duty

7.1.78 all documents in the possession or under the control of the Company or to the production of which the Company is entitled which are necessary to establish the title of the Company to any asset and which attract either stamp duty or require to be stamped with a particular stamp denoting that no duty is chargeable or that the document has been produced to the appropriate Tax Authority, have been properly stamped within the time limit for stamping imposed by the applicable Tax Legislation.

7.1.79 the Company has made and executed, or caused to be made and executed, contract notes in respect of each sale and purchase of shares entered into by it and has caused the contract note to be duly stamped as required by the applicable Tax Legislation.

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7.1.80 to the Seller’s knowledge, the Company is not liable to pay any penalty under the applicable Tax Legislation on the stamping of any instrument chargeable with stamp duty.

Payments by the Company

7.1.81 save as Disclosed, the Company has paid all Taxation in relation to or in connection with the Seller for which it is liable to account to the Tax Authority on the due date for payment thereof and is under no liability to pay any penalty or interest in connection therewith and without prejudice to the generality of the foregoing the Company has made all deductions and withholdings in respect or on account of Taxation which it is required by any relevant legislation to make from any payments made by it in relation to or in connection with the Seller.

PROPERTY WARRANTIES

Interests

7.1.82 the Properties comprise all the land, buildings and premises owned by the Company or occupied or otherwise used by the Company or in which the Company has any interest.

Leased Properties

7.1.83 save as Disclosed, in the case of each of the Leased Properties:

(a) the Leased Property is held by the Company under the terms and conditions of the lease or tenancy agreement (the “Lease”), the description and particulars of the Leased Property are set out in the Disclosure Letter.

(b) the Lease is duly stamped and is in the possession and under the control of the Company, and a true and complete copy of the Lease has been supplied to the Buyer and there are no other agreements, deeds or documents varying, modifying or amending the Lease.

(c) the Lease is on terms negotiated at arm’s length as between a willing lessor and a willing lessee and contains no unusual or onerous provisions or any rights for the lessor to determine the Lease and except as may be set forth in the lease, is expressed to be subject to a right of re-entry exercisable only on the grounds of non-payment of rent or breach of covenant.

(d) all necessary consents (including consent from the lessor’s mortgagee (if any)) for the grant of the Lease were obtained before such grant.

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(e) the Lease is a headlease and to the Seller’s knowledge, the lessor named in the Lease was the registered and beneficial owner of the Leased Property at the time of the grant of the Lease.

(f) the Lease is good, valid and subsisting and not void or to the Seller’s knowledge voidable or otherwise liable to forfeiture or to be terminated earlier than the term stated in the Lease and the Company has paid the rent and all other sums payable under the Lease and has at all times duly and properly observed and performed the covenants and the conditions contained in the Lease, and has received no complaint regarding any alleged breach of any of such covenants and conditions.

(g) the Company has not taken up or agreed to take up any lease or tenancy of any property other than the Leased Properties.

(h) the rent referred to in the Disclosure Letter is the current rent payable under the Lease and to the Seller’s knowledge, there is no rent review in the course of being determined.

(i) to the Seller’s knowledge, if any rent review negotiations, process, proceedings or determination are continuing under any legislation or the Lease, all notices, counternotices and applications to the courts in the relevant jurisdiction or any relevant arbitrator or independent expert have been served within any requisite time limits so as to comply with the provisions of any applicable legislation or the Lease and full particulars of such notices, counternotices and applications have been Disclosed to the Buyer.

(j) save as Disclosed, there is no obligation on the part of the Company to reinstate the Leased Property by removing or dismantling any alterations or improvements made by the Company to the Leased Property at the expiration or sooner determination of the Lease.

(k) to the Seller’s knowledge no collateral assurances, undertakings or concessions have been made by any party to the Lease.

(l) the Company has deposited amounts with the lessor in accordance with the Lease and such deposited amounts, which are listed in the Disclosure Letter, have been secured by a mortgage, chonse rights or a pledge against the property of such lessor.

(m) the Company has not granted or agreed to grant to any third party any sub-lease, sub-tenancy or licence of the Leased Property or any part thereof or parted with or agreed to part with possession of the Leased Property or any part thereof or given or agreed to give any person a right to use, possess or occupy the Leased Property or any part thereof or any interest therein.

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(n) the Company has not issued any notice, written or verbal, exercising any option to renew the Lease or issued any notice to determine the Lease prior to its expiry or entered into any agreement to surrender the Lease and the Leased Property.

(o) the Company has exclusive and unfettered use, possession and occupation of the Leased Property, subject only to the Lease and applicable laws.

(p) the Company is not aware of the occurrence of any event or circumstances which could give rise to any additional restriction or early termination of the continued possession, occupation, use or enjoyment of the Leased Property.

(q) the Leased Property has the benefit of the main services of water, drainage, electricity, gas and telecommunications which are reasonably required for the Company’s continued possession, occupation, use or enjoyment of the Leased Property for the duration of the Lease.

(r) there are no outstanding claims, disputes, complaints, notices, orders or proceedings to which the Company is a party relating to or affecting the Leased Property.

(s) all laws, regulations statutes and subsidiary legislation regarding to the Company’s use of the Leased Property have been complied with in all material respects and all consents, licences or permits required thereunder have been obtained and any conditions or restrictions imposed by such consents, licences or permits have been observed and performed.

(t) all consents and approvals required from the lessor under the Lease have been obtained and the covenants on the part of the Company as lessee contained in such consents and approvals have at all times been duly performed and observed.

(u) save as Disclosed, the Leased Property is in good repair and condition and the Seller is not aware of any condition which may require substantial expenditure in the near future.

(v) save as Disclosed to the Buyer, the Company has not entered into any agreements with any utility authority or person other than an agreement derived from any standard form prescribed by such authority or person which has been signed by the Company for the supply to or discharge from the Leased Property of any utility service and has not deposited any money with any such authority or person as security therefore.

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(w) the lessor has observed and performed all of the lessor’s covenants, terms, obligations and conditions reserved by and contained in the Lease.

Insurance

7.1.84 where the Company is responsible for maintaining insurance in respect of any of the Leased Properties, the policy conforms in all respects with the requirements of the Lease.

7.1.85 true and complete copies of all insurance policies, in respect of the Leased Properties for which the Company is responsible for maintaining insurance, have been delivered to the Buyer.

7.1.86 the Company has not done or omitted to do anything which may result, directly or indirectly, in any of the insurance policies may become void or voidable.

7.1.87 there are no claims outstanding or circumstances of which the Company is aware which would give rise to a claim under any of the insurance policies.

Owned Properties

7.1.88 the Owned Properties represent all the real properties owned by the Company or in respect of which any of the member of the Company has any estate, interest, right or liability (as defined below). In respect of each of the Owned Properties:

(a) the Company is the sole beneficial owner of and has a proper legal title to the Owned Properties and is entitled to transfer, dispose, sell, mortgage or otherwise deal with the Owned Properties and is entitled the use of such property in the manner in which it is used or is proposed to be used;

(b) each of the Owned Properties held by the Company is free from mortgage, debenture, charge, lien, lease, or other Encumbrances or any third party rights and the Company has not entered into any agreement to do any of the foregoing;

(c) the Company has not received or is not aware of there being any notice from any government or other competent authorities requiring it to revise the terms of the ownership rights relating to the Owned Properties or adversely affecting the Owned Properties or the rights of the Company in relation thereto;

(d) all land premium, purchase price, land grant fees or other fees payable in respect of the Owned Properties have been paid in full and no further such premiums, price or fees are payable under any applicable laws;

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(e) none of the terms and conditions contained in the relevant sale and purchase or transfer contracts, deed of mutual covenants, government grant, occupation permit, real estate title certificate, land use right certificate, building ownership certificates and/or certificate of ownership and the applicable laws, rules and regulations have been breached in respect of the Owned Properties;

(f) the Company has duly performed and observed all the terms and conditions contained in the sale and purchase or transfer contracts (if any), assignment, deed of mutual covenant, land use right certificate and building ownership certificates for the Owned Properties to be performed and observed on the part of the Company as Buyer thereof;

(g) all relevant legal requirements or conventions for notarization and registration of the sale and purchase contracts and assignments for the Owned Properties have been complied with;

(h) the land and building ownership rights pertaining to the Owned Properties are valid and subsisting and has not been amended, modified or supplemented in any manner whatsoever;

(i) no contracts have been entered into by the Company to sell, assign, subdivide, let or lease, licence, charge, mortgage, partition, share, grant any option over or otherwise dispose of an interest in or part with the possession or occupation of the Owned Properties or any part thereof or otherwise encumber the Owned Properties nor is there any agreement by the Company to do any of the aforesaid;

(j) the Company is in physical possession and actual occupation of, each and every one of the Owned Properties on an exclusive basis and no right of occupation or enjoyment has been acquired or is in the course of being acquired by any third party or has been granted or agreed to be granted to any third party;

(k) the Company does not have any outstanding liabilities under the terms and conditions upon which the land and building ownership rights pertaining to the Owned Properties are granted;

(l) the Owned Properties are not subject to any restrictive covenants, stipulations, easements, licences, restrictions or other like rights vested in third parties other than those stipulated in the terms and conditions upon which the land and building ownership rights pertaining to the Owned Properties are granted which terms and conditions are of a usual nature with reference to such terms and conditions in The Republic of Korea or other Encumbrances;

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(m) there are no circumstances which would entitle or require any person to exercise any powers of entry or taking possession of the Owned Properties;

(n) compliance has been made with all applicable statutory and bye-law requirements with respect to the Owned Properties;

(o) all requisite licences, certificates and authorities necessary for the existing use of the Owned Properties by the Company have been duly obtained and are in full force, validity and effect;

(p) there are no disputes with any adjoining or neighbouring owner with respect to boundary walls and fences, or with respect to any easement, right or means of access to the Owned Properties;

(q) the Owned Properties are used by the Company for legal purposes and has not violated any relevant land or construction regulations;

(r) all requisite approvals, consents, permits and licences necessary for the user of the Owned Properties as it is presently being used by the Company have been duly obtained and are in full force, validity and effect;

(s) no default (or event which with notice or lapse of time or both will constitute a default) by the Company has occurred or is continuing under the government grant, occupation permit, deed of mutual covenant, land use right certificate, building ownership rights certificate and/or other documents applicable to the property and it is not in breach of any applicable laws, rules, regulations, guidelines, notices, circulars, orders, judgments, decrees or rulings of any court, government, governmental or regulatory authorities in respect of the use occupation and enjoyment of the Owned Properties;

(t) all requisite planning and building approvals required for any government, local or public authority with respect to the Owned Properties have been obtained and are in full force and effect;

(u) all the buildings and other structures on the Owned Properties are in good and substantial repair and fit for the purposes for which they are being used; and

(v) there is no breach of any applicable statutory, bye-law or regulatory requirement as to fire precautions, public health, pollution, discharge of effluents, environmental or any other matters to which, in respect of any of the Owned Properties compliance is required.

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Other involvement in relation to property

7.1.89 the Company has not at any time:

(a) had vested in it (whether as an original tenant or subtenant or as an assignee, transferee or otherwise) any immovable or tangible property other than the Properties.

(b) given any covenant or entered into any agreement, deed or other document (whether as a tenant or subtenant or as an assignee, transferee, guarantor or otherwise) in respect of any immovable property in respect of which any contingent or potential liability remains with the Company other than those Disclosed to the Buyer in relation to the Properties.

(c) done, omitted or knowingly suffered or been party or privy to any act, deed, matter or thing whereby or by means whereof the Properties or any part thereof are or can or shall or may be impeached, charged, affected or encumbered in title, estate or otherwise.

7.2 The Seller acknowledges that, in entering into this Agreement and in purchasing the Sale Shares, the Buyer has relied and will rely upon the Warranties given herein and the Warranties as confirmed by the Seller according to Clause 6.2.1(h) upon Closing.

7.3 The Warranties are given subject to the matters Disclosed in the Disclosure Letter but no other information relating to the Company of which the Buyer has knowledge (actual or constructive) and no investigation by or on behalf of the Buyer shall prejudice any claim made by the Buyer in respect of the Warranties or operate to reduce any amount recoverable and it shall not be a defence to any claim against the Seller that the Buyer knew or ought to have known or had constructive knowledge of any information (other than as Disclosed in the Disclosure Letter) relating to the circumstances giving rise to such claim made by the Buyer in respect of the Warranties.

7.4 The Seller hereby acknowledges and declares that it has full knowledge of the state of affairs of the Company and has not relied on the Company or any officer, director or employee of the Company in entering into this Agreement. The Seller and CDC shall not make any claim against the Company or its Affiliates or any officer, director or employee of the Company or its Affiliates for any Losses the Seller may suffer or incur as a result of entering into this Agreement (including without limitation any Losses resulting from any claim being made against the Seller or CDC by the Buyer under this Agreement).

7.5 Each of the Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Warranty.

7.6 The Seller shall procure that the Warranties are true, accurate and complete at the date of this Agreement and, for this purpose, the Warranties shall be deemed to be repeated at the Closing Date and any express or implied reference therein to the date of this Agreement shall be replaced by a reference to the Closing Date. Subject to Clause 8.1.8, the Warranties shall remain in full force and effect notwithstanding Closing.

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7.7 The Buyer shall be entitled to claim both before and after Closing that any of the Warranties is or was untrue or misleading or has or had been breached even if the Buyer discovered or could have discovered on or before Closing that the Warranty in question was untrue misleading or had been breached and Closing shall not in any way constitute a waiver of any of the Buyer’s rights.

7.8 Except as may be provided herein, the rights and remedies of the Buyer in respect of a breach of any of the Warranties shall not be affected by Closing, by any investigation made by or on behalf of the Buyer into the affairs of the Company, by the giving of any time or other indulgence by the Buyer to any person, by the Buyer rescinding or not rescinding this Agreement, or by any other cause whatsoever except a specific waiver or release by the Buyer in writing; and any such waiver or release shall not prejudice or affect any remaining rights or remedies of the Buyer.

7.9 All representations and warranties made by any party contained in this Agreement, any Exhibit, Schedule, certificate or other instrument specifically referred to in the Warranties pursuant hereto or made in writing by or on behalf of a party in connection with the transactions contemplated by this Agreement, and all indemnification obligations under this Agreement shall survive the execution and delivery of this Agreement and the completion of the transactions contemplated hereunder until the expiration of the applicable statute of limitations or, if Clause 8.1.7 (subject to Clause 8.1.8) is applicable, until the expiry of the period of two (2) years after the date of this Agreement.

7.10 The Seller undertakes with the Buyer that it will both before and after Closing promptly notify the Buyer in writing of any event or circumstance of which it becomes aware which is or may be inconsistent with any of the Warranties or which might make any of the Warranties untrue or misleading if given at Closing.

8. INDEMNIFICATION – GENERAL AND TAX

8.1 General Indemnification

8.1.1 As used in this Clause 8.1, the following terms shall have the following meanings:

(a) “Claim” means any claim, demand, dispute, action, suit, investigation or legal or analogous proceedings.

(b) “General Event of Indemnification” with respect to

(i) the Seller shall mean:

(aa) any breach of any representation or Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation,

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indemnity or covenant of the Seller contained in this Agreement (including the Exhibits and Schedules) or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach; and

(bb) any Claims, liabilities or obligations of any kind or nature relating to the Company or the Sale Shares (or any options or rights with respect to the capital of the Company) arising from, relating to or in connection with the business, operations or affairs of the Company or any of the assets, properties, interests in assets or properties or rights of the Company which were existing at or as of Closing or arising in whole or in part out of any acts, transactions, conditions, circumstances or facts which occurred or existed on or prior to Closing, and which were not Disclosed on or before the execution of this Agreement.

(ii) the Buyer shall mean any breach of any representation, Buyer Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation, indemnity or covenant of the Buyer contained in this Agreement (including the Exhibits) or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach.

(c) “Special Event of Indemnification” with respect to:

(i) the Seller shall mean any Claims, liabilities, or obligations of any kind or nature arising from, relating to or in connection with any of the events set out in Schedule 3 whether existing at or as of Closing or at any time thereafter, and whether Disclosed or not on or before the execution of this Agreement;

(ii) the Buyer, shall mean any Claims, liabilities or obligations arising from the Buyer’s failure to pay the applicable Taxes to the appropriate tax authority in accordance with Clause 3.3 after deducting or withholding such payment from the Purchase Price.

(d) “Losses” in this Clause 8 shall mean any and all Losses (as defined in Clause 1.1) sustained, suffered or incurred by the Buyer Indemnified Person or Seller Indemnified Person.

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8.1.2 “Buyer Indemnified Persons” shall mean and include the Buyer and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns; and “Seller Indemnified Persons” shall mean and include the Seller and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns.

8.1.3 The Seller shall indemnify, defend and hold harmless the Buyer Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification except to the extent such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Buyer Indemnified Persons.

8.1.4 The Buyer shall indemnify, defend and hold harmless the Seller Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification, except to the extent any such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Seller Indemnified Person.

8.1.5 This indemnity is to be a continuing security to the Buyer and the Seller for all representations, Warranties, agreements, undertakings, commitments, obligations, indemnities or covenants on the part of the Seller or the Buyer (as the case may be) under or pursuant to this Agreement notwithstanding settlement of account or other matter or thing whatsoever.

8.1.6 This indemnity is in addition and without prejudice to and not in substitution for any rights or security which the Buyer and the Seller may now or hereafter have or hold for performance and observance of any agreement, undertaking, commitment, obligation, indemnity or covenant on the part of the Seller or the Buyer (as the case may be) under or in connection with this Agreement.

8.1.7 Limitation of Liability in respect of the Warranties or the Buyer Warranties

Notwithstanding anything contained herein to the contrary but subject to Clause 8.1.8, (i) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 8 or Clause 11.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) for Losses the amount of which is less than US$35,000 (“Minor Losses”) even if such Minor Losses in the aggregate exceed the Basket (as defined below); (ii) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 8 or Clause 11.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) unless and until Losses in an aggregate amount (excluding the Minor Losses) exceed US$75,000 (the “Basket”) in which case the Buyer or the Seller may make such claim(s) for indemnification for any and all Losses (excluding the Minor Losses) and not merely for the excess of the Basket; (iii) in no event shall the aggregate liability of (a) the Buyer or the Seller pursuant to

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this Clause 8.1 or (b) CDC pursuant to Clause 11.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) exceed one hundred percent (100%) of the Purchase Price; and (iv) the period during which claims for any breach of a Warranty and/or indemnification pursuant to this Agreement in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) may be made shall commence from the date of this Agreement to the expiry of the period of two (2) years after the date of this Agreement.

8.1.8 None of the limitations regarding any Loss or Claim in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) whether as to the amount or time set forth in Clause 8.1.7 shall apply if in any case the Losses and Claims have arisen from or in connection with:

(a) any Special Event of Indemnification;

(b) any breach of the Tax Warranties set out in Clauses 7.1.59 to 7.1.81; or

(c) any breach of the Warranties set out in Clauses 7.1.19, 7.1.33(b), 7.1.35, 7.1.37, 7.1.38, 7.1.43(b) and 7.1.55 to 7.1.57.

For avoidance of doubt, no claim for any Loss or Claim arising from or in connection with item (a), (b) or (c) of this Clause 8.1.8 above shall be brought after the expiry of the applicable statute of limitation.

8.2 Covenant in Respect of Tax

8.2.1 In this Clause unless the context otherwise requires:

(a) “Tax Event” includes (without limitation) any omission, event, action or transaction whether or not the Company is a party thereto, the death of any person, a change in the residence of any person for any Tax purpose, a failure to make sufficient dividend payments to avoid an apportionment or deemed distribution of income and the entering into and completion of this Agreement and references to the result of events on or before Closing shall include the combined result of two or more events one or more of which shall have taken place on or before Closing;

(b) “relief” includes (without limitation) any relief, allowance, credit, set off, deduction or exemption for any Tax purpose;

(c) reference to income or profits or gains earned, accrued or received shall include income or profits or gains deemed to have been or treated as or regarded as earned, accrued or received for the purposes of any legislation;

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(d) reference to any Tax liability shall include not only any liability to make actual payments of or in respect of Tax but shall also include:

(i) the loss or reduction in the amount of, or the setting off against income, profits or gains, or against any Tax liability for which no provision has been made in preparing the Accounts and Management Accounts of, any relief which would (were it not for the said loss, reduction or setting off) have been available to the Company and which relief has been taken into account in computing (and so eliminating or reducing) any provision for deferred Tax which appears (or which but for such relief would have appeared) in the Accounts and Management Accounts;

(ii) the loss or reduction in the amount of, or the setting off against any Tax liability for which no provision has been made in preparing the Accounts and Management Accounts of, a right to repayment of Tax which has been treated as an asset of any Company in preparing the Accounts and Management Accounts; and

(iii) the loss or reduction in the amount of, or the setting off against income, profits or gains earned, accrued or received on or before Closing, or against any Tax liability of, any relief which is not available before Closing but which arises in respect of a Tax Event occurring after Closing in circumstances where, but for such loss, reduction or setting off, the Company would have had a Tax liability in respect of which the Buyer would have been able to make a claim under this Clause;

and in such a case the amount of Tax which could otherwise be saved or relieved, by the relief so lost, reduced or set off (calculated by reference to the rates of Tax in force at the date of this Agreement) or the amount of repayment which would otherwise have been obtained shall be treated as the amount of a Tax liability which has arisen;

(e) reference to a payment in respect of Tax includes (without limitation) a payment for the surrender of losses or other amounts by way of group relief or for the surrender or transfer of any other relief, a repayment of any such payment and a payment by way of reimbursement, recharge, indemnity or damages.

8.2.2 Subject as hereinafter provided, the Seller hereby covenants with and undertakes to indemnify the Buyer (at its election, for itself, its Affiliates and as trustee for its successors in title) against:

(a) any Tax liability of the Company resulting from or by reference to any income, profits or gains earned accrued or received on or before the

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Closing Date or any Tax Event on or before such date whether alone or in conjunction with other circumstances and whether or not such Tax is chargeable against or attributable to any other person;

(b) any Tax liability of the Company that arises after Closing as a result of an act, omission or transaction by a person other than the Company and which liability to Tax falls upon the Company as a result of its having been in the same group for Tax purposes as that person at any time before Closing;

(c) any Tax liability of the Company that would not have been payable had there been no breach of any Tax Warranties and which is not the subject of the covenants in sub-clauses (a) and (b) above; and

(d) all reasonable costs and expenses which are incurred by the Buyer or any of its Affiliates or the Company in connection with any of the matters referred to in this Clause 8.2 or in taking or defending any action under the covenants contained in this Clause 8.2 (including, without prejudice to the generality of the foregoing, all reasonable legal and other professional fees and disbursements).

8.2.3 The covenants contained in Clause 8.2.2 do not apply to any liability:

(a) to the extent that provision or reserve in respect thereof has been made in the Accounts or Management Accounts and specifically Disclosed or to the extent that payment or discharge of such liability has been taken into account therein and specifically Disclosed; and

(b) in respect of which provision or reserve has been made in the Accounts or Management Accounts and specifically Disclosed which is insufficient only by reason of any increase in rates of Tax made after the Closing with retrospective effect.

9. BUYER’S RIGHTS

9.1 Without prejudice to any other right or remedy of the Buyer hereunder, if before Closing:

(a) the Buyer becomes aware that any of the Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Seller or CDC is in breach of any term of this Agreement; or

(b) any Tax Event occurs which has, or is likely to have, any effect on the financial position or business prospects of the Company as a whole, not being a Tax Event which affects generally all companies carrying on business similar to that of the Company in a part or parts of the world where the Companies carry on business,

the Buyer shall be entitled to terminate this Agreement without incurring any liability to the Seller or CDC.

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9.2 Without prejudice to any other right or remedy of the Seller hereunder, if before Closing the Seller becomes aware that any of the Buyer Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Buyer is in breach of any term of this Agreement, the Seller shall be entitled to terminate this Agreement without incurring any liability to the Buyer.

9.3 The rights, including rights of rescission, conferred on the Buyer and Seller by this Agreement are in addition and without prejudice to all other rights and remedies available to the Buyer and Seller; and no exercise or failure to exercise a right under this Agreement or otherwise or to invoke a remedy shall constitute a waiver of that right or remedy by the Buyer or Seller.

10. PROTECTION OF THE BUYER’S INTERESTS

10.1 Competing Business and Restricted Services, etc.

10.1.1 In this clause:

(a) “competing business” means any business which competes with the Business.

(b) “restricted services” means services of the same type as or similar to or performs the same or similar functions of any services provided by the Company at Closing.

(c) “Restricted Period” means the period of 3 years commencing from the Closing Date.

(d) references to acting directly or indirectly include (without prejudice to the generality of that expression) references to acting alone or jointly with or by means of any other person.

10.1.2 Each of the Seller and CDC covenants with the Buyer that during the Restricted Period:

(a) it shall not directly or indirectly:

(i) solicit, canvass or approach or endeavour to solicit, canvass or approach any person, firm or company for the purpose of offering to that person, firm or company restricted services or provide on behalf of a competing business or restricted services to any person, firm or company:

(aa) who was provided with services by the Company at any time during the two (2) year period immediately preceding Closing; or

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(bb) who was negotiating with the Company for the provision of services at any time during the twelve (12) month period immediately preceding Closing; or

(ii) solicit or entice away or endeavour to solicit or entice away from the Company any person employed by the Company in any capacity at Closing Date with a view to inducing that person to leave such employment and to act for another person in the same or a similar capacity in relation to a competing business or restricted services whether or not such person would commit a breach of contract by reason of leaving such employment except that the foregoing restriction does not apply to any general solicitation for employees or public advertising of employment opportunities not specifically directed at any person employed by the Company.

(b) it shall not at any time disclose or use, for its own benefit or that of any other person (other than for the proper performance of his duties to the Company) any confidential information which it possesses concerning the business or affairs of the Company or of any person having dealings with the Company.

10.1.3 Each of the restrictions set out in Clause 10.1.2 above are separate and severable and in the event of any such restriction being determined as unenforceable in whole or in part for any reason, such unenforceability shall not affect the enforceability of the remaining restrictions or (in the case of restrictions unenforceable in part) the remainder of that restriction.

10.1.4 The restrictions entered into by the Seller in Clause 10.1.2 are given to the Buyer for itself and as trustee for the Company and each of the Seller and CDC agrees that it will at the request and cost of the Buyer enter into a further agreement with the Company whereby it will accept restrictions corresponding to the restrictions in this Agreement (or such of them as the Buyer in its absolute discretion shall deem appropriate). The Buyer declares that insofar as these restrictions relate to the Company it holds the benefit of them as trustee. In exercising any right as trustee hereunder the Buyer shall be entitled to limit the action it takes to such action as it may, in its absolute discretion, consider reasonable.

10.1.5 The parties agree that in connection with the circumstances and the transactions contemplated by this Agreement, the restrictive covenants herein contained are reasonable in time and scope, necessary for the protection of the Company and the legitimate business interests of the Buyer, and supported by adequate consideration. The parties further agree that having regard to those circumstances the said covenants do not work harshly or unreasonably upon the parties. However, it is recognized that restrictions of the nature in question may fail for technical reasons currently unforeseen and accordingly it is hereby agreed and declared that if any of such restrictions shall be adjudged to be void as going beyond what is reasonable in all the circumstances for the protection of the Company or the Buyer’s legitimate interest but would be valid if part of the wording thereof were

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deleted or the periods thereof reduced or the range of activities or area dealt with thereby reduced in time or scope the said restriction shall apply with such modifications as may be necessary to make it valid and effective under applicable law.

10.2 Trademarks, Tradenames, etc.

10.2.1 Each of the Seller and CDC hereby covenants with the Buyer that save as required for the performance of their obligations as contemplated in this Agreement, immediately after Closing and except as otherwise directed by the Buyer, the Seller and CDC shall cease and shall procure that each of their respective Affiliates and other persons authorized by them or their respective Affiliates shall cease the use of all or any of the trademarks, service marks, logos, trade names, Internet domain names and corporate names forming part of the Intellectual Property of the Company (including without limitation “Ion Global ” and “IGK” or any part of parts thereof), in any of their forms or spellings (or in forms or spellings similar or resemble to the same) (whether registered or unregistered) for any purpose whatsoever, by taking all necessary actions and making or obtaining all necessary notification, filing, registration and approval under all applicable law and regulations.

10.3 The obligations and liabilities of the Seller and CDC under this Clause 10 are the joint and several obligations and liabilities of the Seller and CDC.

11. GUARANTEE AND INDEMNITY BY CDC

11.1 In consideration of the Buyer entering into this Agreement, CDC hereby unconditionally and irrevocably guarantees to the Buyer the due and punctual performance and observance by the Seller of all the Seller’s obligations, commitments, undertakings, warranties, indemnities and covenants under or pursuant to this Agreement and subject to the provisions of Clauses 8.1.7 and 8.1.8, agrees to indemnify the Buyer and its Affiliates against all Losses, damages, costs and expenses (including reasonable legal costs and expenses) which the Buyer or any of its Affiliates may suffer through or arising from any breach by the Seller of such obligations, commitments, warranties, undertakings, indemnities or covenants. The liability of CDC as aforesaid shall not be released or diminished by any arrangements or alterations of terms (whether of this Agreement or otherwise) or any forbearance, neglect or delay in seeking performance of the obligations hereby imposed or any granting of time for such performance.

11.2 If and whenever the Seller defaults for any reason whatsoever in the performance of any obligation or liability undertaken or expressed to be undertaken by the Seller under or pursuant to this Agreement, CDC shall forthwith upon demand unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction of) the obligation or liability in regard to which such default has been made in the manner prescribed by this Agreement and so that the same benefits shall be conferred on the Buyer and its Affiliates as they would have received if such obligation or liability had been duly performed and satisfied by the Seller. CDC hereby waives any right which it may have to require the

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Buyer to proceed first against or claim payment from the Seller to the intent that as between the Buyer and CDC the latter shall be liable as principal debtor as if it had entered into all undertakings, agreements and other obligations jointly and severally with the Seller.

11.3 This guarantee and indemnity is to be a continuing security to the Buyer for all obligations, commitments, warranties, undertakings, indemnities and covenants on the part of the Seller under or pursuant to this Agreement notwithstanding any settlement of account or other matter or thing whatsoever.

11.4 This guarantee and indemnity is in addition to and without prejudice to and not in substitution for any rights or security which the Buyer may now or hereafter have or hold for the performance and observance of the obligations, commitments, undertakings, covenants, indemnities and warranties of the Seller and CDC under or in connection with this Agreement.

11.5 CDC shall not, after any claim has been made pursuant to this Clause 11, claim from the Seller any sums which may be owing to them from the Seller or have the benefit of any set-off counter-claim or proof against or dividend, composition or payment by the Seller until all sums owing to the Buyer in respect hereof shall have been paid in full.

11.6 As a separate and independent stipulation, CDC agree that any obligation expressed to be undertaken by the Seller under this Agreement (including, without limitation, any moneys expressed to be payable under this Agreement) which may not be enforceable against or recoverable from the Seller by reason of any legal limitation, disability or incapacity of any of them or any other fact or circumstance shall nevertheless be enforceable against or recoverable from CDC as though the same had been incurred by CDC and CDC was sole or principal obligor in respect thereof and shall be performed or paid by CDC on demand.

12. WARRANTIES BY BUYER

12.1 The Buyer hereby warrants and represents to the Seller that the matter set forth below (“Buyer Warranties”) are true and accurate (a) as of the date of this Agreement and (b) as of the Closing Date:

12.1.1 Corporate Status

(a) the Buyer has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation;

(b) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Buyer and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based; and

(c) so far as the Buyer is aware after making all due enquires, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Buyer has been or is likely to be adversely affected.

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12.1.2 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Buyer and no petition has been presented and no meeting has been convened for the purpose of winding up the Buyer;

(b) no receiver has been appointed in respect of the Buyer;

(c) the Buyer is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Buyer has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside The Republic of Korea;

(e) no unsatisfied judgment is outstanding against the Buyer.

12.1.3 Authority of the Buyer

(a) the Buyer has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Buyer, in accordance with its terms;

(b) the execution and delivery of, and the performance by the Buyer of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Buyer is a party or by which it is bound.

12.1.4 The Buyer acknowledges that, in entering into this Agreement and in selling the Sale Shares, the Seller has relied and will rely upon the Buyer Warranties given herein and the Buyer Warranties as confirmed by the Buyer according to Clause 6.2.5 upon Closing.

12.1.5 The Buyer Warranties are given subject to the matters Disclosed in the Buyer Disclosure Letter.

12.1.6 Each of the Buyer Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Buyer Warranty.

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12.1.7 The Buyer represents that the Buyer Warranties are true, accurate and complete at the date of this Agreement and, for this purpose, such Buyer Warranties shall be deemed to be repeated at the Closing Date.

13. MISCELLANEOUS

13.1 Where in this Agreement, any liability is undertaken by two or more persons, the liability of each of them shall be joint and several.

13.2 No party may assign or transfer, or purport to assign or transfer, any of its rights or obligations under this Agreement without prior written consent of the other parties (except for an assignment or transfer by the Buyer to any of its Affiliates) and this Agreement shall be binding on and enure for the benefit of the parties’ successors, permitted assigns and personal representatives. In the event that an Affiliate of the Buyer to whom the Buyer’s rights or obligations under this Agreement have been assigned, ceases to be an Affiliate of the Buyer, the Buyer shall promptly procure such entity to assign or transfer such rights or obligations back to the Buyer.

13.3 This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.

13.4 This Agreement represents the entire understanding, and constitutes the whole agreement, in relation to its subject matter and supersedes any previous agreement between the parties with respect thereto and, without prejudice to the generality of the foregoing, excludes any warranty, condition or other undertaking implied at law or by custom.

13.5 Each party confirms that, except as provided in this Agreement, no party has relied on any representation or warranty or undertaking which is not contained in this Agreement, without prejudice to any liability for fraudulent misrepresentation, no party shall be under any liability or shall have any remedy in respect of misrepresentation or untrue statement unless and to the extent that a claim lies under this Agreement.

13.6 Subject to the terms hereof, so far as it remains to be performed, this Agreement shall continue in full force and effect notwithstanding Closing.

13.7 The Seller shall after Closing execute all such deeds and documents and do all such things as the Buyer may require for perfecting the transactions intended to be effected under or pursuant to this Agreement and for vesting in the Buyer the full benefit of the Sale Shares. Furthermore, the parties hereto hereby agree to be bound by the provisions set forth in this Agreement even in the event that any provision set forth herein were determined to be unenforceable or ineffective vis-à-vis third parties.

13.8 In the case that any provision or part of a provision of this Agreement is declared invalid, not binding or not enforceable, then, such declaration shall be effective only in connection with such provision or part of a provision and therefore shall not impair the validity, binding effects and enforceability of the other parts of such provision and/or the other provisions of this Agreement.

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13.9 The transfer of any Sale Share pursuant to this Agreement shall be together with all rights and benefits attached thereto as at the date of transfer and shall be free from all liens, charges and Encumbrance.

13.10 This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Facsimile or electronic signatures shall be treated as original signatures.

14. CONFIDENTIALITY OF INFORMATION RECEIVED

14.1 The parties undertake with each other that they shall treat as strictly confidential all proprietary, non-public information received or obtained by them or their employees, agents or advisers as a result of entering into or performing this Agreement including information relating to the provisions of this Agreement, the negotiations leading up to this Agreement, the subject matter of this Agreement or the business or affairs of the Seller, the Buyer or any member of Aegis Group and that it will not at any time hereafter make use of or disclose or divulge to any person any such information without the consent of the other parties and shall use its best endeavours to prevent the publication or disclosure of any such information.

14.2 The restrictions contained in Clause 14.1 shall not apply so as to prevent the parties from making any disclosure required by law or by any securities exchange or supervisory or regulatory or governmental body pursuant to rules to which the parties are subject or from making any disclosure to any professional adviser for the purposes of obtaining advice (providing always that the provisions of this Clause 14 shall apply to and the parties shall procure that they apply to and are observed in relation to, the use or disclosure by such professional adviser of the information provided to them) or from making any disclosure for the purpose of exercising their rights or performing their obligations hereunder, nor shall the restriction apply in respect of any information which comes into the public domain otherwise than by a breach of this Clause 14 by any party.

15. COSTS

15.1 The parties shall pay their own costs in connection with the preparation, negotiation, execution and completion of this Agreement. Notwithstanding the foregoing, the Buyer agrees to pay 50% of the costs for preparing the legal opinion by BVI counsel and Cayman counsel required to be delivered by the Seller pursuant to Clause 6.2.1(j).

15.2 Any stamp duty, securities transaction tax or similar tax of and incidental to this Agreement and the transfer of the Sale Shares shall be borne by the Seller absolutely. The Buyer shall be entitled to deduct or withhold from the Purchase Price on account of such tax according to Clause 3.3.

16. NOTICES

16.1 A notice, approval, consent or other communication in connection with this Agreement:

16.1.1 must be in writing; and

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16.1.2 must be left at the address of the addressee, or sent by prepaid registered post (airmail if posted to or from a place outside The Republic of Korea) to the address of the addressee or sent by facsimile to the facsimile number of the addressee which is specified in this clause or if the addressee notifies another address or facsimile number then to that address or facsimile number.

The address and facsimile number of each party is:

The Seller
Address	:	2 Concourse Parkway, Ste 800, Atlanta GA 30328
Facsimile	:	+1 (678) 259-8737
Attention	:	General Counsel
CDC
Address	:	2 Concourse Parkway, Ste 800, Atlanta GA 30328
Facsimile	:	+1 (678) 259-8737
Attn	:	General Counsel
The Buyer
Address	:	Piet Heinkade 55, 1019 GM Amsterdam, Netherlands
Facsimile	:	31 20 530 45 22
Attention	:	Director
With a copy to:
Address	:	152 Beach Road, #36-05 Gateway East, Singapore 189721
Facsimile	:	(65) 6396 5945
Attn	:	Chief Financial Officer, Asia Pacific, Aegis Media
and
Address	:	Three Park Avenue, 32nd Floor New York, NY 10016 USA
Facsimile	:	1 310 907 1345
Attn	:	Head of Legal Affairs, Aegis Media

16.2 A notice, approval, consent or other communication shall take effect from the time it is received (or, if earlier, the time it is deemed to be received in accordance with Clause 16.3) unless a later time is specified in it.

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16.3 A letter or facsimile is deemed to be received:

16.3.1 in the case of a posted letter, unless actually received earlier, on the third (seventh, if posted to or from a place outside The Republic of Korea) day after posting; and

16.3.2 in the case of facsimile, on production of a transmission report from the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient.

17. GOVERNING LAW AND ARBITRATION

17.1 This Agreement shall be governed by, and construed in accordance with, the law of The Republic of Korea.

17.2 Arbitration

17.2.1 Save for the matters provided under Clause 6.3, any and all disputes arising out of or in connection with the negotiation, execution, interpretation, performance or non-performance of this Agreement shall be solely and finally settled in accordance with the Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”) by one or more arbitrators appointed in accordance with the ICC Rules. The parties agree that the award of the arbitrators shall be the sole and exclusive remedy between them regarding any claims, counterclaims, issues or accountings presented to the arbitrators, irrespective of the magnitude thereof.

17.2.2 All arbitration proceedings shall be conducted in the English language pursuant to the ICC Rules. The arbitration shall take place in Hong Kong or such other place as the parties may mutually agree in writing. The parties hereto agree to facilitate the arbitration by (i) making available to each other and to the arbitrators all documents, books, records and personnel under their control as the arbitrators shall determine to be relevant to the dispute; (ii) conducting arbitration hearings to the greatest extent possible on successive, contiguous days; and (iii) observing strictly the time periods established by the ICC Rules or by the arbitrators for the submission of evidence and briefs.

17.2.3 Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereby waive to the fullest extent permitted by law any rights to appeal or to review such award by any court or tribunal. The parties agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgement on the arbitration award may be entered in any court having jurisdiction over the parties or their assets.

17.2.4 Notwithstanding anything herein contained, either party shall be entitled to seek injunctive relief, if possible, from any court of competent jurisdiction to protect its rights under this Agreement pending the constitution of the arbitral tribunal pursuant to this Clause 17.2.

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be signed on their behalf in the places and on the date hereinafter written.

The Seller
SIGNED by /s/ Mike Latimore	)	for and on behalf of
on behalf of ION GLOBAL (BVI) LTD	)	Babington Services Limited, Director
in the presence of:	)	of Ion Global (BVI) Ltd.
The Buyer
SIGNED by /s/ P. Groot	)
on behalf of GROUP CARAT (NEDERLAND) BV	)
in the presence of: /s/ Marian Puthaeur	)
CDC
SIGNED by	)	/s/ Simon Wong
on behalf of CDC SOFTWARE CORPORATION	)
in the presence of: /s/ Nicole Lo	)

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EX-4.(A)20

Exhibit 4(a).20

Execution Copy

DATED 1 August, 2007

ASSETS PURCHASE AGREEMENT

By and Among

ION GLOBAL (CALIFORNIA), INC.

CDC SOFTWARE CORPORATION

and

MOLECULAR, INC.

Jones Day

Solicitors and International Lawyers

29^th Floor, Edinburgh Tower

The Landmark

15 Queen’s Road Central

Hong Kong

Telephone No.: (852) 2526-6895

CAM No.: 113437-615014

TABLE OF CONTENTS

Clause		Page
1.	INTERPRETATION	1
2.	SALE AND PURCHASE OF PURCHASED ASSETS	9
3.	PURCHASE PRICE	13
4.	CONDITIONS	13
5.	ACTION PENDING CLOSING	16
6.	CLOSING	18
7.	BULK SALES	22
8.	EMPLOYMENT	22
9.	ASSIGNMENT OF CONTRACTS AND RIGHTS	24
10.	WARRANTIES BY SELLER AND CDC	25
11.	INDEMNIFICATION – GENERAL AND TAX	42
12.	BUYER’S RIGHTS	46
13.	PROTECTION OF THE BUYER’S INTERESTS	46
14.	GUARANTEE AND INDEMNITY BY CDC	48
15.	WARRANTIES BY BUYER	49
16.	MISCELLANEOUS	50
17.	CONFIDENTIALITY OF INFORMATION RECEIVED	51
18.	COSTS	52
19.	NOTICES	52
20.	GOVERNING LAW AND ARBITRATION	53

THIS AGREEMENT is made on 1 August, 2007

BY AND AMONG:

(1) ION GLOBAL (CALIFORNIA), INC., a company incorporated under the laws of California with its registered office as of the date hereof at 88 Kearny Street, 9th Floor, San Francisco, California 94108, USA (the “Seller”);

(2) CDC SOFTWARE CORPORATION, a company incorporated under the laws of the Cayman Islands with its registered office as at the date hereof at P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands (“CDC”); and

(3) MOLECULAR, INC., a company incorporated under the laws of Delaware with its registered office as at the date hereof at 343 Arsenal Street, Watertown, Massachusetts 02472 U.S.A. (the “Buyer”).

RECITALS:

A. The Seller has been carrying on the business of (i) providing Internet consulting services and website design and development under the name of Ion Global (the “Business”) and (ii) providing Asian- American advertising and marketing consulting services under the name of Dae Advertising (“Dae Business”). Save for the Business and Dae Business, the Seller has not carried on any other business.

B. The Seller has agreed to sell and the Buyer has agreed to purchase all of the Purchased Assets (as hereinafter defined) related to the Business on the terms and conditions hereinafter contained. All assets, liabilities and other rights and obligations of the Seller relating solely to the Dae Business are specifically excluded from the terms of this Agreement.

C. CDC is an Affiliate of the Seller and has agreed to guarantee the performance of the Seller’s obligations hereunder as set forth in Clause 14.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 In this Agreement and in the Schedules, the following definitions are used:

“AAA Rules”	has the meaning set forth in Clause 20.2.1.
“Accounts”	means the unaudited financial statements of the Seller (including a balance sheet and profit and loss statement) made up to the Accounts Date and for the financial period from 1st January 2006 to the Accounts Date prepared in accordance with US GAAP and in manner consistent with past practice, copies of which are annexed hereto as Exhibit A.
“Accounts Date”	means 31st December 2006.

- 1 -

“Acquisition Agreements”	means, collectively, (i) the assets purchase agreement dated the date of this Agreement and made by and among Ion Global Limited, CDC and wwwins Consulting Hong Kong Limited; (ii) the assets purchase agreement dated the date of this Agreement and made by and among chinadotcom Strategic, Inc., CDC and Carat Korea Co., Ltd.; and (iii) the share purchase agreement dated the date of this Agreement and made by and among Ion Global (BVI) Ltd., CDC and Group Carat (Nederland) BV.
“Aegis Group”	means the group of companies comprising the Aegis Group plc and its Subsidiaries. The expression “member of the Aegis Group” shall be construed accordingly.
“Affiliates”	in respect of any specified person or entity, means a person that directly or indirectly controls, is controlled by or is under common control with such specified person or entity or with which such specified person or entity may be connected or may become connected as an officer, director, executive, principal, agent, representative, consultant or otherwise.
“Agreed Form”	means, in relation to any document, such document in the terms agreed between the parties and signed by or on behalf of them for the purposes of identification.
“Agreement”	has the meaning ascribed to such term in the heading of this Agreement.
“Borrowing”	has the meaning set forth in Clause 10.1.15(a).
“Business”	has the meaning ascribed to such term in Recital A of the Agreement.
“Business Day”	means a day (not being a Saturday) on which banks are open for general banking business in San Francisco, California.
“Buyer”	has the meaning ascribed to such term in the heading of this Agreement.
“Buyer Disclosure Letter”	means the letter of even date herewith by the Buyer to the Seller (and acknowledged by the Seller) on the execution and delivery of this Agreement.

2

“Buyer Indemnified Persons”	has the meaning set forth in Clause 11.1.2.
“Buyer Liabilities”	means the liabilities of the Buyer under the Contracts for which Client Deposits have been paid to the Seller (the amounts as at the date hereof are set out in column 5 of Schedule 4).
“Buyer Warranties”	has the meaning set forth in Clause 15.1.
“Cash”	has the meaning set forth in Clause 2.1.8.
“Claim”	has the meaning set forth in Clause 11.1.1(a).
“Client Deposits”	has the meaning set forth in Clause 2.1.3.
“Closing”	means the completion of the purchase by the Buyer from the Seller of the Purchased Assets in accordance with Clause 6.
“Closing Date”	means 11 September, 2007 or such other date as is determined by the Seller and Buyer.
“Closing Tangible Asset Balance Sheet”	means the balance sheet of the Tangible Asset made up to the Closing Date prepared in accordance with US GAAP and in manner consistent with past practice used to prepare the Accounts.
“Closing Tangible Asset Value”	means the value of the Tangible Asset as at the Closing Date as determined in accordance with Clause 6.6.
“Contracts”	has the meaning set forth in Clause 2.1.3.
“control”	means, in relation to any person at any time, the power (whether directly or indirectly and whether by ownership of share capital, possession of voting power, contract or otherwise) to appoint the majority of the members of the governing body or management, or otherwise to control the affairs and policies of that other person.
“Dae Business”	has the meaning ascribed to such term in Recital A of the Agreement.
“Disclosed”	means referred to in the Disclosure Letter or the Buyer Disclosure Letter (as the case may be).

3

“Disclosure Letter”	means the letter of even date herewith by the Seller to the Buyer (and acknowledged by the Buyer) on the execution and delivery of this Agreement.
“Effective Employment Date”	has the meaning set forth in Clause 8.1.
“Employees”	means the employees employed in the Business at Closing Date, a list of the employees employed in the Business as at the date of this Agreement is set out in Part 1 of Schedule 1.
“Encumbrance”	means any mortgage, charge (fixed or floating), pledge, lien, hypothecation, trust, right of set off or other third party right or interest (legal or equitable) including any right of pre-emption, assignment by way of security, reservation of title or any other security interest of any kind however created or arising or any other agreement or arrangement (including a sale and repurchase arrangement) having similar effect.
“Environment”	means the natural and man-made environment and all or any of the following media namely air, water and land including air within buildings and air within other natural or man-made structures above or below ground.
“Environmental Law”	means all laws, regulations, directives, statutes, subordinate legislation, common law and other national and local laws, all judgments, orders, instructions or awards of any court or competent authority and all codes of practice and guidance notes which relate to the Environment or human health or the health of animals or plants.
“Excluded Assets”	means the assets and properties of the Seller other than the Purchased Assets.
“Excluded Liabilities”	has the meaning set forth in Clause 2.3.
“Fixed Assets”	has the meaning set forth in Clause 2.1.2.
“General Event of Indemnification”	has the meaning set forth in Clause 11.1.1(b).
“Hong Kong”	means the Hong Kong Special Administrative Region of the People’s Republic of China

4

“Independent Advisor”	KPMG International (San Francisco office), or in the event that either the Seller or the Buyer is engaging the services of KPMG International (San Francisco office) at the time of the request made under Clause 6.6.3, a firm of independent nationally recognized chartered accountants agreed by the parties in writing or, failing such agreement, by Ernst & Young (San Francisco office).
“Insurances”	means the policies of assurance and insurance in connection with the Business and the Purchased Assets and the Employees, particulars of which are set out in Schedule 3;
“Intellectual Property”	means all of the following which is owned by, issued to or licensed to the Seller in connection with the Business, along with all income, royalties, damages and payments due or payable at Closing or thereafter including, without limitation, damages and payments for past or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world: patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissue, continuation, continuation-in-part, revision, extension or re-examination thereof; trademarks, service marks, logos, trade names, Internet domain names and corporate names together with all goodwill associated therewith, including, without limitation the use of the current corporate name and all translations, adaptations, derivations and combinations of the foregoing; copyrights and copyrightable works (including without limitation, web sites); and all registrations, applications and renewals for any of the foregoing; trade secrets and confidential information (including, without limitation, ideas, know-how, drawings, specifications, plans, proposals, financial, business and marketing plans, sales and promotional literature, and customer and supplier lists and related information); information technologies (including, without limitation, software programs, data and related documentation); and all copies and tangible embodiments of the foregoing (in whatever form or medium).

5

“Losses”	means all losses, liabilities, costs (including, without limitation, reasonable attorney’s fees), charges and expenses.
“Management Accounts”	means the unaudited balance sheet of the Seller as at the Management Accounts Date and the unaudited statements of profit and loss of the Seller for the period commencing from 1st January 2007 and ended on the Management Accounts Date prepared in accordance with US GAAP and in a manner consistent with past practice, copies of which are annexed hereto as Exhibit B.
“Management Accounts Date”	means 30 June, 2007.
“Material Adverse Change”	means any material adverse change in the business, assets or position (financial, trading or otherwise), profits or prospects of the Business or any event or circumstance that may result in such a material adverse change. Without prejudice to the generality of the foregoing and to the extent that any adverse change or series of adverse change can be quantified, any adverse change to the extent of more than US$25,000 or series of adverse change to the aggregate extent of more than US$25,000 shall be deemed to be a material adverse change.
“Payment Account Details”	means, in relation to any payment to be made under or pursuant to this Agreement, the name, account number, account location and other details specified by the payee and necessary to effect payment by wire transfer to the payee.
“Permit”	means any licence consent authorisation certification or permit required under Environmental Law.
“Purchase Price”	has the meaning set forth in Clause 3.1.
“Purchased Assets”	has the meaning ascribed to such term in Clause 2.1 of this Agreement.
“Relief”	has the meaning set forth in Clause 11.2.1(b).
“Seller”	has the meaning ascribed to such term in the heading of this Agreement.

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“Seller Indemnified Persons”	has the meaning set forth in Clause 11.1.2.
“Service Agreement”	has the meaning set forth in Clause 6.2.1(i).
“Special Event of Indemnification”	has the meaning set forth in Clause 11.1.1(c).
“Subsidiary”	means any Affiliate of a company whose shares of more than fifty percent (50%) are owned by such company.
“Tangible Assets”	means the amount by which the assets (comprising (i) Cash; (ii) Work-In Progress; and (iii) Fixed Assets) exceed the Buyer Liabilities. For the avoidance of doubt, the Tangible Asset shall be calculated in the manner set forth on Schedule 8 and the amounts of the Cash, Fixed Assets and Buyer Liabilities estimated as at the Closing Date are set forth on Schedule 8.
“Tax Authority”	means any local, municipal, governmental, state, federal or fiscal, revenue, customs or excise authority, body, agency or official anywhere in the world having or purporting to have power or authority in relation to Tax, including without limitation the US Internal Revenue Service.
“Tax Event”	has the meaning set forth in Clause 11.2.1(a).
“Tax Legislation”	means all statutes, statutory instruments, orders, enactments, laws, by-laws, directives and regulations, whether domestic or foreign decrees, providing for or imposing any Tax.
“Taxation” or “Tax”	means all taxes, charges, duties, imposts, fees, levies or other assessments, and all estimated payments thereof, including without limitation income, business profits, branch profits, excise, property, sales, use, value added (VAT), environmental, franchise, customs, import, payroll, transfer, gross receipts, withholding, social security, unemployment taxes, as well as stamp duties and other costs, imposed by any Tax Authority, or any subdivision or agency thereof, and any interest and penalty relating to such taxes, charges, fees, levies or other assessments.

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“Transferred Employees”	has the meaning set forth in Clause 8.2.
“US”	means the United States of America.
“US$”	means the lawful currency of the United States of America.
“US GAAP”	means the generally accepted accounting principles applicable in the United States, consistently applied.
“Warranties”	has the meaning set forth in Clause 10.1.
“Work-In-Progress”	the percentage of work completed by the Seller which has not been billed under (i) client projects which are billed on a milestone and fixed fee basis; and (ii) Contracts for which Client Deposits have been paid to the Seller up to the Closing Date.

1.2 In this Agreement, save where the context otherwise requires:

1.2.1 a reference to a statute or statutory provision shall include a reference:

(a) to that statute or provision as from time to time consolidated, modified, re-enacted or replaced by any statute or statutory provision; and

(b) any subordinate legislation made under the relevant statute;

1.2.2 words in the singular shall include the plural, and vice versa;

1.2.3 the masculine gender shall include the feminine and neutral and vice versa;

1.2.4 a reference to a person shall include a reference to a firm, a body corporate, an unincorporated association or to a person’s executors or administrators;

1.2.5 a reference to a clause, sub-clause, Schedule and Exhibit shall be a reference to a clause, sub-clause, Schedule and Exhibit (as the case may be) of or to this Agreement;

1.2.6 if a period of time is specified and commences from a given day or the day of an act or event, it shall be calculated inclusive of that day;

1.2.7 references to any legal term for any action, remedy, method or judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than the State of Delaware be deemed to include what most nearly approximates in that jurisdiction to the Delaware legal term;

1.2.8 references to writing shall include any modes of reproducing words in a legible and non-transitory form;

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1.2.9 a reference to a balance sheet or profit and loss account shall include a reference to any note forming part of it;

1.2.10 where any of the Warranties is qualified in this Agreement or in the Disclosure Letter by the expression “to the Seller’s knowledge” or “so far as the Seller is aware” or any similar expression, that Warranty shall be deemed to include an additional statement that it has been made after due, diligent and careful enquiry to ensure that all information given in the Warranty is true, complete and accurate in all respects;

1.2.11 any reference herein to “including” shall be construed as a reference to “including but not limited to”;

1.2.12 the headings in this Agreement are for convenience only and shall not affect the interpretation of any provision of this Agreement; and

1.2.13 references to this Agreement include this Agreement as amended or supplemented in accordance with its terms.

1.3 The designations adopted in the recitals and introductory statements preceding this clause apply throughout this Agreement and the Schedules.

2. SALE AND PURCHASE OF PURCHASED ASSETS

2.1 The Buyer, relying on the agreements, covenants, representations, warranties, undertakings and indemnities of the Seller herein, hereby agrees to purchase from the Seller and the Seller as legal and beneficial owner hereby agrees to sell to the Buyer on the Closing Date free and clear of all Encumbrances, the Purchased Assets (as defined below) together with all rights, title, benefits and interests of the Seller therein, thereto and thereunder:

2.1.1 all customer accounts and mailing and prospect lists in respect of the customers of the Business listed in Part 3 of Schedule 1 together with all the Seller’s rights to service those customers subject to Clause 9;

2.1.2 the machinery, equipment, software and computers (together with all the data stored therein) of the Business (“Fixed Assets”) listed on Schedule 2;

2.1.3 all claims, benefits, rights and entitlements under the contracts, contract rights, agreements, licenses, commitments, sales and purchase orders and other instruments (whether uncompleted or pending) of the Business (collectively, the “Contracts”) listed on Schedule 4 including all deposits or progress payments received prior to the Closing Date for services not yet provided by the Seller as at the Closing Date in respect of the same (“Client Deposits”);

2.1.4 all of the Seller’s rights, claims, credits, causes of action or rights of set-off against third parties relating to the Purchased Assets, including, without limitation, unliquidated rights under manufacturers’ and sellers’ warranties;

2.1.5 the Intellectual Property owned by or issued to the Seller or licensed to the Seller from a third party listed on Schedule 6;

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2.1.6 all claims and rights (if any) under the transferable licenses, including, but not limited to, licenses, permits, consents, authorizations, certificates and approvals of any governmental agency or other governmental authorizations listed on Schedule 7;

2.1.7 all books, accounts, records, files and papers, whether in hard copy or computer format, including, without limitation, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records (subject to all applicable laws), and any information relating to taxes imposed on the Business or the Purchased Assets to the extent such materials relate directly to the Business or the Purchased Assets;

2.1.8 the cash on hand or deposit at banks representing all the Client Deposits (“Cash”), the amount as at the date hereof is set out in column 4 of Schedule 4;

2.1.9 all of the assets, properties and rights related to the Business acquired by the Seller after the date of this Agreement;

2.1.10 all goodwill associated with the Business or the Purchased Assets, together with the right to represent to third parties that the Buyer is the successor to the Business,

(collectively, the “Purchased Assets”).

2.2 Required Consent

2.2.1 Without prejudice to Clause 4, in the event that the Seller is unable to transfer to the Buyer a Contract on the Closing Date because consent from the relevant party to the Contract (other than the Seller) for such transfer has not been obtained on or before that date, the Seller shall use its reasonable efforts to obtain such consent and transfer the full benefit and legal title of such Contract to the Buyer within 60 days from the Closing Date.

2.2.2 The Buyer shall use its reasonable efforts to assist the Seller in obtaining the consent for the purpose of Clause 2.2.1. Without prejudice to Clause 4, the Buyer may at its absolute discretion waive any of the requirements under Clause 2.2.1.

No assumption of liabilities

2.3 Save as herein provided to the contrary, the Buyer is not assuming any obligation or liability of any kind or nature whatsoever of the Seller, whether or not related to the Purchased Assets or the Business, including, without limitation, the following liabilities and obligations of the Seller:

2.3.1 all Claims, demands, obligations or liabilities for Tax for all periods prior to the Closing Date and all Claims, demands, obligations or liabilities for the payment of any transfer tax, stamp duty or recording or filing fees, if any, imposed upon the sale, transfer, assignment and conveyance of the Purchased Assets;

2.3.2 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever, whether or not accrued, absolute, contingent, determined or determinable, actual or threatened, known or unknown, which arose or were incurred on or before the Closing Date, or which are based on events occurring on or before the Closing

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Date, or which are based on or related to the operation of the Business or ownership or use of the Purchased Assets on or before the Closing Date, notwithstanding that the date on which the Claim, demand, liability or obligation is asserted is after the Closing Date;

2.3.3 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever relating to or resulting from the bad faith, willful misconduct or negligence of any Affiliate or other shareholders, managers, directors, officers, employees, agents or representatives of the Seller (including, but not limited to, sexual harassment, discrimination, wrongful termination or other claims involving the workplace), whether actual or threatened, which arose or were incurred on or before the Closing Date, or which are based on events occurring on or before the Closing Date, or which are based on or related to the operation of the Business or ownership or use of the Purchased Assets on or before the Closing Date, notwithstanding that the date on which the Claim, demand, obligation, liability or indemnification is asserted is after the Closing Date;

2.3.4 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever relating to any rent, rate or service charge in respect of the premises used by the Business;

2.3.5 all Claims, demands, obligations or liabilities of any nature whatsoever of the Seller to any of its Affiliates or shareholders;

2.3.6 all accounts payable of the Seller;

2.3.7 all indebtedness of the Seller or other liabilities of the Seller for any Borrowing;

2.3.8 any obligation or liability of the Seller which were required to be Disclosed, listed or described in this Agreement and which were not so Disclosed, listed or described;

2.3.9 any obligation or liability of the Seller for fees, costs and expenses relating to the negotiation, execution and delivery of this Agreement and the consummation of the transactions contemplated thereby, including, without limitation, any broker’s or finder’s fees or legal, accounting and other professional or consulting fees and expenses;

2.3.10 any Claim, demand, obligation or liability of the Seller existing at the Closing Date relating to accrued but unpaid salary or incentive, bonus or profit sharing compensation or payments or vacation, holiday, severance pay or any equity or option grants or issuances;

2.3.11 any Claim, demand, obligation or liability relating to any accrued or other liability (as required by US GAAP) for premiums, contributions or payments (including matching contributions or payments) required to be made by the Seller under or as a result of any pension, retirement, compensation or similar plan or for any penalties, interests or other charges relating thereto;

2.3.12 any obligation or liability of the Seller to (a) any of its employees who are offered employment with the Buyer but who on the Closing Date do not accept such employment, and (a) any former employees of the Seller;

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2.3.13 any obligation or liability of the Seller under any policies of insurance;

2.3.14 any obligation or liability of the Seller arising out of or resulting from the Seller’s noncompliance with any applicable law or regulation;

2.3.15 any liability, obligation or performance of the Seller under this Agreement;

2.3.16 any Claim, demand, liability or obligation of the Seller arising out of or resulting from the Seller’s acts or omissions occurring before, on or after the Closing Date;

2.3.17 any liability under or related to the credit cards listed in Section 10.1.15(a)(i) of the Disclosure Letter; and

2.3.18 any liability or obligation of the Seller relating to the Excluded Assets,

(collectively the “Excluded Liabilities”).

2.4 The Seller shall promptly pay and discharge in full when due or required to be discharged, or contest in good faith, all Excluded Liabilities.

2.5 Save as provided herein to the contrary, after the Closing, any regular periodic charges with respect to the Business or the Purchased Assets, including amounts payable with respect to personal property Taxes relating to the Purchased Assets, which become due and payable on or after the Closing Date and relate to periods that begin before and end after the Closing Date, shall be prorated and adjusted between the Seller and the Buyer as of the Closing Date on a per diem basis, and the Seller shall be responsible for and pay to the Buyer the portion of such amounts allocable to the period prior to the Closing Date for which payment is due on or after the Closing Date within five (5) Business Days of demand from the Buyer upon presentation of the relevant invoice(s) relating to such charges provided, however, that the Seller shall not be required to pay to the Buyer any amount it intends to dispute in good faith and shall provide the Buyer written notice of its intention to dispute such amount within such five (5) Business Day period.

2.6 From and after the Closing, the Buyer shall have the right and authority to collect for its own account all receivables and other related items that are included in the Purchased Assets. To the extent that, after the Closing, (i) the Buyer or any of its Affiliates receive any payment that is for the account of the Seller according to the terms of this Agreement, or the Seller makes a payment on behalf of the Buyer, the Buyer shall deliver such amount to the Seller or (ii) the Seller or any of its Affiliates receives any payment that is for the account of the Buyer or any of its Affiliates according to the terms of this Agreement, or the Buyer makes a payment on behalf of the Seller, the Seller shall deliver such amount to the Buyer. All amounts due and payable under this Clause 2.6, if any, shall be due and payable by the applicable party in immediately available funds, by wire transfer to an account designated in writing by the other party and shall be delivered to the other party within ten (10) Business Days of receipt thereof.

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3. PURCHASE PRICE

3.1 As consideration for the purchase of the Purchased Assets, in reliance upon the representations and warranties, covenants, agreements and undertakings of the Seller made herein, and subject to the terms and conditions of this Agreement, the Buyer shall pay to the Seller (or where applicable, the Buyer shall remit to the Seller), the sum of US$500,000 (the “Purchase Price”).

3.2 Any payments made to a party to this Agreement pursuant to this Agreement shall be made in cash in US$ and effected by crediting the account specified in the Payment Account Details of the payee(s) by way of wire transfer in immediately available funds on or before the due date for payment which shall be a good discharge of the party required to make payment in respect of its obligations to make such payment.

3.3 The Buyer shall be entitled to deduct or withhold from the Purchase Price such amount as the Buyer may be required to deduct or withhold on account of any Tax under any applicable law or regulation and pay only the balance thereof to the Seller and in such event, the payment of such balance of the Purchase Price (after the deduction or withholding as aforesaid) shall be deemed to be a good discharge of the Buyer’s obligations to make payment of the Purchase Price hereunder.

4. CONDITIONS

4.1 Conditions Precedent of the Buyer

The obligations of the Buyer under this Agreement are subject to the Buyer’s satisfaction that the following conditions have been duly fulfilled:

4.1.1 completion of satisfactory (in Buyer’s sole and discretionary judgment) legal, commercial, IT, human resources, taxation, financial and clients due diligence by Buyer;

4.1.2 the completion of any formal internal corporate approvals as may be required by Aegis Group plc including approval by the board of directors and Chief Executive Office of Aegis Group plc;

4.1.3 the parties to the Contracts set out in paragraphs (1) to (3) of Schedule 4 (other than the Seller) namely, (i) AIG.com, Inc. and Software Galeria, Inc.; (ii) Walt Disney Parks and Resorts; and (iii) Medallurgy LLC having given each of their respective consents to the assignments or novations of the same in favour of the Buyer;

4.1.4 (a)      there having occurred no Material Adverse Change in the period between the date of this Agreement and Closing;

(b) nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a breach of the Warranties;

(c) no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the purchase of the Purchased Assets by the Buyer;

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(d) each of the Seller and CDC having performed or complied with, in all material respects, all covenants, obligations and agreements contemplated by this Agreement to be performed or complied with by it at or prior to Closing, including without limitations those set forth in Clause 5;

(e) all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary or desirable for or in respect of the proposed sale of the Purchased Assets by the Seller to the Buyer having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies on terms satisfactory to the Buyer and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals remaining in full force and effect.

4.1.5 the Seller having certified in writing the matters mentioned under Clause 4.1.4.

4.1.6 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction of the Buyer.

4.2 Conditions Precedent of the Seller

The obligations of the Seller under this Agreement are subject to the Seller’s satisfaction that the following conditions have been duly fulfilled:

4.2.1 the completion of any formal internal corporate approvals as may required by the Seller including approval by the Seller’s and its Affiliates’ board of directors and stockholders.

4.2.2 (a)      there having occurred no Material Adverse Change in the period between the date of this Agreement and Closing;

(b) nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a breach of the Buyer Warranties;

(c) no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the purchase of the Purchased Assets by the Buyer;

(d) the Buyer having performed or complied with, in all material respects, all covenants, obligations and agreements contemplated by this Agreement to be performed or complied with by it at or prior to Closing;

(e) all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary for or desirable for or in respect of the proposed sale

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of the Purchased Assets by the Seller to the Buyer having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies on terms satisfactory to the Seller and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals, remaining in full force and effect.

4.2.3 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction of the Seller.

4.3 Responsibility for Satisfaction

4.3.1 The Seller undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.1.3 to 4.1.5 as soon as possible after the date of this Agreement and before Closing, and shall promptly give notice to the Buyer upon satisfaction of the same.

4.3.2 The Buyer undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.2.2 (b) and (d) as soon as possible after the date of this Agreement and before Closing, and shall promptly give notice to the Seller upon satisfaction of the same.

4.3.3 Without prejudice to the foregoing, it is agreed that all requests and enquiries from any government, governmental, supranational or trade agency, court or regulatory body shall be dealt with by the Seller and the Buyer in consultation with each other and each of the Seller and the Buyer shall upon mutual agreement, promptly co-operate with and provide all necessary information and assistance reasonably required by such government, agency, court or body upon being requested to do so by the other.

4.3.4 The Buyer may at any time by notice in writing to the Seller, waive any of the conditions in Clause 4.1, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.1 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Buyer.

4.3.5 The Seller may at any time by notice in writing to the Buyer, waive any of the conditions in Clause 4.2, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.2 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Seller.

4.3.6 Should the Buyer or the Seller become aware of anything which will or may prevent any of the conditions set out in Clause 4.1 or Clause 4.2 from being satisfied by the time and date required by Clause 4.4.1 and Clause 4.4.2 the relevant party shall forthwith notify the other in writing.

4.4 Non-Satisfaction

4.4.1 If any of the conditions in Clause 4.1 is not satisfied or waived by the Buyer on or before 11 September, 2007 or such other date as the parties may agree or the Buyer becomes aware of any fact that would prevent any of the conditions in Clause 4.1 from being satisfied, the Buyer may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.1).

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4.4.2 If any of the conditions in Clause 4.2 is not satisfied or waived by the Seller on or before 11 September, 2007 or such other date as the parties may agree or the Seller becomes aware of any fact that would prevent any of the conditions in Clause 4.2 from being satisfied, the Seller may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.2).

4.4.3 In the event that the Buyer or Seller shall terminate this Agreement in accordance with Clause 4.4.1 or Clause 4.4.2 (as the case may be), and without limiting the Buyer’s or Seller’s right to claim, all obligations of the Buyer and Seller under this Agreement shall, unless otherwise expressly stated, cease, but, for the avoidance of doubt, all rights and liabilities of the parties which have accrued before such termination shall continue to exist.

5. ACTION PENDING CLOSING

5.1 Seller’s General Obligations

The Seller undertakes to procure that from the date of this Agreement until Closing:

5.1.1 the Seller will carry the Business only in the ordinary and usual course and in the manner and scope carried on as at the date of this Agreement, save insofar as agreed in writing by the Buyer;

5.1.2 the Buyer and its agents will, upon reasonable notice, be allowed access to the clients, employees and premises of the Seller and shall also be allowed access to, and to take copies of, the books and records of the Seller including, without limitation, the statutory books, minute books, leases, licences, contracts, details of receivables, Intellectual Property, tax records, supplier lists and customer lists in the possession or control of the Seller which relate solely to the Business and the Purchased Assets, subject always to the applicable protections of confidentiality set forth in Clause 17 hereof;

5.1.3 such representatives and advisers as the Buyer requests may be designated to work with the Seller with regard to the management and operations of the Business. The Seller will consult with such representatives and advisers with respect to any action which may materially affect the Business of the Seller taken as a whole. The Seller will furnish to such representatives and advisers such information as it may reasonably request for this purpose;

5.1.4 the Seller shall take all commercially reasonable efforts consistent with past practices to maintain the present status of its property and assets (including the Purchased Assets);

5.1.5 the Seller shall take all commercially reasonable efforts consistent with past practices to maintain the validity of its Intellectual Property set out in Schedule 6;

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5.1.6 save only as may be necessary to give effect to this Agreement, the Seller shall not commit, voluntarily permit or procure any act or omission which would render any of the Warranties untrue, inaccurate or misleading in any respect upon Closing;

5.1.7 the Seller shall use its commercially reasonable efforts to promptly provide to the Buyer monthly management accounts in the usual form generated by the Seller;

5.1.8 the Seller shall authorize the Buyer to obtain from the California State Board of Equalization (“State Board of Equalization”) a certificate stating that no taxes, interest or penalties are due with regard to the Seller and shall permit the Buyer to provide the Seller’s details including its name, address, registration or permit number and a description of the transactions contemplated under this Agreement to the State of Board of Equalization upon the Buyer’s application for such certification.

5.2 Restrictions on the Seller

Without prejudice to the generality of Clause 5.1, except as may be expressly provided or contemplated in this Agreement or with the prior written consent of the Buyer (which consent shall not be unreasonably withheld), the Seller shall not between the date of this Agreement and Closing with respect to the Business or the Purchased Assets:

5.2.1 incur or enter into any agreement or commitment involving any capital expenditure in excess of US$25,000;

5.2.2 enter into or amend any contract or commitment in respect of the Business: (i) which is not capable of being terminated without compensation at any time with one months’ notice or less; or (ii) which is not in the ordinary and usual course of business and on arms’ length terms or (iii) which involves or may involve total revenue or total expenditure in excess of US$25,000;

5.2.3 enter into any leasing, hire purchase or other agreement or arrangement for payment on deferred terms otherwise than in the ordinary course of business;

5.2.4 incur any indebtedness otherwise than in the ordinary and usual course of business;

5.2.5 save as required by law, make any amendment to the terms and conditions of employment or engagement (including, without limitation, remuneration, pension entitlements and other benefits) of any employee, consultants or interns employed by the Seller under the Business, provide or agree to provide any gratuitous payment or benefit to any such person or any of their dependants, or dismiss or terminate (except with good cause) the employment of any employee or engage or appoint any additional employee for the Business;

5.2.6 acquire or agree to acquire or sell, transfer, lease, assign or dispose any Purchased Assets or agree to sell, transfer, lease, assign or dispose of any Purchased Assets or enter into or amend any material contract or arrangement in respect of the Purchased Assets;

5.2.7 sell, convey, lease, assign or otherwise transfer or dispose of any interest in any amounts receivable except in the ordinary course of business;

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5.2.8 delay making payment to any trade creditors of the Business generally beyond the date on which payment of the relevant trade debt should be paid in accordance with credit periods authorised by the relevant creditors (or (if different) the period extended prior to the date of this Agreement by creditors in which to make payment);

5.2.9 amend, to any material extent, any of the terms on which goods, facilities or services are supplied, such supplies being material in the context of the Business, except where required to do so in order to comply with any applicable legal or regulatory requirement;

5.2.10 enter into any guarantee, indemnity or other agreement to secure any obligation of a third party or create or agree to create any Encumbrance over any of the Purchased Assets;

5.2.11 amend or discontinue any Insurance contract, fail to notify any claim under the Insurances in accordance with the provisions of the relevant policy or settle any such claim below the amount claimed;

5.2.12 make any change to its accounting practices or policies or accounting reference date or amend its memorandum or articles of association (or equivalent constitutional documents);

5.2.13 make any substantial change in the nature or organisation of the Business;

5.2.14 discontinue or cease to operate all or a material part of the Business or resolve to be wound up;

5.2.15 change its residence for Taxation purposes;

5.2.16 grant a licence of or assign or otherwise dispose of or create any Encumbrance over any Purchased Assets in favour of any third party (not being the Buyer); or

5.2.17 commence, compromise or discontinue any legal or arbitration proceedings relating to the Business and the Purchased Assets (other than in respect of the collection of debts which are not material in the context of the Business in the ordinary and usual course of business).

5.3 Exercise of Buyer’s Rights

It is hereby acknowledged (for the avoidance of doubt) that none of the provisions of this Clause 5 or the exercise or failure to exercise by the Buyer of its rights thereunder, shall give rise to any liability on the part of the Buyer or any of its employees, consultants or representatives or any person connected with it (except to the extent that any losses or damages to the Seller are caused by the Buyer’s gross negligence or wilful misconduct in respect of the exercise of the Buyer’s right under Clause 5.1.2).

6. CLOSING

6.1 Closing shall take place at the offices of Jones Day at 29th Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong or such other place as the parties may agree, on the Closing Date.

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6.2 On the Closing Date:

6.2.1 the Seller shall deliver or cause to be delivered to the Buyer:

(a) such conveyances, assurances, transfers, assignments, releases, novation agreements, consents and other documents duly executed by the relevant parties as the Buyer may require to vest in the Buyer the full benefit of and valid legal title to the Purchased Assets and all other rights and assets hereby agreed to be sold and the full benefit of this Agreement including:

(i) Bill of Sale and Assignment of the Purchased Assets in substantially the form attached as Schedule 12 duly executed by the Seller and CDC;

(ii) duly executed assignments or novation agreements in the Agreed Form of the Contracts set out in paragraphs (1) to (3) of Schedule 4;

(b) all subsisting contracts, licenses and permits in connection with the Purchased Assets and all books, accounts, papers, records and other documents (including financial records) relating to the Purchased Assets and all lists of customers and suppliers and other information or documents in relation to the Business as the Buyer may require;

(c) all the designs and drawings, plans, technical and sales publications, advertising material, brochures, catalogues and other technical and sales matter of the Seller in relation to the Business together with any plates, blocks, negatives and other like material relating thereto;

(d) any other documents of title or transfer of ownership relating to any of the other Purchased Assets;

(e) such other documents as may be required to give to the Buyer good title to the Purchased Assets, to enable the Buyer or its nominees to become the registered owner thereof and to consummate the transactions contemplated by this Agreement;

(f) duly notarised power of attorney under which any document is executed on behalf of the Seller if applicable;

(g) certificate in the form set out in Part 1 of Schedule 10 duly executed by the Seller confirming the Warranties;

(h) certificate in writing duly executed by the Seller pursuant to Clause 4.1.5 confirming the matters mentioned thereunder;

(i) the service agreement in substantially the form attached hereto as Schedule 11 (“Service Agreement”) duly executed by Wei-Tai Kwok, and the employment letters in substantially the form attached hereto as Part 2 of Schedule 1 duly executed by Simon Mathews, James Douglas and Camila Carvalho;

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(j) legal opinion from Cayman counsel in the Agreed Form and dated as of the Closing Date;

(k) duly executed release in the Agreed Form releasing the Transferred Employees from certain obligations and liabilities under the existing employment agreements (including any non-compete or non-disclosure provisions and any non-solicitation undertakings thereunder) permitting the Transferred Employees to perform their obligations under the relevant employment agreements with the Buyer and, in the case of any non-solicitation undertakings, only to the extent necessary to assist the Seller in compliance of its obligations under Clause 8.2;

(l) [intentionally left blank]

(m) a reasonably current long form Good Standing Certificate of the Seller issued by the California Secretary of State;

(n) appropriate payoff letters and termination statements under the Uniform Commercial Code and other instruments as may be requested by the Buyer to extinguish all outstanding indebtedness of the Seller (including indebtedness to Affiliates) in respect of the Purchased Assets and all Encumbrances related thereto as reasonably directed by the Buyer;

(o) reasonably current Certificate of Good Standing and Incumbency of CDC;

(p) signed copies of the resolutions duly passed by:

(i) the board of directors and the shareholder of the Seller; and

(ii) the board of directors of CDC, approving this Agreement, the transfer of the Purchased Assets and the transactions contemplated hereunder, and the execution, delivery and performance of this Agreement by the Seller and CDC, in form and substance satisfactory to the Buyer;

a schedule prepared by the Seller setting out the Work-In-Progress for the purpose of the Buyer’s preparation of the Calculation Statement.

6.2.2 the Seller shall permit the Buyer to take possession of the Purchased Assets.

6.3 Upon compliance by the Seller with the provisions of Clause 6.2, the Buyer shall at Closing pay the Purchase Price to the Seller in accordance with Clauses 3.2 and 3.3.

6.4 The Buyer shall provide Seller with a certificate in the form set out in Part 2 of Schedule 10 duly executed by the Buyer confirming the Buyer Warranties.

6.5 It is a condition to Closing that (and the Buyer and Seller shall have no obligation to complete the sale and purchase of the Purchased Assets hereunder unless) the transactions contemplated under all the Acquisition Agreements shall be completed simultaneously and successfully with the completion of the sale and purchase of the Purchased Assets hereunder.

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6.6 Closing Tangible Asset Value

6.6.1 Within a period of two (2) months after Closing, the Buyer shall at its sole cost and expense prepare the Closing Tangible Asset Balance Sheet and provide the Seller with a written statement of its calculation of the Closing Tangible Asset Value (the “Calculation Statement”) according to the Closing Tangible Asset Balance Sheet. The Seller shall render reasonable assistance to the Buyer and provide such information as the Buyer may reasonably require in order to enable the Buyer to prepare the Closing Tangible Asset Balance Sheet at the Buyer’s sole cost and expense.

6.6.2 Upon receiving a Calculation Statement, the Seller shall within thirty (30) days either (i) notify the Buyer in writing that they agree with the Calculation Statement or (ii) notify the Buyer in writing that it does not agree with the Calculation Statement and stating the grounds of its disagreement and its own calculation of the Closing Tangible Asset Value together with a copy of any financial information used in making such calculation (the “Dispute Notice”). The Buyer shall give reasonable assistance to the Seller and its representatives and agents including without limitation access to the books and records relating to the Business and Purchased Assets necessary for the Seller to evaluate the Calculation Statement. If the Buyer does not receive any Dispute Notice from the Seller within such thirty (30) days period, the Seller shall be deemed to have agreed to the Calculation Statement and the Buyer’s calculation of the Closing Tangible Asset Value.

6.6.3 In the event a Dispute Notice is given by the Seller according to Clause 6.6.2, the Seller and the Buyer shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Seller and the Buyer are unable to reach an agreement within five (5) days after receipt of the Dispute Notice by the Buyer, either party may request an Independent Advisor to review the disputed items or amounts and compute the Closing Tangible Asset Value in question. In making its calculation, the Independent Advisor shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within fourteen (14) days after such request and shall be conclusive and binding on the parties. The fees, costs and expenses of the Independent Advisor shall be borne by the party whose calculation of the Closing Tangible Asset Value is furthest from the Independent Advisor’s calculation.

If the Closing Tangible Asset Value is less than the sum of US$25,000, the Seller shall forthwith pay to the Buyer the amount of the deficit. If the Closing Tangible Asset Value is greater than the sum of US$25,000, the Buyer shall forthwith pay to the Seller the amount by which the Closing Tangible Asset Value exceed US$25,000.

6.7 Client Billing and Work-In-Progress

6.7.1 Upon the execution of this Agreement by the parties, the Seller shall notify all of its clients that are billed on a monthly basis of the transactions contemplated by this Agreement. The Seller shall bill such clients for all services provided through Closing Date and such amounts shall be paid by the clients directly to the Seller. If any client does not accept such billing arrangement, the Buyer shall bill the relevant client and remit payment received from the client in accordance with Clause 2.6.

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6.7.2 For all client projects which are billed on a milestone and fixed fee basis and Contracts for which Client Deposits have been paid to the Seller, the Seller and Buyer shall negotiate in good faith to agree upon the Work-In-Progress for each such project and Contract. Any disagreements regarding calculation of the Work-In-Progress as set out in the Calculation Statement shall be resolved in accordance with the mechanism set forth in Clause 6.6 of this Agreement.

6.7.3 The Seller warrants and agrees that the Buyer can bill the clients in full in respect of all account receivables for Work-In-Progress and that such accounts receivables shall be collectable in full. The Seller shall reimburse the Buyer any amount of the account receivables included in the calculation of the Work-In-Progress which is not fully paid by the relevant debtor within a period of six (6) months after Closing (“Outstanding Accounts Receivables”). Upon the Seller’s reimbursement of the Outstanding Accounts Receivables to the Buyer, the Buyer shall assign the right for collection of the Outstanding Account Receivables to the Seller.

7. BULK SALES

The Buyer hereby waives, in connection with the transactions contemplated by this Agreement, compliance with the “bulk sales” provision of Article 6 of the Uniform Commercial Code as it is in effect in the states where the Seller owns assets to be conveyed to the Buyer hereunder and other similar bulk transfer notice provisions other than bulk sale tax notice provisions. The Seller shall indemnify and hold harmless the Buyer against any and all liabilities that may be asserted by third parties against the Buyer as a result of such non-compliance.

8. EMPLOYMENT

8.1 Prior to the Closing Date, the Seller shall give notice to the Employees terminating their employment in accordance with any applicable laws including but not limited to any laws related to foreign national work visa, with effect from the Closing Date or such later date as shall be required in order to comply with the provisions of the applicable laws. On or before Closing, the Buyer shall offer to such Employees employment with the Buyer on base salary terms no less favourable from those on which the Employees are currently employed by the Seller as set forth on Part 1 of Schedule 1, and on such additional terms as are set forth on Part 2 of Schedule 1 with effect from the Closing Date or such later date as required by applicable laws (“Effective Employment Date”), such offer notices to be in Agreed Form. If the Effective Employment Date for any Employee shall fall on a date after the Closing Date, then, for the period from the Closing Date to the Effective Employment Date, the Seller shall, upon the Buyer’s request, and pursuant to an agreement with terms and conditions reasonably satisfactory to the Buyer and the Seller, second such Employee as the Buyer so requests to the Buyer. The Buyer will, during the term of secondment (“Secondment Period”) of each such Employee, be responsible for the payment of the salaries, expenses and benefits of such Employee relating to and during such secondment (“Second Payments”). In addition, the Buyer shall, during the Secondment Period for any Seconded Employee, accrue bonuses for such Seconded Employee in accordance with the Buyer’s bonus policies then in effect. Such bonuses shall be paid to the Seconded Employee in accordance with the Buyer’s bonus policies then in effect after the Seconded Employee becomes an employee of the Buyer. The Buyer may terminate the secondment of any Employee at any time;

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provided, however that the Buyer shall provide Seller five (5) days written notice prior to such termination; provided further, however, that Buyer shall not be required to provide such notice to the Seller before terminating the secondment of such Employee if the Employee has engaged in any felony, fraud, dishonesty, gross negligence, misconduct or conduct that brings Buyer or any subsidiary or affiliate of Buyer into substantial public disgrace or disrepute. The Buyer hereby undertakes to remit to the Seller any Secondment Payments paid by the Seller within ten (10) Business Days of the Buyer’s receipt of a statement from the Seller setting out a breakdown of such payments relating to each seconded Employee.

8.2 The Seller shall use commercially reasonable efforts to procure the Employees to consider employment with the Buyer and will assist the Buyer in making offers and in hiring the Employees, including by providing the Buyer with access to such Employees during the period from the effective date of this Agreement until Closing. The Seller shall not take, and shall cause each of its Affiliates not to take, any action that would impede, hinder, interfere or otherwise compete with the Buyer’s effort to hire any Employees. Employees who receive and accept offers of employment from the Buyer are referred to as “Transferred Employees” as of the Effective Employment Date and shall enter into such agreements as may be requested by the Buyer, which may include customary invention assignment, confidentiality, non-solicitation and non-compete provisions. The Seller shall be responsible for Employees who do not become Transferred Employees and for all severance, costs and expenses related to such Employees.

8.3 Save as provided in the third to last sentence of Clause 8.1, no employment related liabilities arising through the Effective Employment Date with respect to any Transferred Employees, any other Employees or employees of the Seller or any Subsidiary of the Seller or any of their respective beneficiaries shall be assigned to or assumed by the Buyer. The Seller shall pay each Transferred Employee any and all salary and other employment related payments due to such Transferred Employee (a) through the Effective Employment Date in accordance with the Seller’s existing policies, including any payments with respect to accrued vacation time, bonuses agreed to be paid by the Seller or otherwise promised by the Seller for the financial year 2007, severance or prior notice of termination, and (b) any payments required to be made to any such Employee as a result of the transactions contemplated hereby. The Seller shall fully indemnify and keep indemnified the Buyer against any claim for wrongful dismissal or redundancy or otherwise that may be made against the Buyer by any person who was at any time an employee of the Seller in connection with the Business including any claims arising out of their terms of employment or under the applicable laws and against any other claims arising from the termination of their employment, and the Seller shall also indemnify and keep indemnified the Buyer against any such claims brought by any Employee who accepts employment with the Buyer to the extent that such claims relate or are referable to a period or periods of employment before the Effective Employment Date. Notwithstanding the foregoing, the Buyer shall indemnify the Seller against any claim made by a customer or supplier of the Buyer based on work performed by a seconded Employee at the direction of the Buyer during the Secondment Period.

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9. ASSIGNMENT OF CONTRACTS AND RIGHTS

9.1 This Agreement shall not constitute an agreement to assign any Purchased Asset or any claim, right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of the Buyer thereunder.

9.2 If any licenses, consents or agreements from third parties are required for the transfer, assignment or novation to or in favour of the Buyer of any Contracts under this Agreement, the Seller shall use its reasonable efforts (but without any payment of money by the Buyer) to obtain such license, consents or agreement from the other parties on or before the Closing Date or claim any right or any benefit arising thereunder for the assignment thereof to the Buyer as the Buyer may request.

9.3 Without prejudice to Clauses 2.2 and 4, if such license, consent or agreement is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of the Seller thereunder so that Buyer would not in fact receive or otherwise be entitled to the full benefit of all such rights, the Seller shall, to the extent not prohibited under applicable agreements, enter into such arrangement with the Buyer at the Buyer’s reasonable direction under which the Buyer will obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or subleasing to the Buyer, or under which the Seller would enforce for the benefit of the Buyer, with the Buyer assuming Seller’s obligations, any and all rights of the Seller against a third party thereto. The Seller shall promptly pay to the Buyer when received all monies received by the Seller under any Purchased Asset or any claim, right or any benefit arising thereunder. The foregoing provisions do not affect Buyer’s rights and remedies against the Seller in respect of a Contract which they have warranted is assignable, or may be performed by Buyer instead of the Seller without any novation or transfer agreement.

9.4 Subject to Clauses 9.1 to 9.4, with effect from the Closing Date, the Buyer shall observe and perform all obligations and commitments of the Seller under the Contracts and the liabilities incurred from such obligations and commitments provided that nothing in this Agreement:

9.4.1 shall require the Buyer to perform any obligation falling due for performance or which should have been performed before the Closing Date; or

9.4.2 shall make the Buyer liable for any act, neglect, default or omission in respect of any Contracts or for any claim, expense, loss or damage arising from any failure to obtain the consent or agreement of any third party to the entry into of this Agreement or from any breach of any of the Contracts caused by this Agreement or its Closing; or

9.4.3 shall impose any obligation on the Buyer for or in respect of any goods supplied by the Seller or any service performed by the Seller.

9.5 The Seller shall indemnify the Buyer against all actions, proceedings, costs, damages, claims and demands in respect of:

9.5.1 any act or omission on the part of the Seller in relation to the Contracts;

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9.5.2 any alleged fault, defect or error of any kind arising from goods supplied or services provided by the Seller.

10. WARRANTIES BY SELLER AND CDC

10.1 The Seller hereby warrants and represents to the Buyer that the matter set forth in Clauses 10.1.1 to 10.1.59 (“Warranties”) are true, accurate and complete (a) as of the date of this Agreement and (b) as of the Closing Date.

GENERAL WARRANTIES

The Accounts

10.1.1 General

the Accounts and Management Accounts:

(a) have been prepared in accordance with US GAAP;

(b) are accurate and show a true and fair view of the affairs of the Seller and the Business as at the specified accounting date and of its results for the accounting reference period ended on that date;

(c) comply with the requirements of all applicable statutes, laws, rules and regulations;

(d) are prepared on consistent bases and policies of accounting; and

(e) are not affected by any unusual or non-recurring items except as may be referenced in the notes associated therewith.

10.1.2 Provision for liabilities, capital commitments and bad debts

the Accounts and Management Accounts make adequate provisions or reserves for, or disclose, all liabilities (including contingent, deferred and disputed liabilities) and whether liquidated or unliquidated and all capital commitments of the Seller and the Business as at the specified accounting date, indicate clearly which of those liabilities are not usually provided for or reserved, and make adequate provision or reserve for all bad and doubtful debts. All accounts and notes receivables of the Seller are, individually and in the aggregate, collectible in full, net of reserves therefore. All accounts and notes receivable of the Seller represent sales actually made in the ordinary course of business or valid claims as to which full performance has been rendered by the Seller. To the Seller’s knowledge, no counter claims, defences or offsetting claims with respect to the accounts or notes receivable of the Seller are pending or threatened. Save as Disclosed, all of the accounts and notes receivable of the Seller relate solely to sales of goods or services to customers of the Seller, none of whom are Affiliates of the Seller or any of its Affiliates.

10.1.3 [Intentionally left blank]

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10.1.4 Valuation and depreciation as in previous accounts

the method of valuing work in progress adopted in the Accounts and Management Accounts and the basis of depreciation adopted in respect of fixed assets are the same as the corresponding accounts for the preceding years (if any).

10.1.5 Rate of depreciation

save as Disclosed, the rate of depreciation adopted in the Accounts and Management Accounts is sufficient for the value of each of the fixed assets of the Business to be written down to nil by the end of its useful working life.

10.1.6 Profits

save as Disclosed, the profits shown in the Accounts and Management Accounts have not to a material extent been affected (except as disclosed in those accounts) by any extraordinary or exceptional event or circumstance or by any other factor rendering them unusually high or low except as may be referenced therein.

10.1.7 Position since Accounts Date

save as Disclosed, since the Accounts Date:

(a) the Business has been carried on in the ordinary course and so as to maintain it as a going concern;

(b) there has been no Material Adverse Change in the financial or trading position or prospects of the Seller and the Business;

(c) there has been no reduction amounting to a Material Adverse Change in the value of the net tangible assets of the Seller and the Business on the basis of the valuations adopted in the Accounts;

(d) the Seller has not entered into any transaction which has given rise or shall give rise to a liability to Taxation on the Seller (or would have done so or would or might do so but for the availability of any relief, allowance, deduction or credit) other than profits tax on actual income (and not chargeable gains or deemed income) of the Seller arising from transactions entered into in the ordinary course of business;

(e) the Business has not been affected by the loss of any important customer or source of supply or by any abnormal factor not affecting similar businesses to a similar extent and the Seller are not aware of any facts likely to give rise to any such effect whether before or after Closing;

(f) the Seller has not acquired or disposed of or agreed to acquire or dispose of any business or any asset;

(g) no debtor has been released by the Seller on terms that he pays less than the book value of any debt (subject to settlement discounts on the usual terms which have been Disclosed to the Buyer) and no debt has been written off or has proved to be irrecoverable to any extent;

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(h) the Seller has not paid any service, management or similar charges or any interest or amount in the nature of interest to any other person or incurred any liability to make such a payment other than in the ordinary course of business;

(i) the Seller does not have any known, material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, regardless of when asserted) arising out of transactions or events entered into prior to the date of this Agreement, or any action or inaction, or any state of facts existing, with respect to or based upon transactions or events occurring prior to the date of this Agreement, except (i) liabilities reflected in the Accounts or Management Accounts, or (ii) liabilities that have arisen after the Accounts or Management Accounts Date in the ordinary course of business (none of which relates to breach of contract, breach of warranty, tort, infringement, legal violation or environmental liability).

(j) Schedule 9 sets forth a true, accurate and complete list of the name and address of each bank with which the Seller has an account or safe deposit box and the name of each person authorized to draw thereon or have access thereto.

Assets

10.1.8 Title to Assets

the assets included in the Accounts and Management Accounts or acquired by the Seller since the Accounts Date and all Purchased Assets are the absolute property of the Seller free from any mortgage, charge, lien, bill of sale or other Encumbrance and are not the subject of any leasing, hiring or hire-purchase agreement or agreement for payment on deferred terms or assignment or factoring or other similar agreement or any interests of the third parties, and all such assets are in the possession or under the control of the Seller.

10.1.9 Condition of plant machinery and equipment

the machinery, office equipment, computer systems and vehicles used by the Seller for the Business are in good repair, regularly maintained and fully serviceable and comply in all material respects with any applicable legal requirement or restriction, and the vehicles are duly licensed and suitable for the purposes for which they are used.

10.1.10 Control of records and information

all records and information belonging to the Seller (whether or not held in written form) relating to the Business and the Purchased Assets are in its exclusive possession, under its direct control and subject to unrestricted access by it.

10.1.11 Acquisition at arm’s length

the Seller has not acquired any Purchased Asset on terms which were not by way of bargain at arm’s-length.

10.1.12 [intentionally left blank]

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10.1.13 Nature of debts

the Seller is not owed any money other than trade debts incurred in the ordinary course of business and cash at bank under the Business.

10.1.14   (a)      Realisation of book debts

the book debts shown in the Accounts and Management Accounts have realised, or shall realise within twelve months from the date of this Agreement, their full nominal amount less any reserve for bad or doubtful debts included in the Accounts and Management Accounts; and the book debts of the Seller which have arisen since the Accounts Date shall realise within the same period.

(b) Sufficiency of Assets

the Purchased Assets constitute assets, properties and rights used exclusively in the Business as heretofore conducted.

Borrowings, Grants and Loans to Directors

10.1.15 Borrowings

(a) save as Disclosed the Seller does not have outstanding any obligation for the payment or repayment of money, whether present or future, actual or contingent, relating to the Business in respect of:

(i) monies borrowed or raised (whether from banks or otherwise and including, without limitation, any revolving lines of credit or term loans);

(ii) any recourse to a company selling or discounting receivables in respect of receivables sold or discounted;

(iii) moneys raised under any bond, note, stock, or other security;

(iv) moneys raised under or in respect of acceptance credit and documentary credit facilities;

(v) the acquisition cost of assets or services to the extent payable after the time of acquisition or possession;

(vi) rental payments under capital leases, chattel leases and hire purchase agreements; or

(vii) any guarantee, indemnity or other assurance against or arrangement intended to prevent or limit loss in respect of any obligation for the payment or repayment of money described in paragraphs (i) to (vii) above whether by the Seller, its Affiliates, shareholders, managers, officers, employees, agents, representatives or any other third party (any such obligation being referred to under this Agreement as a “Borrowing”);

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(b) save as Disclosed the Seller does not have subsisting over the whole or any part of its present or future revenues or assets under the Business any Encumbrance, mortgage, charge, pledge, lien or other security interest or any other agreement or arrangement having a similar effect.

(c) save as Disclosed no Borrowing of the Seller relating to its Business has become or is now due and payable, or capable of being declared due and payable, before its normal or originally stated maturity and no demand or other notice requiring the payment or repayment of money before its normal or originally stated maturity has been received by the Seller.

(d) no event or circumstance has occurred, or may occur with the giving of notice or lapse of time determination of materiality or satisfaction of any other condition, such as to entitle any person to require the payment or repayment of any Borrowing relating to the Seller’s Business before its normal or originally stated maturity or which is or shall be such as to terminate, cancel or render incapable of exercise any entitlement to draw money or otherwise exercise the rights of the Seller under an agreement relating to Borrowing relating to the Seller’s Business.

10.1.16 Grants and subsidies

the Seller has not done or agreed to do anything in respect of its Business as a result of which:

(a) any investment grant or other grant or any subsidy received by the Seller is or may be liable to be refunded wholly or partly; or

(b) any application made by the Seller for such a grant or subsidy shall or may be refused wholly or partly

and neither the signature nor the performance of the Agreement shall have any such result.

10.1.17 Connected transactions

there is not outstanding any agreement or arrangement between the Seller and any company of which it is a subsidiary or another subsidiary of any such company relating to the Business (including, but not limited to, any such agreement or arrangement under which the Seller is, or may in the future become, liable to pay any service, management or similar charge or to make any payment of interest or in the nature of interest).

Environment

10.1.18 the Seller has complied in all material respects with Environmental Law in respect of the Business and:

(a) there are no circumstances in relation to the Seller or the Business which would reasonably be expected to give rise to or to the Seller’s knowledge have given rise to any civil, criminal, administrative or other action, claim, suit, complaint, proceeding, investigation, decontamination, remediation or expenditure by any person or competent authority under Environmental Law in relation to any properties now owned or formerly owned by the Seller or used in the Business;

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(b) the Seller has obtained and there are in full force and effect and the Seller has at all times complied in all material respects with all environmental Permits necessary for the Business, there are no circumstances which could reasonably be expected to lead to the revocation, cancellation, suspension, modification, variation or alteration of such environmental Permits and there are no circumstances which necessitate any works, remediation or expenditure (other than routine maintenance) in order to continue to comply with the environmental Permits;

(c) at no time has the Seller received any notice alleging a breach of the terms of an environmental Permit or any other breach of Environmental Law;

(d) all assessments reviews reports returns information and audits required by Environmental Law or any environmental Permit have been properly carried out and submitted to the appropriate authorities and their recommendations and requirements implemented where required by Environmental Law;

(e) to the Seller’s knowledge, there are no further environmental Permits to be obtained in connection with the current business of the Seller which require works, remediation or additional expenditure to ensure compliance with such environmental Permits.

Intellectual Property Rights

10.1.19 Intellectual Property

(a) the Intellectual Property as listed on Schedule 6 comprises all of the intellectual property rights necessary for the operation of the Business as conducted by the Seller prior to the date hereof and the Closing Date;

(b) Schedule 6 sets forth a complete and correct list of all:

(i) patented or registered Intellectual Property and pending patent applications or other applications for registrations of Intellectual Property owned or filed by the Seller;

(ii) all trade names and unregistered trademarks, service marks and domain names owned or used by the Seller;

(iii) all copyrights and copyrightable works owned or used by the Seller; and

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(iv) all licenses or similar agreements for the Intellectual Property to which the Seller is a party, either as licensee or licensor;

(c) save as Disclosed the Seller owns and possesses all right, title and interest in and to, or has a valid and enforceable license to use, the Intellectual Property necessary for the operation of its Business as conducted by it prior to the date hereof and the Closing Date, free and clear of all liens, licenses, security interests, encumbrances and other restrictions;

(d) to the Seller’s knowledge no claim by any third party contesting the validity, enforceability, use or ownership of any of the Intellectual Property has been made, is currently outstanding or, is threatened and to the Seller’s knowledge, there are no grounds for the same;

(e) to the Seller’s knowledge, no loss or expiration of any part of the Intellectual Property is pending or reasonably foreseeable;

(f) the Seller has not received any notices of, and is not aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to the Intellectual Property (including, without limitation, any demand or request that the Seller license any rights from a third party);

(g) the Seller has not infringed, misappropriated or otherwise conflicted with any intellectual property rights or other rights of any third parties and the Seller is not aware of any infringement, misappropriation or conflict which will occur as a result of the continued operation of its business as conducted by the Seller prior to the date hereof and the Closing Date; and

(h) the transactions contemplated by this Agreement will have no effect on the Seller’s right, title and interest in and to the Intellectual Property. The Seller has taken all necessary action, in its reasonable business judgment, to maintain and protect the Intellectual Property so as to not affect the validity or enforceability of the Intellectual Property.

10.1.20 Web site

save as Disclosed, with respect to the Seller’s Web site used for the Business, the Seller has taken all commercially reasonable steps in connection with the creation and operation of the Web site, including, without limitation, the following:

(a) the Seller (i) has obtained the following Universal Resource Locators (“URLs”): theglobe.ionglobal.com; (ii) has maintained adequate computer resources and system redundancies to ensure that no service outages will occur due to insufficient data-storage, memory, server or other related reasons at operations levels consistent with the Business as currently conducted; and (iii) has in place, prior to activation of the Web site, a plan to permit and accommodate anticipated increases in traffic levels (e.g., additional servers, hardware, software and/or personnel); and

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(b) to the Seller’s knowledge, the Seller has complied in all material respects with all current privacy standards regarding data collection of site visitors and customers, including without limitation, obtaining certification from eTrust and BBBOnline as applicable (if global—then must also be in compliance with the European Privacy Directive and register accordingly, as well as other countries’ privacy policies).

Commercial Arrangements and Conduct

10.1.21 Material contracts

save as Disclosed, in relation to the Business and the Purchased Assets, there is not outstanding:

(a) any contract of guarantee, indemnity or suretyship or any contract to secure any obligation of any person;

(b) any agreement or arrangement between the Seller and a major distributor, supplier or customer of the Seller which involves total revenue or total expenditure in excess of US$25,000;

(c) any joint venture, consortium or partnership agreement or arrangement to which the Seller is a party;

(d) any sale or purchase option or similar agreement or arrangement affecting any assets owned or used by the Seller or by which it is bound;

(e) any liability, obligation or commitment of any kind (other than those listed in (a) to (d) above) on the part of the Seller (including a capital commitment) which:

(i) is incapable of complete performance within three months from the date of Agreement; or

(ii) has not been incurred in the ordinary course of business; or

(iii) is, or is likely to be, of major significance to the Company; or

(iv) exceeds, or is likely to exceed, in aggregate a sum of US$25,000.

10.1.22 Effect of Agreement on other agreements

save as Disclosed there is no agreement or arrangement in relation to the Business and the Purchased Assets involving a total revenue or total expenditure in excess of US$25,000 between the Seller and any other person which shall or may be terminated as a result of this Agreement or Closing or which shall be affected by it or which includes any provision with respect to a change in the control, management or shareholders of the Seller.

10.1.23 Commercial position

save as Disclosed, so far as the Seller is aware:

(a) there is no substantial customer or supplier of the Seller in relation to the Business who has ceased purchasing or ordering from or supplying to it or who to the Seller’s knowledge is likely after the date of this Agreement or Closing to reduce substantially or terminate purchases or orders from or supplies to it;

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(b) there are no special circumstances which might lead to the supply by the Seller or to it of any goods or services, in relation to the Business being restricted or hindered.

10.1.24 Restrictive agreements and anti-competitive behaviour

(a) the Seller does not violate and has not violated any law or regulation applicable in any jurisdiction relating to anti-competitive agreements or practices or behaviour or any similar matter;

(b) the Seller is not in relation to the Business, bound by or party to any order or decision made or undertakings (binding or not) given to or any court or tribunal of competent jurisdiction or any similar authority in any jurisdiction, under or in any law, regulation or administrative process relating to unfair competition, anti-trust, monopolies, mergers or other similar matters;

(c) except as contemplated by this Agreement and the related agreements, the Seller has not in relation to the Business, within the last two years been party to any merger, acquisition, reorganization or other similar arrangement which was capable of review by any anti-trust or similar authorities in any jurisdiction.

10.1.25 Notice of official action

the Seller is not aware of any process, notice or communication, formal or informal, by or on behalf of any authority of any country having jurisdiction in anti-trust matters, in relation to any aspect of the Business or the conduct of the Seller or any agreement or arrangement to which the Seller is or was, or is alleged to be or have been, a party, and so far as the Seller are aware it is not likely to receive any such process, notice or communication.

Litigation, Defaults and Insurance

10.1.26 Legal proceedings

save as Disclosed the Seller is not engaged or proposing to engage in any litigation, arbitration, prosecution or other legal proceedings, and there are no claims or actions (whether criminal or civil) in progress, outstanding, pending or threatened against the Seller, any of its assets or to the Seller’s knowledge, against any of its directors or officers or in respect of which the Seller is liable to indemnify any party concerned.

10.1.27 Unlawful acts by the Seller

to the Seller’s knowledge, neither the Seller nor any of its directors or any of its Affiliate’s, officers or employees has by any act or default committed:

(a) any criminal or unlawful act in connection with the business of the Seller, other than minor road traffic offences;

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(b) any breach of trust, fraud or other willful misconduct in relation to the business or affairs of the Seller or misappropriation or infringement of any Intellectual Property; or

(c) any breach of contract or statutory duty or any tortious act which could entitle any third party to terminate any contract to which the Seller is a party or could lead to a claim against the Seller for damages, compensation or an injunction.

10.1.28 Defaults by others

save as Disclosed no party with whom the Seller has entered into any contract in relation to the Business or the Purchased Assets is in default under it, and there are no circumstances likely to give rise to such a default.

10.1.29 Official investigations

to the Seller’s knowledge, no governmental or official investigation or inquiry concerning the Seller is in progress or threatened and, so far as the Seller is aware, there are no circumstances which are likely to give rise to any such investigation or inquiry.

10.1.30 Adequacy of cover

the Seller has, and at all times has had, valid insurance coverage in respect of the Business and Purchased Assets:

(a) against all risks (including product liability and loss of profits for a period of at least six months) normally insured against by companies carrying on the same type of business as the Seller or having similar assets;

(b) for the full replacement value of its assets and for such amount in respect of its business as would in the circumstances be prudent for such a business; and

(c) from a well-established and reputable insurer.

10.1.31 Policies

all policies of insurance taken out in connection with the Business or Purchased Assets of the Seller have been Disclosed to the Buyer, are written in the name of the Seller and are in full force and effect; and the Seller has not done or omitted to do or allowed anyone to do or not to do anything which might render any of those policies void or voidable and has complied with all conditions attached to them.

10.1.32 Claims

no claim under any policy of insurance taken out in connection with the Business or Purchased Assets of the Seller is outstanding and, so far as the Seller is aware, there are no circumstances likely to give rise to such a claim.

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Corporate Organisation and Business

10.1.33 Corporate Status

(a) the Seller (including any of its representative office or branch) has been duly incorporated and validly existing under the laws of the jurisdiction of its incorporation, and is duly authorized, qualified or licensed to do business as a foreign corporation in each of the jurisdictions that it is now carrying on business;

(b) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Seller and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based;

(c) so far as the Seller is aware, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Seller has been or is likely to be adversely affected; and

(d) neither the execution of this Agreement or the other documents hereunder, nor the performance by the Seller or CDC of their respective obligations hereunder or thereunder will (a) violate or conflict with the Articles of Incorporation or the bylaws of the Seller or any applicable law, (b) violate, conflict with or result in a breach or termination of, or otherwise give any person or entity additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any note, deed, lease, instrument, security agreement, mortgage, commitment, contract, agreement, license or other instrument or oral understanding to which the Seller or any of its Affiliates is a party or by which any of the assets or the properties of the Seller are bound or (c) result in the creation or imposition of any Encumbrance with respect to, or otherwise have an adverse effect upon, any of the assets or properties of the Seller.

10.1.34 Articles of Incorporation

the copies of the articles of incorporation, bylaws and other constitutional documents of the Seller delivered to the Buyer are true and complete copies, and the Seller has complied with all the provisions of its articles of incorporation, bylaws and constitutional documents and, in particular, has not entered into any ultra vires transaction.

10.1.35 Minute books and registers

the minute books and registers of the Seller and all current books of account are written up to date and all such documents and other necessary records, deeds, agreements and documents relating to its affairs are in its possession or under its control.

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10.1.36 Compliance with applicable law and regulation

the Seller and its officers have complied in all material respects with the provisions of all applicable law and regulation in its place of incorporation, and the places where it carries on its business.

10.1.37 Title to Business and Purchased Assets

(a) the Seller has valid title to, and is the exclusive legal and beneficial owner of the Business and the Purchased Assets, and, therefore, has an absolute right to sell and transfer the Business and the Purchased Assets. All the Purchased Assets will be sold and transferred to the Buyer free and clear of any Encumbrance together with all accrued beneficial rights attached to them at the date of this Agreement or subsequently becoming attached to them;

(b) save as Disclosed, no consent, approval, authorization, permit or licence from any third party, government agency or regulatory body is necessary for the sale and transfer of the Business and the Purchased Assets by the Seller to the Buyer hereunder.

10.1.38 Powers of attorney

other than in the ordinary course of business, there are no powers of attorney given by the Seller except any given incidental to and for the purposes only of enforcement of any security.

10.1.39 Licences permissions or consents

all material licences, permissions and consents required for the carrying on of the Business of the Seller have been obtained by it and are in full force and effect and the Seller is not aware of any circumstances indicating that any of those licences, permissions or consents is likely to be revoked or not renewed in the ordinary course.

10.1.40 Other aspects of carrying on business

the Seller:

(a) does not use on its stationery or vehicles or otherwise carry on Business under any name other than its corporate name and the name “Ion Global”; and

(b) has complied in all material respects with all requisite corporate powers, its articles of incorporation, bylaws and legal requirements applicable to its business, whether in the US (including any state, municipality or any other jurisdiction thereof) or in any other country or jurisdiction.

10.1.41 Existence of Subsidiaries and other business

the Seller` does not have, and has never had, any Subsidiary. Save for the Business and the Dae Business, the Seller has not carried on any other business.

10.1.42 [intentionally left blank]

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Employees

10.1.43 Disclosure of Material Facts

(a) the name and title of all existing employees of the Seller for the operation of the Business are set out in Part 1 of Schedule 1 and all the information set out thereunder are true and accurate;

(b) all facts and matters relating to the employment of all Employees of the Seller (including but not limited to their respective salaries, ages, length of service, notice periods, terms and conditions of employment, employment or benefits policies, share incentive schemes, share option schemes or profit-share schemes and entitlements under these schemes, all rights, and any other agreement or arrangement relating to the employment of the employees of the Seller) have been provided to the Buyer;

(c) all facts and matters relating to all collective agreements, arrangements or other understandings with any trade union, staff association or other body representing the employees of the Seller have been Disclosed to the Buyer;

(d) the amounts of the bonuses for the financial year 2007 for Employees will be substantially similar to the amounts of the bonuses for the financial year 2006 granted to Employees.

10.1.44 Compliance with Requirements

the Seller has in relation to each of its Employees:

(a) complied in all material respects with all law, regulations and codes of practice or employment rules relevant to its relations with the Employee and with any recognised trade union representing him and all collective agreements from time to time in force relating to such relations or the conditions of service of the Employee and has maintained adequate and suitable records regarding the service of the Employee;

(b) discharged fully its obligations to pay or deduct, as applicable, all salaries, wages, withholdings, commissions, bonuses, overtime pay, holiday pay, sick pay, accrued entitlement under incentive schemes and insurance contributions and other benefits of or connected with employment;

(c) without prejudice to paragraph 10.1.44(a) above, complied in all material respects with all its obligations under statute and otherwise concerning the health and safety at work of each of the Employees and has not incurred any liability to any Employee in respect of any accident or injury which is not fully covered by insurance.

10.1.45 Agreements

save as Disclosed, the Seller has not entered into:

(a) any agreement or arrangement to make any payments (other than emoluments) to or on behalf of any of its directors or Employees;

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(b) any contract of service with any Employee which is not terminable by the Seller by one month’s notice or less without payment of compensation (except as provided by statute);

(c) any agreement or arrangement for the provision of services in return for remuneration;

(d) any agreement imposing an obligation on the Seller to increase the rates of remuneration of, or to make any bonus or incentive payments or any benefits in kind or any payments under a profit-sharing scheme to or on behalf of, any of its Employees at any future date;

(e) any negotiation for a change in the emoluments or other terms of engagement of any grade of any of the Seller’s Employees;

(f) any agreement or arrangement for the provision of compensation on the termination of employment of any Employee of the Seller beyond the minimum required by law.

10.1.46 Disputes

(a) no material dispute has arisen since the date of incorporation of the Seller between the Seller and its Employees or former employees and there are no present circumstances which are likely to give rise to any such dispute;

(b) to the Seller’s knowledge there are no complaints pending or threatened against the Seller of whatsoever nature in relation to any of its Employees or former employees and there is no industrial action or dispute threatened or existing or anticipated in respect of or concerning any of the Seller’s Employees or former employees;

(c) no Employee or former employee has any right to ownership of any Intellectual Property in any invention or improvement made or discovered by him in the course of employment with the Seller or otherwise any compensation or payment in respect of or right to use any such invention or improvement;

(d) to the Seller’s knowledge there are no enquiries or investigations existing, pending or threatened affecting the Seller by any regulatory body or authority concerning any Employee;

(e) no Employee has given notice of termination of his contract of employment or is under notice of dismissal;

(f) the Seller has not offered any contract of employment to any person under the Business, which offer remains outstanding; and

(g) there is no person employed or previously employed by the Seller under the Business who is on maternity leave, absent on grounds of disability or other leave of absence and have a statutory or contractual right to return to work for the Seller.

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Miscellaneous

10.1.47 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Seller and no petition has been presented and no meeting has been convened for the purpose of winding up the Seller;

(b) no receiver has been appointed in respect of the Seller, the Business or the Purchased Assets;

(c) the Seller is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Seller has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside of California; and

(e) no unsatisfied judgment is outstanding against the Seller.

10.1.48 Consents

save as Disclosed, all consents, permissions, approvals and agreements of third parties which are necessary for the Seller to obtain in order to enter into and perform this Agreement in accordance with its terms have been unconditionally obtained in writing and have been Disclosed to the Buyer.

10.1.49 Material information

all material information relating to the Seller, the Business and the Purchased Assets which is known or would on reasonable enquiry be known to the Seller and which should be known by a reasonable Buyer for value of the Purchased Assets has been Disclosed or provided to the Buyer.

10.1.50 Brokers and Finders

No person or entity acting on behalf or under the authority of the Seller is or will be entitled to any broker’s, finder’s or similar fee or commission in connection with the transactions contemplated hereby.

10.1.51 Recitals and disclosures

the recitals, Exhibits and Schedules to the Agreement and all information and documents relating to the Business and Purchased Assets supplied by the Seller or any agent of any of them to the Buyer, its solicitors, accountants or other agents or advisers during or with a view to the negotiations leading up to the Agreement, are true and accurate in all respects, and there is no fact not Disclosed which would render any such information or document inaccurate or misleading or which, if Disclosed, might reasonably affect the willingness of the Buyer to purchase the Purchased Assets for the consideration or otherwise on the terms specified in the Agreement. All budgets and forecasts provided to the Buyer have been prepared using

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reasonable and customary assumptions. Neither the Seller nor CDC has withheld from the Buyer any material facts relating to the assets, properties, liabilities, business operations, financial condition, results of operations or prospects of the Seller, the Business or the Purchased Assets. Neither this Agreement (including the Exhibits, Schedules, certificates and other documents delivered hereto) nor any other agreement, document, certificate or written statement furnished to the Buyer by or on behalf of the Seller in connection with this Agreement, the other documents or the transactions contemplated hereunder or thereunder contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.

Authority of the Seller and CDC

10.1.52 Each of the Seller and CDC has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Seller and CDC, in accordance with its terms;

10.1.53 the execution and delivery of, and the performance by each of the Seller and CDC of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Seller or CDC is a party or by which it is bound;

10.1.54 neither the Seller nor any of its respective agents or advisers is aware of any fact or matter which would or may constitute a breach of any of the Warranties and which failure to disclose by such agents or advisers is deemed fraudulent.

TAX WARRANTIES

Accounts

10.1.55 the Seller has no liability in respect of Taxation (whether actual or contingent) or any liability for interest, penalties or charges imposed in relation to any Taxation arising in any part of the world that is not adequately Disclosed or provided for in full in the Accounts and Management Accounts.

10.1.56 the amount of the provision for deferred Taxation contained in the Accounts and Management Accounts was, at the date the Accounts and Management Accounts were prepared in accordance with US GAAP.

Events since the Accounts Date

Since the Accounts Date:

10.1.57 the Seller has not been involved in any transaction outside the ordinary course of business which has given or may give rise to a liability to Taxation on the Seller or in relation to the Business (or would have given or might give rise to such a liability but for the availability of any relief, allowance, deduction or credit).

10.1.58 no disposal has taken place or other event occurred which will or may have the effect of crystallising a liability to Taxation which should have been included in the provision for deferred Taxation contained in the Accounts and Management Accounts if such a disposal or other event had been planned or predicted at the date on which the Accounts and Management Accounts were drawn up.

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Payments by the Seller

10.1.59 the Seller have paid all Taxation in relation to or in connection with the Company for which it is liable to account to the Tax Authority on the due date for payment thereof and is under no liability to pay any penalty or interest in connection therewith and without prejudice to the generality of the foregoing the Seller has made all deductions and withholdings in respect or on account of Taxation which it is required by any relevant legislation to make from any payments made by it in relation to or in connection with the Seller and has accounted in full to the appropriate Tax Authorities for all amounts so deducted or withheld.

10.2 The Seller acknowledges that, in entering into this Agreement and in purchasing the Purchased Assets, the Buyer has relied and will rely upon the Warranties given herein and the Warranties as confirmed by the Seller according to Clause 6.2.1(g).

10.3 The Warranties are given subject to the matters Disclosed in the Disclosure Letter but no other information relating to the Business, the Purchased Assets and the Seller of which the Buyer has knowledge (actual or constructive) and no investigation by or on behalf of the Buyer shall prejudice any claim made by the Buyer in respect of the Warranties or operate to reduce any amount recoverable and it shall not be a defence to any claim against the Seller that the Buyer knew or ought to have known or had constructive knowledge of any information (other than as Disclosed in the Disclosure Letter) relating to the circumstances giving rise to such claim.

10.4 The Seller and CDC shall not (in the event of any claim being made against them in connection with the sale of the Purchased Assets to the Buyer) make any claim against its officer, director, employee or Affiliate on whom the Seller and CDC may have relied before agreeing to any term of this Agreement.

10.5 Each of the Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Warranty or any other term of this Agreement.

10.6 The Seller shall procure that the Warranties are true, accurate and complete at the date of this Agreement and, for this purpose the Warranties shall be deemed to be repeated at the Closing Date and any express or implied reference therein to the date of this Agreement shall be replaced by a reference to the Closing Date. Subject to Clause 11.1.7, the Warranties shall remain in full force and effect notwithstanding Closing.

10.7 Except as may be provided herein, the rights and remedies of the Buyer in respect of a breach of any of the Warranties shall not be affected by Closing, by any investigation made by or on behalf of the Buyer into the affairs of the Seller and the Business, by the giving of any time or other indulgence by the Buyer to any person, by the Buyer rescinding or not rescinding this Agreement, or by any other cause whatsoever except a specific waiver or release by the Buyer in writing; and any such waiver or release shall not prejudice or affect any remaining rights or remedies of the Buyer.

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10.8 All representations and warranties made by any party contained in this Agreement, any Exhibit, Schedule, certificate or other instrument specifically referred to in the Warranties pursuant hereto or made in writing by or on behalf of a party in connection with the transactions contemplated by this Agreement, and all indemnification obligations under this Agreement shall survive the execution and delivery of this Agreement and the Closing of the transactions contemplated hereunder until the expiration of the applicable statute of limitations or, if Clause 11.1.7 (subject to Clause 11.1.8) is applicable, until the expiry of the period of eighteen (18) months after the date of this Agreement.

10.9 The Seller undertakes with the Buyer that it will before and after Closing promptly notify the Buyer in writing of any event or circumstance of which they become aware which is or may be inconsistent with any of the Warranties or which might make any of the Warranties untrue or misleading if given at Closing.

11. INDEMNIFICATION – GENERAL AND TAX

11.1 General Indemnification

11.1.1 As used in this Clause 11.1, the following terms shall have the following meanings:

(a) “Claim” means any claim, demand, dispute, action, suit, investigation or legal or analogous proceedings.

(b) “General Event of Indemnification” with respect to:

(i) the Seller shall mean:

(aa) any breach of any representation or Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation, indemnity or covenant of the Seller contained in this Agreement (including the Exhibits and Schedules) or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach;

(bb) any Claims, liabilities or obligations of any kind or nature relating to the Business or the Purchased Assets arising from, relating to or in connection with the Business, operations or affairs of the Seller or any of the assets, properties, interests in assets or properties or rights of the Seller which were existing at or as of Closing or arising in whole or in part out of any acts, transactions, conditions, circumstances or facts which occurred or existed on or prior to Closing, and which were not Disclosed on or before the execution of this Agreement; and

(cc) any Claims, liabilities or obligations of any kind or nature arising from, relating to or in connection with the Excluded Assets or the Excluded Liabilities whether existing at or as of Closing or at any time thereafter;

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(ii) the Buyer shall mean any breach of any representation, Buyer Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation, indemnity or covenant of the Buyer contained in this Agreement or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach.

(c) “Special Event of Indemnification” with respect to:

(i) the Seller shall mean any Claims, liabilities or obligations of any kind or nature arising from, relating to or in connection with any of the events set out in Schedule 13 whether existing at or as of Closing or at any time thereafter, and whether Disclosed or not on or before the execution of this Agreement; and

(ii) the Buyer, shall mean any Claims, liabilities or obligations arising from the Buyer’s failure to pay the applicable Taxes to the appropriate tax authority in accordance with Clause 3.3 after deducting or withholding such payment from the Purchase Price.

(d) “Losses” in this Clause 11 shall mean any and all Losses (as defined in Clause 1.1) sustained, suffered or incurred by the Buyer Indemnified Person or Seller Indemnified Person.

11.1.2 “Buyer Indemnified Persons” shall mean and include the Buyer and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns; and “Seller Indemnified Persons” shall mean and include the Seller and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns.

11.1.3 The Seller shall indemnify, defend and hold harmless the Buyer Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification except to the extent such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Buyer Indemnified Persons.

11.1.4 The Buyer shall indemnify, defend and hold harmless the Seller Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification, except to the extent any such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Seller Indemnified Person.

11.1.5 This indemnity is to be a continuing security to the Buyer and Seller for all representations, Warranties, agreements, undertakings, commitments, obligations, indemnities or covenants on the part of the Seller or the Buyer (as the case may be) under or pursuant to this Agreement notwithstanding settlement of account or other matter or thing whatsoever.

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11.1.6 This indemnity is in addition and without prejudice to and not in substitution for any rights or security which the Buyer and the Seller may now or hereafter have or hold for performance and observance of any agreement, undertaking, commitment, obligation, indemnity or covenant on the part of the Seller or the Buyer (as the case may be) under or in connection with this Agreement.

11.1.7 Limitation of Liability in respect of the Warranties or the Buyer Warranties

Notwithstanding anything contained herein to the contrary but subject to Clause 11.1.8, (i) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 11 or Clause 14.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) for Losses the amount of which is less than US$35,000 (“Minor Losses”) even if such Minor Losses in the aggregate exceed the Basket (as defined below); (ii) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 11 or Clause 14.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) unless and until Losses in an aggregate amount (excluding the Minor Losses) exceed US$75,000 (the “Basket”) in which case the Buyer or the Seller may make such claim(s) for indemnification for any and all Losses (excluding the Minor Losses) and not merely for the excess of the Basket; (iii) in no event shall the aggregate liability of (a) the Buyer or the Seller pursuant to this Clause 11.1 or (b) CDC pursuant to Clause 14.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) exceed one hundred percent (100%) of the Purchase Price; and (iv) the period during which claims for any breach of a Warranty and/or indemnification pursuant to this Agreement in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) may be made shall commence from the date of this Agreement to the expiry of the period of eighteen (18) months after the date of this Agreement.

11.1.8 None of the limitations regarding any Loss or Claim in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) whether as to the amount or time set forth in Clause 11.1.7 shall apply if in any case the Losses and Claims have arisen from or in connection with:

(a) any Special Event of Indemnification;

(b) any breach of the Tax Warranties set out in Clauses 10.1.55 to 10.1.59; or

(c) any breach of the Warranties set out in Clauses 10.1.14(b), 10.1.19, 10.1.33(a), 10.1.36, 10.1.37, 10.1.52 to 10.1.54.

For avoidance of doubt, no claim for any Loss or Claim arising from or in connection with items (a), (b) or (c) of this Clause 11.1.8 above shall be brought after the expiry of the applicable statute of limitation.

11.2 Covenant in Respect of Tax

11.2.1 In this Clause unless the context otherwise requires:

(a) “Tax Event” includes (without limitation) any omission, event, action or transaction whether or not the Seller is a party thereto, the death of any person,

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a change in the residence of any person for any Tax purpose, a failure to make sufficient dividend payments to avoid an apportionment or deemed distribution of income and the entering into and Closing of this Agreement and references to the result of events on or before Closing shall include the combined result of two or more events one or more of which shall have taken place on or before Closing;

(b) “relief” includes (without limitation) any relief, allowance, credit, set off, deduction or exemption for any Tax purpose; and

(c) reference to income or profits or gains earned, accrued or received shall include income or profits or gains deemed to have been or treated as or regarded as earned, accrued or received for the purposes of any legislation.

11.2.2 Subject as hereinafter provided, the Seller hereby covenants with and undertakes to indemnify the Buyer (at its election, for itself, its Affiliates and as trustee for its successors in title) against:

(a) any Tax liability of the Seller or in relation to the Business or Purchased Assets resulting from or by reference to any income, profits or gains earned accrued or received on or before the Closing Date or any Tax Event on or before such date whether alone or in conjunction with other circumstances and whether or not such Tax is chargeable against or attributable to any other person;

(b) any Tax liability of the Seller or in relation to the Business or Purchased Assets that arises after Closing as a result of an act, omission or transaction by a person other than the Seller and which liability to Tax falls upon the Seller or in relation to the Business or Purchased Assets as a result of its having been in the same group for Tax purposes as that person at any time before Closing;

(c) any Tax liability of the Seller or in relation to the Business or Purchased Assets that would not have been payable had there been no breach of any Tax Warranties and which is not the subject of the covenants in sub-clauses (a) and (b) above; and

(d) all costs and expenses which are incurred by the Buyer or any of its Affiliates or the Seller in connection with any of the matters referred to in this Clause 11.2 or in taking or defending any action under the covenants contained in this Clause 11.2 (including, without prejudice to the generality of the foregoing, all legal and other professional fees and disbursements).

11.2.3 The Purchase Price shall be allocated among the Purchased Assets in accordance with their values as determined by the Buyer; provided that no portion of the Purchase Price beyond the minimum portion required by the Buyer’s accountants shall be allocated to the non-solicitation provisions under Clause 13.1 hereof. Each of the parties hereto shall (i) report the purchase and sale of the Purchased Assets in accordance with the allocations determined by the Buyer for all Tax purposes (including the filing of IRS Form 8594), (ii) not take a Tax position which is inconsistent with such allocation, and (iii) cooperate with each other in preparing IRS Form 8594 or any other statements, Tax returns or reports required by the IRS or any other Tax Authority.

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12. BUYER’S RIGHTS

12.1 Without prejudice to any other right or remedy of the Buyer hereunder, if before Closing:

(a) the Buyer becomes aware that any of the Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Seller or CDC is in breach of any term of this Agreement; or

(b) any Tax Event occurs which has, or is likely to have, any effect on the financial position or business prospects of the Business or Purchased Assets as a whole, not being a Tax Event which affects generally all companies carrying on business similar to that of the Seller in a part or parts of the world where the Business is conducted,

the Buyer shall be entitled to terminate this Agreement without incurring liability to the Seller or CDC.

12.2 Without prejudice to any other right or remedy of the Seller hereunder, if before Closing the Seller becomes aware that any of the Buyer Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Buyer is in breach of any term of this Agreement, the Seller shall be entitled to terminate this Agreement without incurring liability to the Buyer.

12.3 The rights, including rights of rescission, conferred on the Buyer and Seller by this Agreement are in addition and without prejudice to all other rights and remedies available to the Buyer and the Seller; and no exercise or failure to exercise a right under this Agreement or otherwise or to invoke a remedy shall constitute a waiver of that right or remedy by the Buyer or the Seller.

13. PROTECTION OF THE BUYER’S INTERESTS

13.1 Competing Business and Restricted Services, etc.

13.1.1 In this clause:

(a) “competing business” means any business which competes with the Business.

(b) “restricted services” means services of the same type as or similar to or performs the same or similar functions of any services provided by the Seller under the Business at Closing.

(c) “Restricted Period” means the period of 3 years commencing from the Closing Date.

(d) references to acting directly or indirectly include (without prejudice to the generality of that expression) references to acting alone or jointly with or by means of any other person.

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13.1.2 Each of the Seller and CDC covenants with the Buyer that during the Restricted Period:

(a) it shall not directly or indirectly:

(i) solicit, canvass or approach or endeavour to solicit, canvass or approach any person, firm or company for the purpose of offering to that person, firm or company restricted services or provide on behalf of a competing business any restricted services to any person, firm or company:

(aa) who was provided with services under the Business by the Seller or the Buyer at any time during the previous two (2) year period immediately preceding Closing; or

(bb) who was negotiating with the Seller or the Buyer for the provision of services under the Business at any time during the previous twelve (12) month period immediately preceding Closing.

(ii) solicit or entice away or endeavour to solicit or entice away from the Buyer any person employed by the Buyer in any capacity with a view to inducing that person to leave such employment and to act for another person in the same or a similar capacity in relation to a competing business or restricted services whether or not such person would commit a breach of contract by reason of leaving such employment except that the foregoing restriction does not apply to any general solicitation for employees or public advertising of employment opportunities not specifically directed at any person employed by the Buyer;

(b) it shall not at any time disclose or use, for his own benefit or that of any other person any confidential information which it possesses concerning the Business or of any person having dealings with the Business.

13.1.3 Each of the restrictions set out in Clause 13.1.2 above are separate and severable and in the event of any such restriction being determined as unenforceable in whole or in part for any reason, such unenforceability shall not affect the enforceability of the remaining restrictions or (in the case of restrictions unenforceable in part) the remainder of that restriction.

13.1.4 The parties agree that in connection with the circumstances and transactions contemplated by this Agreement, the restrictive covenants herein contained are reasonable in time and scope, necessary for the protection of the Business and the legitimate interests of the Buyer, and supported by adequate consideration and further agree that having regard to those circumstances the said covenants do not work harshly or unreasonably upon the parties. However, it is recognized that restrictions of the nature in question may fail for technical reasons currently unforeseen and accordingly it is hereby agreed and declared that if any of such restrictions shall be adjudged to be void as going beyond what is reasonable in all the circumstances for the protection of the Business or the Buyer’s legitimate interests but would be valid if

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part of the wording thereof were deleted or the periods thereof reduced or the range of activities or area dealt with thereby reduced in time or scope the said restriction shall apply with such modifications as may be necessary to make it valid and effective under applicable law.

13.2 Trademarks, Tradenames, etc.

13.2.1 Each of the Seller and CDC hereby covenants with the Buyer that save as required for the performance of their obligations as contemplated in this Agreement, immediately after Closing and except as otherwise directed by the Buyer, the Seller and CDC shall cease and shall procure that each of their respective Affiliates and other persons authorized by them or such Affiliates shall cease the use of all or any of the trademarks, service marks, logos, trade names, Internet domain names and corporate names forming part of the Purchased Assets or otherwise used in the Business (including without limitation “Ion Global” or any part of parts thereof), in any of their forms or spellings (or in forms or spellings similar or resemble to the same) (whether registered or unregistered) for any purpose whatsoever.

13.3 The obligations and liabilities of the Seller and CDC under this Clause 13 are the joint and several obligations and liabilities of the Seller and CDC.

14. GUARANTEE AND INDEMNITY BY CDC

14.1 In consideration of the Buyer entering into this Agreement, CDC hereby unconditionally and irrevocably guarantees to the Buyer the due and punctual performance and observance by the Seller of all the Seller’s obligations, commitments, undertakings, warranties, indemnities and covenants under or pursuant to this Agreement and subject to the provisions of Clauses 11.1.7 and 11.1.8 agrees to indemnify the Buyer and its Affiliates against all Losses, damages, costs and expenses (including reasonable legal costs and expenses) which the Buyer or any of its Affiliates may suffer through or arising from any breach by the Seller of such obligations, commitments, warranties, undertakings, indemnities or covenants. The liability of CDC as aforesaid shall not be released or diminished by any arrangements or alterations of terms (whether of this Agreement or otherwise) or any forbearance, neglect or delay in seeking performance of the obligations hereby imposed or any granting of time for such performance.

14.2 If and whenever the Seller defaults for any reason whatsoever in the performance of any obligation or liability undertaken or expressed to be undertaken by the Seller under or pursuant to this Agreement, CDC shall forthwith upon demand unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction of) the obligation or liability in regard to which such default has been made in the manner prescribed by this Agreement and so that the same benefits shall be conferred on the Buyer and its Affiliates as they would have received if such obligation or liability had been duly performed and satisfied by the Seller. CDC hereby waives any right which it may have to require the Buyer to proceed first against or claim payment from the Seller to the intent that as between the Buyer and CDC the latter shall be liable as principal debtor as if CDC had entered into all undertakings, agreements and other obligations jointly and severally with the Seller.

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14.3 This guarantee and indemnity is to be a continuing security to the Buyer for all obligations, commitments, warranties, undertakings, indemnities and covenants on the part of the Seller under or pursuant to this Agreement notwithstanding any settlement of account or other matter or thing whatsoever.

14.4 This guarantee and indemnity is in addition to and without prejudice to and not in substitution for any rights or security which the Buyer may now or hereafter have or hold for the performance and observance of the obligations, commitments, undertakings, covenants, indemnities and warranties of the Seller and CDC under or in connection with this Agreement.

14.5 CDC shall not, after any claim has been made pursuant to this Clause 14, claim from the Seller any sums which may be owing to them from the Seller or have the benefit of any set-off, counter-claim or proof against or dividend, composition or payment by the Seller until all sums owing to the Buyer in respect hereof shall have been paid in full.

14.6 As a separate and independent stipulation, CDC agree that any obligation expressed to be undertaken by the Seller under this Agreement (including, without limitation, any moneys expressed to be payable under this Agreement) which may not be enforceable against or recoverable from the Seller by reason of any legal limitation, disability or incapacity of any of them or any other fact or circumstance shall nevertheless be enforceable against or recoverable from CDC as though the same had been incurred by CDC and CDC was sole or principal obligors in respect thereof and shall be performed or paid by CDC on demand.

15. WARRANTIES BY BUYER

15.1 The Buyer hereby warrants and represents to the Seller that the matter set forth below (“Buyer Warranties”) are true and accurate (a) as of the date of this Agreement and (b) as of the Closing Date:

15.1.1 Corporate Status

(a) the Buyer has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation;

(b) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Buyer and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based; and

(c) so far as the Buyer is aware after making all due enquires, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Buyer has been or is likely to be adversely affected.

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15.1.2 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Buyer and no petition has been presented and no meeting has been convened for the purpose of winding up the Buyer;

(b) no receiver has been appointed in respect of the Buyer;

(c) the Buyer is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Buyer has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside Hong Kong;

(e) no unsatisfied judgment is outstanding against the Buyer.

15.1.3 Authority of the Buyer

(a) the Buyer has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Buyer, in accordance with its terms;

(b) the execution and delivery of, and the performance by the Buyer of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Seller or CDC is a party or by which it is bound.

15.1.4 The Buyer acknowledges that, in entering into this Agreement and in selling the Purchased Assets, the Seller has relied and will rely upon the Buyer Warranties given herein and the Buyer Warranties as confirmed by the Buyer according to Clause 6.4 upon Closing.

15.1.5 The Buyer Warranties are given subject to the matters Disclosed in the Buyer Disclosure Letter.

15.1.6 Each of the Buyer Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Buyer Warranty.

15.1.7 The Buyer represents that the Buyer Warranties are true, accurate and complete at the date of this Agreement and, for this purpose, such Buyer Warranties shall be deemed to be repeated at the Closing Date.

16. MISCELLANEOUS

16.1 Where in this Agreement, any liability is undertaken by two or more persons, the liability of each of them shall be joint and several.

16.2 No party may assign or transfer, or purport to assign or transfer, any of its rights or obligations under this Agreement without prior written consent of the other parties (except for an assignment or transfer by the Buyer to any of its Affiliates) and this

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Agreement shall be binding on and enure for the benefit of the parties’ successors, permitted assigns and personal representatives. In the event that an Affiliate of the Buyer to whom the Buyer’s rights or obligations under this Agreement have been assigned, ceases to be an Affiliate of the Buyer, the Buyer shall promptly procure such entity to assign or transfer such rights or obligations back to the Buyer (as the case may be).

16.3 This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.

16.4 This Agreement represents the entire understanding, and constitutes the whole agreement, in relation to its subject matter and supersedes any previous agreement between the parties with respect thereto and, without prejudice to the generality of the foregoing, excludes any warranty, condition or other undertaking implied at law or by custom.

16.5 Each party confirms that, except as provided in this Agreement, no party has relied on any representation or warranty or undertaking which is not contained in this Agreement, without prejudice to any liability for fraudulent misrepresentation, no party shall be under any liability or shall have any remedy in respect of misrepresentation or untrue statement unless and to the extent that a claim lies under this Agreement.

16.6 Subject to the terms hereof, so far as it remains to be performed, this Agreement shall continue in full force and effect notwithstanding Closing.

16.7 The Seller shall after Closing execute all such deeds and documents and do all such things as the Buyer may require for perfecting the transactions intended to be effected under or pursuant to this Agreement and for vesting in the Buyer the full benefit of the Purchased Assets. Furthermore, the parties hereto hereby agree to be bound by the provisions set forth in this Agreement even in the event that any provision set forth herein were determined to be unenforceable or ineffective vis-à-vis third parties.

16.8 In the case that any provision or part of a provision of this Agreement is declared invalid, not binding or not enforceable, then, such declaration shall be effective only in connection with such provision or part of a provision and therefore shall not impair the validity, binding effects and enforceability of the other parts of such provision and/or the other provisions of this Agreement.

16.9 The transfer of any Purchased Assets pursuant to this Agreement shall be together with all rights and benefits attached thereto as at the date of transfer and shall be free from all liens, charges and Encumbrance.

16.10 This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Facsimile or electronic signatures shall be treated as original signatures.

17. CONFIDENTIALITY OF INFORMATION RECEIVED

17.1 The parties undertake with each other that they shall treat as strictly confidential all proprietary, non-public information received or obtained by them or their employees,

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agents or advisers as a result of entering into or performing this Agreement including information relating to the provisions of this Agreement, the negotiations leading up to this Agreement, the subject matter of this Agreement or the business or affairs of the Seller, the Buyer or any member of Aegis Group and that it will not at any time hereafter make use of or disclose or divulge to any person any such information without consent of the other parties and shall use its best endeavours to prevent the publication or disclosure of any such information.

17.2 The restrictions contained in Clause 17.1 shall not apply so as to prevent the parties from making any disclosure required by law or by any securities exchange or supervisory or regulatory or governmental body pursuant to rules to which the parties are subject or from making any disclosure to any professional adviser for the purposes of obtaining advice (providing always that the provisions of this Clause 17 shall apply to and the parties shall procure that they apply to and are observed in relation to, the use or disclosure by such professional adviser of the information provided to them) or from making any disclosure for the purpose of exercising their rights or performing their obligations hereunder, nor shall the restriction apply in respect of any information which comes into the public domain otherwise than by a breach of this Clause 17 by any party.

17.3 For a period of six (6) months after Closing, the Seller shall procure an announcement to be posted on the website www.dae.com in relation to the sale of the Business to the Buyer the content of which shall be mutually agreed between the Buyer and Seller and shall procure a link to website www.molecular.com to be posted on the website www.dae.com.

18. COSTS

18.1 The parties shall pay their own costs in connection with the preparation, negotiation, execution and completion of this Agreement. Notwithstanding the foregoing, the Buyer agrees to pay 50% of the costs for preparation of the legal opinion by Cayman counsel required to be delivered by the Seller pursuant to Clause 6.2.1(j).

18.2 Any stamp or transfer duty or similar tax of and incidental to this Agreement and the transfer of the Purchased Assets hereunder shall be borne by the Seller absolutely. The Buyer shall be entitled to deduct or withhold from the Purchase Price on account of such tax according to Clause 3.3.

19. NOTICES

19.1 A notice, approval, consent or other communication in connection with this Agreement:

19.1.1 must be in writing; and

19.1.2 must be left at the address of the addressee, or sent by prepaid registered post (airmail if posted to or from a place outside the US) to the address of the addressee or sent by facsimile to the facsimile number of the addressee which is specified in this clause or if the addressee notifies another address or facsimile number in the US then to that address or facsimile number.

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The address and facsimile number of each party is:

The Seller
Address	:	88 Kearny St., 9th Floor
		San Francisco, CA 94108
Facsimile	:	1-415-398-2940
Attn		Managing Director
CDC
Address	:	2 Concourse Parkway, Ste 800
		Atlanta GA 30328
Facsimile	:	1-678-259-8737
Attn		General Counsel
The Buyer
Address	:	343 Arsenal Street
		Watertown, MA 02472
Facsimile	:	617-218-6500
Attn	:	Chief Financial Officer
With a copy to
Address	:	Three Park Avenue, 32nd Floor
		New York, NY 10016 USA
Facsimile	:	1 310 907 1345
Attn	:	Head of Legal Affairs, Aegis Media

19.2 A notice, approval, consent or other communication shall take effect from the time it is received (or, if earlier, the time it is deemed to be received in accordance with Clause 19.3) unless a later time is specified in it.

19.3 A letter or facsimile is deemed to be received:

19.3.1 in the case of a posted letter, unless actually received earlier, on the third (seventh, if posted to or from a place outside the US) day after posting; and

19.3.2 in the case of facsimile, on production of a transmission report from the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient.

20. GOVERNING LAW AND ARBITRATION

20.1 This Agreement shall be governed by, and construed in accordance with, Delaware law without reference to any conflicts of law principles thereto.

20.2 Arbitration

20.2.1 Save for the matters provided under Clause 6.6, any and all disputes arising out of or in connection with the negotiation, execution, interpretation, performance or non-performance of this Agreement shall be solely and finally settled by binding arbitration conducted pursuant to the rules of the American Arbitration Association

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(the “AAA Rules”) by one or more arbitrators appointed in accordance with the AAA Rules. The parties agree that the award of the arbitrators shall be the sole and exclusive remedy between them regarding any claims, counterclaims, issues or accountings presented to the arbitrators, irrespective of the magnitude thereof.

20.2.2 All arbitration proceedings shall be conducted in the English language pursuant to the AAA Rules. The arbitration shall take place in San Francisco, California or such other place as the parties may mutually agree in writing. The parties hereto agree to facilitate the arbitration by (i) making available to each other and to the arbitrators all documents, books, records and personnel under their control as the arbitrators shall determine to be relevant to the dispute; (ii) conducting arbitration hearings to the greatest extent possible on successive, contiguous days; and (iii) observing strictly the time periods established by the AAA Rules or by the arbitrators for the submission of evidence and briefs.

20.2.3 Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereby waive to the fullest extent permitted by law any rights to appeal or to review such award by any court or tribunal. The parties agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgement on the arbitration award may be entered in any court having jurisdiction over the parties or their assets.

20.2.4 Notwithstanding anything herein contained, either party shall be entitled to seek injunctive relief, if possible, from any court of competent jurisdiction to protect its rights under this Agreement pending the constitution of the arbitral tribunal pursuant to this Clause 20.2.

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be signed on their behalf in the places and on the date hereinafter written.

The Seller
SIGNED by	)
on behalf of	)	/s/ Marcus Simon Crowley
ION GLOBAL (CALIFORNIA), INC.	)
in the presence of:    /s/ Vanora Chiang	)
The Buyer
SIGNED by	)
on behalf of MOLECULAR, INC.	)	/s/ David Bruce Holtham
in the presence of:    /s/ Angeline Yuen	)
CDC
SIGNED by	)
on behalf of	)	/s/ Simon Wong
CDC SOFTWARE CORPORATION	)
in the presence of:    /s/ Nicole Lo	)

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EX-4.(A)21

Exhibit 4(a)21

Execution Copy

DATED 1 August, 2007

ASSETS PURCHASE AGREEMENT

By and Among

ION GLOBAL (CALIFORNIA), INC.

CDC SOFTWARE CORPORATION

and

MOLECULAR, INC.

Jones Day

Solicitors and International Lawyers

29^th Floor, Edinburgh Tower

The Landmark

15 Queen’s Road Central

Hong Kong

Telephone No.: (852) 2526-6895

CAM No.: 113437-615014

TABLE OF CONTENTS

Clause		Page
1.	INTERPRETATION	1
2.	SALE AND PURCHASE OF PURCHASED ASSETS	9
3.	PURCHASE PRICE	13
4.	CONDITIONS	13
5.	ACTION PENDING CLOSING	16
6.	CLOSING	18
7.	BULK SALES	22
8.	EMPLOYMENT	22
9.	ASSIGNMENT OF CONTRACTS AND RIGHTS	24
10.	WARRANTIES BY SELLER AND CDC	25
11.	INDEMNIFICATION – GENERAL AND TAX	42
12.	BUYER’S RIGHTS	46
13.	PROTECTION OF THE BUYER’S INTERESTS	46
14.	GUARANTEE AND INDEMNITY BY CDC	48
15.	WARRANTIES BY BUYER	49
16.	MISCELLANEOUS	50
17.	CONFIDENTIALITY OF INFORMATION RECEIVED	51
18.	COSTS	52
19.	NOTICES	52
20.	GOVERNING LAW AND ARBITRATION	53

THIS AGREEMENT is made on 1 August, 2007

BY AND AMONG:

(1) ION GLOBAL (CALIFORNIA), INC., a company incorporated under the laws of California with its registered office as of the date hereof at 88 Kearny Street, 9th Floor, San Francisco, California 94108, USA (the “Seller”);

(2) CDC SOFTWARE CORPORATION, a company incorporated under the laws of the Cayman Islands with its registered office as at the date hereof at P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands (“CDC”); and

(3) MOLECULAR, INC., a company incorporated under the laws of Delaware with its registered office as at the date hereof at 343 Arsenal Street, Watertown, Massachusetts 02472 U.S.A. (the “Buyer”).

RECITALS:

A. The Seller has been carrying on the business of (i) providing Internet consulting services and website design and development under the name of Ion Global (the “Business”) and (ii) providing Asian- American advertising and marketing consulting services under the name of Dae Advertising (“Dae Business”). Save for the Business and Dae Business, the Seller has not carried on any other business.

B. The Seller has agreed to sell and the Buyer has agreed to purchase all of the Purchased Assets (as hereinafter defined) related to the Business on the terms and conditions hereinafter contained. All assets, liabilities and other rights and obligations of the Seller relating solely to the Dae Business are specifically excluded from the terms of this Agreement.

C. CDC is an Affiliate of the Seller and has agreed to guarantee the performance of the Seller’s obligations hereunder as set forth in Clause 14.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 In this Agreement and in the Schedules, the following definitions are used:

“AAA Rules”	has the meaning set forth in Clause 20.2.1.
“Accounts”	means the unaudited financial statements of the Seller (including a balance sheet and profit and loss statement) made up to the Accounts Date and for the financial period from 1st January 2006 to the Accounts Date prepared in accordance with US GAAP and in manner consistent with past practice, copies of which are annexed hereto as Exhibit A.
“Accounts Date”	means 31st December 2006.

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“Acquisition Agreements”	means, collectively, (i) the assets purchase agreement dated the date of this Agreement and made by and among Ion Global Limited, CDC and wwwins Consulting Hong Kong Limited; (ii) the assets purchase agreement dated the date of this Agreement and made by and among chinadotcom Strategic, Inc., CDC and Carat Korea Co., Ltd.; and (iii) the share purchase agreement dated the date of this Agreement and made by and among Ion Global (BVI) Ltd., CDC and Group Carat (Nederland) BV.
“Aegis Group”	means the group of companies comprising the Aegis Group plc and its Subsidiaries. The expression “member of the Aegis Group” shall be construed accordingly.
“Affiliates”	in respect of any specified person or entity, means a person that directly or indirectly controls, is controlled by or is under common control with such specified person or entity or with which such specified person or entity may be connected or may become connected as an officer, director, executive, principal, agent, representative, consultant or otherwise.
“Agreed Form”	means, in relation to any document, such document in the terms agreed between the parties and signed by or on behalf of them for the purposes of identification.
“Agreement”	has the meaning ascribed to such term in the heading of this Agreement.
“Borrowing”	has the meaning set forth in Clause 10.1.15(a).
“Business”	has the meaning ascribed to such term in Recital A of the Agreement.
“Business Day”	means a day (not being a Saturday) on which banks are open for general banking business in San Francisco, California.
“Buyer”	has the meaning ascribed to such term in the heading of this Agreement.
“Buyer Disclosure Letter”	means the letter of even date herewith by the Buyer to the Seller (and acknowledged by the Seller) on the execution and delivery of this Agreement.

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“Buyer Indemnified Persons”	has the meaning set forth in Clause 11.1.2.
“Buyer Liabilities”	means the liabilities of the Buyer under the Contracts for which Client Deposits have been paid to the Seller (the amounts as at the date hereof are set out in column 5 of Schedule 4).
“Buyer Warranties”	has the meaning set forth in Clause 15.1.
“Cash”	has the meaning set forth in Clause 2.1.8.
“Claim”	has the meaning set forth in Clause 11.1.1(a).
“Client Deposits”	has the meaning set forth in Clause 2.1.3.
“Closing”	means the completion of the purchase by the Buyer from the Seller of the Purchased Assets in accordance with Clause 6.
“Closing Date”	means 11 September, 2007 or such other date as is determined by the Seller and Buyer.
“Closing Tangible Asset Balance Sheet”	means the balance sheet of the Tangible Asset made up to the Closing Date prepared in accordance with US GAAP and in manner consistent with past practice used to prepare the Accounts.
“Closing Tangible Asset Value”	means the value of the Tangible Asset as at the Closing Date as determined in accordance with Clause 6.6.
“Contracts”	has the meaning set forth in Clause 2.1.3.
“control”	means, in relation to any person at any time, the power (whether directly or indirectly and whether by ownership of share capital, possession of voting power, contract or otherwise) to appoint the majority of the members of the governing body or management, or otherwise to control the affairs and policies of that other person.
“Dae Business”	has the meaning ascribed to such term in Recital A of the Agreement.
“Disclosed”	means referred to in the Disclosure Letter or the Buyer Disclosure Letter (as the case may be).

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“Disclosure Letter”	means the letter of even date herewith by the Seller to the Buyer (and acknowledged by the Buyer) on the execution and delivery of this Agreement.
“Effective Employment Date”	has the meaning set forth in Clause 8.1.
“Employees”	means the employees employed in the Business at Closing Date, a list of the employees employed in the Business as at the date of this Agreement is set out in Part 1 of Schedule 1.
“Encumbrance”	means any mortgage, charge (fixed or floating), pledge, lien, hypothecation, trust, right of set off or other third party right or interest (legal or equitable) including any right of pre-emption, assignment by way of security, reservation of title or any other security interest of any kind however created or arising or any other agreement or arrangement (including a sale and repurchase arrangement) having similar effect.
“Environment”	means the natural and man-made environment and all or any of the following media namely air, water and land including air within buildings and air within other natural or man-made structures above or below ground.
“Environmental Law”	means all laws, regulations, directives, statutes, subordinate legislation, common law and other national and local laws, all judgments, orders, instructions or awards of any court or competent authority and all codes of practice and guidance notes which relate to the Environment or human health or the health of animals or plants.
“Excluded Assets”	means the assets and properties of the Seller other than the Purchased Assets.
“Excluded Liabilities”	has the meaning set forth in Clause 2.3.
“Fixed Assets”	has the meaning set forth in Clause 2.1.2.
“General Event of Indemnification”	has the meaning set forth in Clause 11.1.1(b).
“Hong Kong”	means the Hong Kong Special Administrative Region of the People’s Republic of China

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“Independent Advisor”	KPMG International (San Francisco office), or in the event that either the Seller or the Buyer is engaging the services of KPMG International (San Francisco office) at the time of the request made under Clause 6.6.3, a firm of independent nationally recognized chartered accountants agreed by the parties in writing or, failing such agreement, by Ernst & Young (San Francisco office).
“Insurances”	means the policies of assurance and insurance in connection with the Business and the Purchased Assets and the Employees, particulars of which are set out in Schedule 3;
“Intellectual Property”	means all of the following which is owned by, issued to or licensed to the Seller in connection with the Business, along with all income, royalties, damages and payments due or payable at Closing or thereafter including, without limitation, damages and payments for past or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world: patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissue, continuation, continuation-in-part, revision, extension or re-examination thereof; trademarks, service marks, logos, trade names, Internet domain names and corporate names together with all goodwill associated therewith, including, without limitation the use of the current corporate name and all translations, adaptations, derivations and combinations of the foregoing; copyrights and copyrightable works (including without limitation, web sites); and all registrations, applications and renewals for any of the foregoing; trade secrets and confidential information (including, without limitation, ideas, know-how, drawings, specifications, plans, proposals, financial, business and marketing plans, sales and promotional literature, and customer and supplier lists and related information); information technologies (including, without limitation, software programs, data and related documentation); and all copies and tangible embodiments of the foregoing (in whatever form or medium).

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“Losses”	means all losses, liabilities, costs (including, without limitation, reasonable attorney’s fees), charges and expenses.
“Management Accounts”	means the unaudited balance sheet of the Seller as at the Management Accounts Date and the unaudited statements of profit and loss of the Seller for the period commencing from 1st January 2007 and ended on the Management Accounts Date prepared in accordance with US GAAP and in a manner consistent with past practice, copies of which are annexed hereto as Exhibit B.
“Management Accounts Date”	means 30 June, 2007.
“Material Adverse Change”	means any material adverse change in the business, assets or position (financial, trading or otherwise), profits or prospects of the Business or any event or circumstance that may result in such a material adverse change. Without prejudice to the generality of the foregoing and to the extent that any adverse change or series of adverse change can be quantified, any adverse change to the extent of more than US$25,000 or series of adverse change to the aggregate extent of more than US$25,000 shall be deemed to be a material adverse change.
“Payment Account Details”	means, in relation to any payment to be made under or pursuant to this Agreement, the name, account number, account location and other details specified by the payee and necessary to effect payment by wire transfer to the payee.
“Permit”	means any licence consent authorisation certification or permit required under Environmental Law.
“Purchase Price”	has the meaning set forth in Clause 3.1.
“Purchased Assets”	has the meaning ascribed to such term in Clause 2.1 of this Agreement.
“Relief”	has the meaning set forth in Clause 11.2.1(b).
“Seller”	has the meaning ascribed to such term in the heading of this Agreement.

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“Seller Indemnified Persons”	has the meaning set forth in Clause 11.1.2.
“Service Agreement”	has the meaning set forth in Clause 6.2.1(i).
“Special Event of Indemnification”	has the meaning set forth in Clause 11.1.1(c).
“Subsidiary”	means any Affiliate of a company whose shares of more than fifty percent (50%) are owned by such company.
“Tangible Assets”	means the amount by which the assets (comprising (i) Cash; (ii) Work-In Progress; and (iii) Fixed Assets) exceed the Buyer Liabilities. For the avoidance of doubt, the Tangible Asset shall be calculated in the manner set forth on Schedule 8 and the amounts of the Cash, Fixed Assets and Buyer Liabilities estimated as at the Closing Date are set forth on Schedule 8.
“Tax Authority”	means any local, municipal, governmental, state, federal or fiscal, revenue, customs or excise authority, body, agency or official anywhere in the world having or purporting to have power or authority in relation to Tax, including without limitation the US Internal Revenue Service.
“Tax Event”	has the meaning set forth in Clause 11.2.1(a).
“Tax Legislation”	means all statutes, statutory instruments, orders, enactments, laws, by-laws, directives and regulations, whether domestic or foreign decrees, providing for or imposing any Tax.
“Taxation” or “Tax”	means all taxes, charges, duties, imposts, fees, levies or other assessments, and all estimated payments thereof, including without limitation income, business profits, branch profits, excise, property, sales, use, value added (VAT), environmental, franchise, customs, import, payroll, transfer, gross receipts, withholding, social security, unemployment taxes, as well as stamp duties and other costs, imposed by any Tax Authority, or any subdivision or agency thereof, and any interest and penalty relating to such taxes, charges, fees, levies or other assessments.

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“Transferred Employees”	has the meaning set forth in Clause 8.2.
“US”	means the United States of America.
“US$”	means the lawful currency of the United States of America.
“US GAAP”	means the generally accepted accounting principles applicable in the United States, consistently applied.
“Warranties”	has the meaning set forth in Clause 10.1.
“Work-In-Progress”	the percentage of work completed by the Seller which has not been billed under (i) client projects which are billed on a milestone and fixed fee basis; and (ii) Contracts for which Client Deposits have been paid to the Seller up to the Closing Date.

1.2 In this Agreement, save where the context otherwise requires:

1.2.1 a reference to a statute or statutory provision shall include a reference:

(a) to that statute or provision as from time to time consolidated, modified, re-enacted or replaced by any statute or statutory provision; and

(b) any subordinate legislation made under the relevant statute;

1.2.2 words in the singular shall include the plural, and vice versa;

1.2.3 the masculine gender shall include the feminine and neutral and vice versa;

1.2.4 a reference to a person shall include a reference to a firm, a body corporate, an unincorporated association or to a person’s executors or administrators;

1.2.5 a reference to a clause, sub-clause, Schedule and Exhibit shall be a reference to a clause, sub-clause, Schedule and Exhibit (as the case may be) of or to this Agreement;

1.2.6 if a period of time is specified and commences from a given day or the day of an act or event, it shall be calculated inclusive of that day;

1.2.7 references to any legal term for any action, remedy, method or judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than the State of Delaware be deemed to include what most nearly approximates in that jurisdiction to the Delaware legal term;

1.2.8 references to writing shall include any modes of reproducing words in a legible and non-transitory form;

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1.2.9 a reference to a balance sheet or profit and loss account shall include a reference to any note forming part of it;

1.2.10 where any of the Warranties is qualified in this Agreement or in the Disclosure Letter by the expression “to the Seller’s knowledge” or “so far as the Seller is aware” or any similar expression, that Warranty shall be deemed to include an additional statement that it has been made after due, diligent and careful enquiry to ensure that all information given in the Warranty is true, complete and accurate in all respects;

1.2.11 any reference herein to “including” shall be construed as a reference to “including but not limited to”;

1.2.12 the headings in this Agreement are for convenience only and shall not affect the interpretation of any provision of this Agreement; and

1.2.13 references to this Agreement include this Agreement as amended or supplemented in accordance with its terms.

1.3 The designations adopted in the recitals and introductory statements preceding this clause apply throughout this Agreement and the Schedules.

2. SALE AND PURCHASE OF PURCHASED ASSETS

2.1 The Buyer, relying on the agreements, covenants, representations, warranties, undertakings and indemnities of the Seller herein, hereby agrees to purchase from the Seller and the Seller as legal and beneficial owner hereby agrees to sell to the Buyer on the Closing Date free and clear of all Encumbrances, the Purchased Assets (as defined below) together with all rights, title, benefits and interests of the Seller therein, thereto and thereunder:

2.1.1 all customer accounts and mailing and prospect lists in respect of the customers of the Business listed in Part 3 of Schedule 1 together with all the Seller’s rights to service those customers subject to Clause 9;

2.1.2 the machinery, equipment, software and computers (together with all the data stored therein) of the Business (“Fixed Assets”) listed on Schedule 2;

2.1.3 all claims, benefits, rights and entitlements under the contracts, contract rights, agreements, licenses, commitments, sales and purchase orders and other instruments (whether uncompleted or pending) of the Business (collectively, the “Contracts”) listed on Schedule 4 including all deposits or progress payments received prior to the Closing Date for services not yet provided by the Seller as at the Closing Date in respect of the same (“Client Deposits”);

2.1.4 all of the Seller’s rights, claims, credits, causes of action or rights of set-off against third parties relating to the Purchased Assets, including, without limitation, unliquidated rights under manufacturers’ and sellers’ warranties;

2.1.5 the Intellectual Property owned by or issued to the Seller or licensed to the Seller from a third party listed on Schedule 6;

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2.1.6 all claims and rights (if any) under the transferable licenses, including, but not limited to, licenses, permits, consents, authorizations, certificates and approvals of any governmental agency or other governmental authorizations listed on Schedule 7;

2.1.7 all books, accounts, records, files and papers, whether in hard copy or computer format, including, without limitation, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records (subject to all applicable laws), and any information relating to taxes imposed on the Business or the Purchased Assets to the extent such materials relate directly to the Business or the Purchased Assets;

2.1.8 the cash on hand or deposit at banks representing all the Client Deposits (“Cash”), the amount as at the date hereof is set out in column 4 of Schedule 4;

2.1.9 all of the assets, properties and rights related to the Business acquired by the Seller after the date of this Agreement;

2.1.10 all goodwill associated with the Business or the Purchased Assets, together with the right to represent to third parties that the Buyer is the successor to the Business,

(collectively, the “Purchased Assets”).

2.2 Required Consent

2.2.1 Without prejudice to Clause 4, in the event that the Seller is unable to transfer to the Buyer a Contract on the Closing Date because consent from the relevant party to the Contract (other than the Seller) for such transfer has not been obtained on or before that date, the Seller shall use its reasonable efforts to obtain such consent and transfer the full benefit and legal title of such Contract to the Buyer within 60 days from the Closing Date.

2.2.2 The Buyer shall use its reasonable efforts to assist the Seller in obtaining the consent for the purpose of Clause 2.2.1. Without prejudice to Clause 4, the Buyer may at its absolute discretion waive any of the requirements under Clause 2.2.1.

No assumption of liabilities

2.3 Save as herein provided to the contrary, the Buyer is not assuming any obligation or liability of any kind or nature whatsoever of the Seller, whether or not related to the Purchased Assets or the Business, including, without limitation, the following liabilities and obligations of the Seller:

2.3.1 all Claims, demands, obligations or liabilities for Tax for all periods prior to the Closing Date and all Claims, demands, obligations or liabilities for the payment of any transfer tax, stamp duty or recording or filing fees, if any, imposed upon the sale, transfer, assignment and conveyance of the Purchased Assets;

2.3.2 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever, whether or not accrued, absolute, contingent, determined or determinable, actual or threatened, known or unknown, which arose or were incurred on or before the Closing Date, or which are based on events occurring on or before the Closing

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Date, or which are based on or related to the operation of the Business or ownership or use of the Purchased Assets on or before the Closing Date, notwithstanding that the date on which the Claim, demand, liability or obligation is asserted is after the Closing Date;

2.3.3 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever relating to or resulting from the bad faith, willful misconduct or negligence of any Affiliate or other shareholders, managers, directors, officers, employees, agents or representatives of the Seller (including, but not limited to, sexual harassment, discrimination, wrongful termination or other claims involving the workplace), whether actual or threatened, which arose or were incurred on or before the Closing Date, or which are based on events occurring on or before the Closing Date, or which are based on or related to the operation of the Business or ownership or use of the Purchased Assets on or before the Closing Date, notwithstanding that the date on which the Claim, demand, obligation, liability or indemnification is asserted is after the Closing Date;

2.3.4 all Claims, demands, obligations, liabilities or indemnifications of any nature whatsoever relating to any rent, rate or service charge in respect of the premises used by the Business;

2.3.5 all Claims, demands, obligations or liabilities of any nature whatsoever of the Seller to any of its Affiliates or shareholders;

2.3.6 all accounts payable of the Seller;

2.3.7 all indebtedness of the Seller or other liabilities of the Seller for any Borrowing;

2.3.8 any obligation or liability of the Seller which were required to be Disclosed, listed or described in this Agreement and which were not so Disclosed, listed or described;

2.3.9 any obligation or liability of the Seller for fees, costs and expenses relating to the negotiation, execution and delivery of this Agreement and the consummation of the transactions contemplated thereby, including, without limitation, any broker’s or finder’s fees or legal, accounting and other professional or consulting fees and expenses;

2.3.10 any Claim, demand, obligation or liability of the Seller existing at the Closing Date relating to accrued but unpaid salary or incentive, bonus or profit sharing compensation or payments or vacation, holiday, severance pay or any equity or option grants or issuances;

2.3.11 any Claim, demand, obligation or liability relating to any accrued or other liability (as required by US GAAP) for premiums, contributions or payments (including matching contributions or payments) required to be made by the Seller under or as a result of any pension, retirement, compensation or similar plan or for any penalties, interests or other charges relating thereto;

2.3.12 any obligation or liability of the Seller to (a) any of its employees who are offered employment with the Buyer but who on the Closing Date do not accept such employment, and (a) any former employees of the Seller;

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2.3.13 any obligation or liability of the Seller under any policies of insurance;

2.3.14 any obligation or liability of the Seller arising out of or resulting from the Seller’s noncompliance with any applicable law or regulation;

2.3.15 any liability, obligation or performance of the Seller under this Agreement;

2.3.16 any Claim, demand, liability or obligation of the Seller arising out of or resulting from the Seller’s acts or omissions occurring before, on or after the Closing Date;

2.3.17 any liability under or related to the credit cards listed in Section 10.1.15(a)(i) of the Disclosure Letter; and

2.3.18 any liability or obligation of the Seller relating to the Excluded Assets,

(collectively the “Excluded Liabilities”).

2.4 The Seller shall promptly pay and discharge in full when due or required to be discharged, or contest in good faith, all Excluded Liabilities.

2.5 Save as provided herein to the contrary, after the Closing, any regular periodic charges with respect to the Business or the Purchased Assets, including amounts payable with respect to personal property Taxes relating to the Purchased Assets, which become due and payable on or after the Closing Date and relate to periods that begin before and end after the Closing Date, shall be prorated and adjusted between the Seller and the Buyer as of the Closing Date on a per diem basis, and the Seller shall be responsible for and pay to the Buyer the portion of such amounts allocable to the period prior to the Closing Date for which payment is due on or after the Closing Date within five (5) Business Days of demand from the Buyer upon presentation of the relevant invoice(s) relating to such charges provided, however, that the Seller shall not be required to pay to the Buyer any amount it intends to dispute in good faith and shall provide the Buyer written notice of its intention to dispute such amount within such five (5) Business Day period.

2.6 From and after the Closing, the Buyer shall have the right and authority to collect for its own account all receivables and other related items that are included in the Purchased Assets. To the extent that, after the Closing, (i) the Buyer or any of its Affiliates receive any payment that is for the account of the Seller according to the terms of this Agreement, or the Seller makes a payment on behalf of the Buyer, the Buyer shall deliver such amount to the Seller or (ii) the Seller or any of its Affiliates receives any payment that is for the account of the Buyer or any of its Affiliates according to the terms of this Agreement, or the Buyer makes a payment on behalf of the Seller, the Seller shall deliver such amount to the Buyer. All amounts due and payable under this Clause 2.6, if any, shall be due and payable by the applicable party in immediately available funds, by wire transfer to an account designated in writing by the other party and shall be delivered to the other party within ten (10) Business Days of receipt thereof.

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3. PURCHASE PRICE

3.1 As consideration for the purchase of the Purchased Assets, in reliance upon the representations and warranties, covenants, agreements and undertakings of the Seller made herein, and subject to the terms and conditions of this Agreement, the Buyer shall pay to the Seller (or where applicable, the Buyer shall remit to the Seller), the sum of US$500,000 (the “Purchase Price”).

3.2 Any payments made to a party to this Agreement pursuant to this Agreement shall be made in cash in US$ and effected by crediting the account specified in the Payment Account Details of the payee(s) by way of wire transfer in immediately available funds on or before the due date for payment which shall be a good discharge of the party required to make payment in respect of its obligations to make such payment.

3.3 The Buyer shall be entitled to deduct or withhold from the Purchase Price such amount as the Buyer may be required to deduct or withhold on account of any Tax under any applicable law or regulation and pay only the balance thereof to the Seller and in such event, the payment of such balance of the Purchase Price (after the deduction or withholding as aforesaid) shall be deemed to be a good discharge of the Buyer’s obligations to make payment of the Purchase Price hereunder.

4. CONDITIONS

4.1 Conditions Precedent of the Buyer

The obligations of the Buyer under this Agreement are subject to the Buyer’s satisfaction that the following conditions have been duly fulfilled:

4.1.1 completion of satisfactory (in Buyer’s sole and discretionary judgment) legal, commercial, IT, human resources, taxation, financial and clients due diligence by Buyer;

4.1.2 the completion of any formal internal corporate approvals as may be required by Aegis Group plc including approval by the board of directors and Chief Executive Office of Aegis Group plc;

4.1.3 the parties to the Contracts set out in paragraphs (1) to (3) of Schedule 4 (other than the Seller) namely, (i) AIG.com, Inc. and Software Galeria, Inc.; (ii) Walt Disney Parks and Resorts; and (iii) Medallurgy LLC having given each of their respective consents to the assignments or novations of the same in favour of the Buyer;

4.1.4 (a) there having occurred no Material Adverse Change in the period between the date of this Agreement and Closing;

(b) nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a breach of the Warranties;

(c) no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the purchase of the Purchased Assets by the Buyer;

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(d) each of the Seller and CDC having performed or complied with, in all material respects, all covenants, obligations and agreements contemplated by this Agreement to be performed or complied with by it at or prior to Closing, including without limitations those set forth in Clause 5;

(e) all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary or desirable for or in respect of the proposed sale of the Purchased Assets by the Seller to the Buyer having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies on terms satisfactory to the Buyer and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals remaining in full force and effect.

4.1.5 the Seller having certified in writing the matters mentioned under Clause 4.1.4.

4.1.6 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction of the Buyer.

4.2 Conditions Precedent of the Seller

The obligations of the Seller under this Agreement are subject to the Seller’s satisfaction that the following conditions have been duly fulfilled:

4.2.1 the completion of any formal internal corporate approvals as may required by the Seller including approval by the Seller’s and its Affiliates’ board of directors and stockholders.

4.2.2 (a) there having occurred no Material Adverse Change in the period between the date of this Agreement and Closing;

(b) nothing having occurred or been omitted which is, or had it occurred or been omitted on or before the date of this Agreement would have constituted, a breach of the Buyer Warranties;

(c) no order or judgement of any court or governmental, statutory or regulatory body having been issued or made prior to Closing, which has the effect of making unlawful or otherwise prohibiting the purchase of the Purchased Assets by the Buyer;

(d) the Buyer having performed or complied with, in all material respects, all covenants, obligations and agreements contemplated by this Agreement to be performed or complied with by it at or prior to Closing;

(e) all necessary notification and filings having been made, the expiry, lapsing or termination of all applicable waiting periods (including extensions thereof) under any applicable legislation or regulations and all the licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals necessary for or desirable for or in respect of the proposed sale

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of the Purchased Assets by the Seller to the Buyer having been obtained from appropriate governments, governmental, supranational or trade agencies, courts or other regulatory bodies on terms satisfactory to the Seller and such licences, authorisations, orders, grants, confirmations, permissions, registrations and other approvals, remaining in full force and effect.

4.2.3 the simultaneous and successful completion of the transactions contemplated under all the Acquisition Agreements to the satisfaction of the Seller.

4.3 Responsibility for Satisfaction

4.3.1 The Seller undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.1.3 to 4.1.5 as soon as possible after the date of this Agreement and before Closing, and shall promptly give notice to the Buyer upon satisfaction of the same.

4.3.2 The Buyer undertakes to use its reasonable endeavours to ensure the satisfaction of the conditions set out in Clauses 4.2.2 (b) and (d) as soon as possible after the date of this Agreement and before Closing, and shall promptly give notice to the Seller upon satisfaction of the same.

4.3.3 Without prejudice to the foregoing, it is agreed that all requests and enquiries from any government, governmental, supranational or trade agency, court or regulatory body shall be dealt with by the Seller and the Buyer in consultation with each other and each of the Seller and the Buyer shall upon mutual agreement, promptly co-operate with and provide all necessary information and assistance reasonably required by such government, agency, court or body upon being requested to do so by the other.

4.3.4 The Buyer may at any time by notice in writing to the Seller, waive any of the conditions in Clause 4.1, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.1 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Buyer.

4.3.5 The Seller may at any time by notice in writing to the Buyer, waive any of the conditions in Clause 4.2, in whole or in part, or extend the time set out in Clause 4.4 within which the conditions set out in Clause 4.2 shall be satisfied and such waiver may be made subject to such terms and conditions as are determined by the Seller.

4.3.6 Should the Buyer or the Seller become aware of anything which will or may prevent any of the conditions set out in Clause 4.1 or Clause 4.2 from being satisfied by the time and date required by Clause 4.4.1 and Clause 4.4.2 the relevant party shall forthwith notify the other in writing.

4.4 Non-Satisfaction

4.4.1 If any of the conditions in Clause 4.1 is not satisfied or waived by the Buyer on or before 11 September, 2007 or such other date as the parties may agree or the Buyer becomes aware of any fact that would prevent any of the conditions in Clause 4.1 from being satisfied, the Buyer may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.1).

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4.4.2 If any of the conditions in Clause 4.2 is not satisfied or waived by the Seller on or before 11 September, 2007 or such other date as the parties may agree or the Seller becomes aware of any fact that would prevent any of the conditions in Clause 4.2 from being satisfied, the Seller may, in its sole discretion, terminate this Agreement and no party shall have any claim against any other under it, save for any claim arising from any antecedent breach (including breach of any undertaking contained in Clause 4.3.2).

4.4.3 In the event that the Buyer or Seller shall terminate this Agreement in accordance with Clause 4.4.1 or Clause 4.4.2 (as the case may be), and without limiting the Buyer’s or Seller’s right to claim, all obligations of the Buyer and Seller under this Agreement shall, unless otherwise expressly stated, cease, but, for the avoidance of doubt, all rights and liabilities of the parties which have accrued before such termination shall continue to exist.

5. ACTION PENDING CLOSING

5.1 Seller’s General Obligations

The Seller undertakes to procure that from the date of this Agreement until Closing:

5.1.1 the Seller will carry the Business only in the ordinary and usual course and in the manner and scope carried on as at the date of this Agreement, save insofar as agreed in writing by the Buyer;

5.1.2 the Buyer and its agents will, upon reasonable notice, be allowed access to the clients, employees and premises of the Seller and shall also be allowed access to, and to take copies of, the books and records of the Seller including, without limitation, the statutory books, minute books, leases, licences, contracts, details of receivables, Intellectual Property, tax records, supplier lists and customer lists in the possession or control of the Seller which relate solely to the Business and the Purchased Assets, subject always to the applicable protections of confidentiality set forth in Clause 17 hereof;

5.1.3 such representatives and advisers as the Buyer requests may be designated to work with the Seller with regard to the management and operations of the Business. The Seller will consult with such representatives and advisers with respect to any action which may materially affect the Business of the Seller taken as a whole. The Seller will furnish to such representatives and advisers such information as it may reasonably request for this purpose;

5.1.4 the Seller shall take all commercially reasonable efforts consistent with past practices to maintain the present status of its property and assets (including the Purchased Assets);

5.1.5 the Seller shall take all commercially reasonable efforts consistent with past practices to maintain the validity of its Intellectual Property set out in Schedule 6;

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5.1.6 save only as may be necessary to give effect to this Agreement, the Seller shall not commit, voluntarily permit or procure any act or omission which would render any of the Warranties untrue, inaccurate or misleading in any respect upon Closing;

5.1.7 the Seller shall use its commercially reasonable efforts to promptly provide to the Buyer monthly management accounts in the usual form generated by the Seller;

5.1.8 the Seller shall authorize the Buyer to obtain from the California State Board of Equalization (“State Board of Equalization”) a certificate stating that no taxes, interest or penalties are due with regard to the Seller and shall permit the Buyer to provide the Seller’s details including its name, address, registration or permit number and a description of the transactions contemplated under this Agreement to the State of Board of Equalization upon the Buyer’s application for such certification.

5.2 Restrictions on the Seller

Without prejudice to the generality of Clause 5.1, except as may be expressly provided or contemplated in this Agreement or with the prior written consent of the Buyer (which consent shall not be unreasonably withheld), the Seller shall not between the date of this Agreement and Closing with respect to the Business or the Purchased Assets:

5.2.1 incur or enter into any agreement or commitment involving any capital expenditure in excess of US$25,000;

5.2.2 enter into or amend any contract or commitment in respect of the Business: (i) which is not capable of being terminated without compensation at any time with one months’ notice or less; or (ii) which is not in the ordinary and usual course of business and on arms’ length terms or (iii) which involves or may involve total revenue or total expenditure in excess of US$25,000;

5.2.3 enter into any leasing, hire purchase or other agreement or arrangement for payment on deferred terms otherwise than in the ordinary course of business;

5.2.4 incur any indebtedness otherwise than in the ordinary and usual course of business;

5.2.5 save as required by law, make any amendment to the terms and conditions of employment or engagement (including, without limitation, remuneration, pension entitlements and other benefits) of any employee, consultants or interns employed by the Seller under the Business, provide or agree to provide any gratuitous payment or benefit to any such person or any of their dependants, or dismiss or terminate (except with good cause) the employment of any employee or engage or appoint any additional employee for the Business;

5.2.6 acquire or agree to acquire or sell, transfer, lease, assign or dispose any Purchased Assets or agree to sell, transfer, lease, assign or dispose of any Purchased Assets or enter into or amend any material contract or arrangement in respect of the Purchased Assets;

5.2.7 sell, convey, lease, assign or otherwise transfer or dispose of any interest in any amounts receivable except in the ordinary course of business;

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5.2.8 delay making payment to any trade creditors of the Business generally beyond the date on which payment of the relevant trade debt should be paid in accordance with credit periods authorised by the relevant creditors (or (if different) the period extended prior to the date of this Agreement by creditors in which to make payment);

5.2.9 amend, to any material extent, any of the terms on which goods, facilities or services are supplied, such supplies being material in the context of the Business, except where required to do so in order to comply with any applicable legal or regulatory requirement;

5.2.10 enter into any guarantee, indemnity or other agreement to secure any obligation of a third party or create or agree to create any Encumbrance over any of the Purchased Assets;

5.2.11 amend or discontinue any Insurance contract, fail to notify any claim under the Insurances in accordance with the provisions of the relevant policy or settle any such claim below the amount claimed;

5.2.12 make any change to its accounting practices or policies or accounting reference date or amend its memorandum or articles of association (or equivalent constitutional documents);

5.2.13 make any substantial change in the nature or organisation of the Business;

5.2.14 discontinue or cease to operate all or a material part of the Business or resolve to be wound up;

5.2.15 change its residence for Taxation purposes;

5.2.16 grant a licence of or assign or otherwise dispose of or create any Encumbrance over any Purchased Assets in favour of any third party (not being the Buyer); or

5.2.17 commence, compromise or discontinue any legal or arbitration proceedings relating to the Business and the Purchased Assets (other than in respect of the collection of debts which are not material in the context of the Business in the ordinary and usual course of business).

5.3 Exercise of Buyer’s Rights

It is hereby acknowledged (for the avoidance of doubt) that none of the provisions of this Clause 5 or the exercise or failure to exercise by the Buyer of its rights thereunder, shall give rise to any liability on the part of the Buyer or any of its employees, consultants or representatives or any person connected with it (except to the extent that any losses or damages to the Seller are caused by the Buyer’s gross negligence or wilful misconduct in respect of the exercise of the Buyer’s right under Clause 5.1.2).

6. CLOSING

6.1 Closing shall take place at the offices of Jones Day at 29th Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong or such other place as the parties may agree, on the Closing Date.

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6.2 On the Closing Date:

6.2.1 the Seller shall deliver or cause to be delivered to the Buyer:

(a) such conveyances, assurances, transfers, assignments, releases, novation agreements, consents and other documents duly executed by the relevant parties as the Buyer may require to vest in the Buyer the full benefit of and valid legal title to the Purchased Assets and all other rights and assets hereby agreed to be sold and the full benefit of this Agreement including:

(i) Bill of Sale and Assignment of the Purchased Assets in substantially the form attached as Schedule 12 duly executed by the Seller and CDC;

(ii) duly executed assignments or novation agreements in the Agreed Form of the Contracts set out in paragraphs (1) to (3) of Schedule 4;

(b) all subsisting contracts, licenses and permits in connection with the Purchased Assets and all books, accounts, papers, records and other documents (including financial records) relating to the Purchased Assets and all lists of customers and suppliers and other information or documents in relation to the Business as the Buyer may require;

(c) all the designs and drawings, plans, technical and sales publications, advertising material, brochures, catalogues and other technical and sales matter of the Seller in relation to the Business together with any plates, blocks, negatives and other like material relating thereto;

(d) any other documents of title or transfer of ownership relating to any of the other Purchased Assets;

(e) such other documents as may be required to give to the Buyer good title to the Purchased Assets, to enable the Buyer or its nominees to become the registered owner thereof and to consummate the transactions contemplated by this Agreement;

(f) duly notarised power of attorney under which any document is executed on behalf of the Seller if applicable;

(g) certificate in the form set out in Part 1 of Schedule 10 duly executed by the Seller confirming the Warranties;

(h) certificate in writing duly executed by the Seller pursuant to Clause 4.1.5 confirming the matters mentioned thereunder;

(i) the service agreement in substantially the form attached hereto as Schedule 11 (“Service Agreement”) duly executed by Wei-Tai Kwok, and the employment letters in substantially the form attached hereto as Part 2 of Schedule 1 duly executed by Simon Mathews, James Douglas and Camila Carvalho;

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(j) legal opinion from Cayman counsel in the Agreed Form and dated as of the Closing Date;

(k) duly executed release in the Agreed Form releasing the Transferred Employees from certain obligations and liabilities under the existing employment agreements (including any non-compete or non-disclosure provisions and any non-solicitation undertakings thereunder) permitting the Transferred Employees to perform their obligations under the relevant employment agreements with the Buyer and, in the case of any non-solicitation undertakings, only to the extent necessary to assist the Seller in compliance of its obligations under Clause 8.2;

(l) [intentionally left blank]

(m) a reasonably current long form Good Standing Certificate of the Seller issued by the California Secretary of State;

(n) appropriate payoff letters and termination statements under the Uniform Commercial Code and other instruments as may be requested by the Buyer to extinguish all outstanding indebtedness of the Seller (including indebtedness to Affiliates) in respect of the Purchased Assets and all Encumbrances related thereto as reasonably directed by the Buyer;

(o) reasonably current Certificate of Good Standing and Incumbency of CDC;

(p) signed copies of the resolutions duly passed by:

(i) the board of directors and the shareholder of the Seller; and

(ii) the board of directors of CDC, approving this Agreement, the transfer of the Purchased Assets and the transactions contemplated hereunder, and the execution, delivery and performance of this Agreement by the Seller and CDC, in form and substance satisfactory to the Buyer;

a schedule prepared by the Seller setting out the Work-In-Progress for the purpose of the Buyer’s preparation of the Calculation Statement.

6.2.2 the Seller shall permit the Buyer to take possession of the Purchased Assets.

6.3 Upon compliance by the Seller with the provisions of Clause 6.2, the Buyer shall at Closing pay the Purchase Price to the Seller in accordance with Clauses 3.2 and 3.3.

6.4 The Buyer shall provide Seller with a certificate in the form set out in Part 2 of Schedule 10 duly executed by the Buyer confirming the Buyer Warranties.

6.5 It is a condition to Closing that (and the Buyer and Seller shall have no obligation to complete the sale and purchase of the Purchased Assets hereunder unless) the transactions contemplated under all the Acquisition Agreements shall be completed simultaneously and successfully with the completion of the sale and purchase of the Purchased Assets hereunder.

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6.6 Closing Tangible Asset Value

6.6.1 Within a period of two (2) months after Closing, the Buyer shall at its sole cost and expense prepare the Closing Tangible Asset Balance Sheet and provide the Seller with a written statement of its calculation of the Closing Tangible Asset Value (the “Calculation Statement”) according to the Closing Tangible Asset Balance Sheet. The Seller shall render reasonable assistance to the Buyer and provide such information as the Buyer may reasonably require in order to enable the Buyer to prepare the Closing Tangible Asset Balance Sheet at the Buyer’s sole cost and expense.

6.6.2 Upon receiving a Calculation Statement, the Seller shall within thirty (30) days either (i) notify the Buyer in writing that they agree with the Calculation Statement or (ii) notify the Buyer in writing that it does not agree with the Calculation Statement and stating the grounds of its disagreement and its own calculation of the Closing Tangible Asset Value together with a copy of any financial information used in making such calculation (the “Dispute Notice”). The Buyer shall give reasonable assistance to the Seller and its representatives and agents including without limitation access to the books and records relating to the Business and Purchased Assets necessary for the Seller to evaluate the Calculation Statement. If the Buyer does not receive any Dispute Notice from the Seller within such thirty (30) days period, the Seller shall be deemed to have agreed to the Calculation Statement and the Buyer’s calculation of the Closing Tangible Asset Value.

6.6.3 In the event a Dispute Notice is given by the Seller according to Clause 6.6.2, the Seller and the Buyer shall meet and attempt in good faith to resolve the items or amounts in dispute. If the Seller and the Buyer are unable to reach an agreement within five (5) days after receipt of the Dispute Notice by the Buyer, either party may request an Independent Advisor to review the disputed items or amounts and compute the Closing Tangible Asset Value in question. In making its calculation, the Independent Advisor shall consider only the items or amounts in dispute (and to the extent required, any other items or amounts necessary to derive the disputed items or amounts). Such determination shall be made within fourteen (14) days after such request and shall be conclusive and binding on the parties. The fees, costs and expenses of the Independent Advisor shall be borne by the party whose calculation of the Closing Tangible Asset Value is furthest from the Independent Advisor’s calculation.

If the Closing Tangible Asset Value is less than the sum of US$25,000, the Seller shall forthwith pay to the Buyer the amount of the deficit. If the Closing Tangible Asset Value is greater than the sum of US$25,000, the Buyer shall forthwith pay to the Seller the amount by which the Closing Tangible Asset Value exceed US$25,000.

6.7 Client Billing and Work-In-Progress

6.7.1 Upon the execution of this Agreement by the parties, the Seller shall notify all of its clients that are billed on a monthly basis of the transactions contemplated by this Agreement. The Seller shall bill such clients for all services provided through Closing Date and such amounts shall be paid by the clients directly to the Seller. If any client does not accept such billing arrangement, the Buyer shall bill the relevant client and remit payment received from the client in accordance with Clause 2.6.

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6.7.2 For all client projects which are billed on a milestone and fixed fee basis and Contracts for which Client Deposits have been paid to the Seller, the Seller and Buyer shall negotiate in good faith to agree upon the Work-In-Progress for each such project and Contract. Any disagreements regarding calculation of the Work-In-Progress as set out in the Calculation Statement shall be resolved in accordance with the mechanism set forth in Clause 6.6 of this Agreement.

6.7.3 The Seller warrants and agrees that the Buyer can bill the clients in full in respect of all account receivables for Work-In-Progress and that such accounts receivables shall be collectable in full. The Seller shall reimburse the Buyer any amount of the account receivables included in the calculation of the Work-In-Progress which is not fully paid by the relevant debtor within a period of six (6) months after Closing (“Outstanding Accounts Receivables”). Upon the Seller’s reimbursement of the Outstanding Accounts Receivables to the Buyer, the Buyer shall assign the right for collection of the Outstanding Account Receivables to the Seller.

7. BULK SALES

The Buyer hereby waives, in connection with the transactions contemplated by this Agreement, compliance with the “bulk sales” provision of Article 6 of the Uniform Commercial Code as it is in effect in the states where the Seller owns assets to be conveyed to the Buyer hereunder and other similar bulk transfer notice provisions other than bulk sale tax notice provisions. The Seller shall indemnify and hold harmless the Buyer against any and all liabilities that may be asserted by third parties against the Buyer as a result of such non-compliance.

8. EMPLOYMENT

8.1 Prior to the Closing Date, the Seller shall give notice to the Employees terminating their employment in accordance with any applicable laws including but not limited to any laws related to foreign national work visa, with effect from the Closing Date or such later date as shall be required in order to comply with the provisions of the applicable laws. On or before Closing, the Buyer shall offer to such Employees employment with the Buyer on base salary terms no less favourable from those on which the Employees are currently employed by the Seller as set forth on Part 1 of Schedule 1, and on such additional terms as are set forth on Part 2 of Schedule 1 with effect from the Closing Date or such later date as required by applicable laws (“Effective Employment Date”), such offer notices to be in Agreed Form. If the Effective Employment Date for any Employee shall fall on a date after the Closing Date, then, for the period from the Closing Date to the Effective Employment Date, the Seller shall, upon the Buyer’s request, and pursuant to an agreement with terms and conditions reasonably satisfactory to the Buyer and the Seller, second such Employee as the Buyer so requests to the Buyer. The Buyer will, during the term of secondment (“Secondment Period”) of each such Employee, be responsible for the payment of the salaries, expenses and benefits of such Employee relating to and during such secondment (“Second Payments”). In addition, the Buyer shall, during the Secondment Period for any Seconded Employee, accrue bonuses for such Seconded Employee in accordance with the Buyer’s bonus policies then in effect. Such bonuses shall be paid to the Seconded Employee in accordance with the Buyer’s bonus policies then in effect after the Seconded Employee becomes an employee of the Buyer. The Buyer may terminate the secondment of any Employee at any time;

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provided, however that the Buyer shall provide Seller five (5) days written notice prior to such termination; provided further, however, that Buyer shall not be required to provide such notice to the Seller before terminating the secondment of such Employee if the Employee has engaged in any felony, fraud, dishonesty, gross negligence, misconduct or conduct that brings Buyer or any subsidiary or affiliate of Buyer into substantial public disgrace or disrepute. The Buyer hereby undertakes to remit to the Seller any Secondment Payments paid by the Seller within ten (10) Business Days of the Buyer’s receipt of a statement from the Seller setting out a breakdown of such payments relating to each seconded Employee.

8.2 The Seller shall use commercially reasonable efforts to procure the Employees to consider employment with the Buyer and will assist the Buyer in making offers and in hiring the Employees, including by providing the Buyer with access to such Employees during the period from the effective date of this Agreement until Closing. The Seller shall not take, and shall cause each of its Affiliates not to take, any action that would impede, hinder, interfere or otherwise compete with the Buyer’s effort to hire any Employees. Employees who receive and accept offers of employment from the Buyer are referred to as “Transferred Employees” as of the Effective Employment Date and shall enter into such agreements as may be requested by the Buyer, which may include customary invention assignment, confidentiality, non-solicitation and non-compete provisions. The Seller shall be responsible for Employees who do not become Transferred Employees and for all severance, costs and expenses related to such Employees.

8.3 Save as provided in the third to last sentence of Clause 8.1, no employment related liabilities arising through the Effective Employment Date with respect to any Transferred Employees, any other Employees or employees of the Seller or any Subsidiary of the Seller or any of their respective beneficiaries shall be assigned to or assumed by the Buyer. The Seller shall pay each Transferred Employee any and all salary and other employment related payments due to such Transferred Employee (a) through the Effective Employment Date in accordance with the Seller’s existing policies, including any payments with respect to accrued vacation time, bonuses agreed to be paid by the Seller or otherwise promised by the Seller for the financial year 2007, severance or prior notice of termination, and (b) any payments required to be made to any such Employee as a result of the transactions contemplated hereby. The Seller shall fully indemnify and keep indemnified the Buyer against any claim for wrongful dismissal or redundancy or otherwise that may be made against the Buyer by any person who was at any time an employee of the Seller in connection with the Business including any claims arising out of their terms of employment or under the applicable laws and against any other claims arising from the termination of their employment, and the Seller shall also indemnify and keep indemnified the Buyer against any such claims brought by any Employee who accepts employment with the Buyer to the extent that such claims relate or are referable to a period or periods of employment before the Effective Employment Date. Notwithstanding the foregoing, the Buyer shall indemnify the Seller against any claim made by a customer or supplier of the Buyer based on work performed by a seconded Employee at the direction of the Buyer during the Secondment Period.

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9. ASSIGNMENT OF CONTRACTS AND RIGHTS

9.1 This Agreement shall not constitute an agreement to assign any Purchased Asset or any claim, right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of the Buyer thereunder.

9.2 If any licenses, consents or agreements from third parties are required for the transfer, assignment or novation to or in favour of the Buyer of any Contracts under this Agreement, the Seller shall use its reasonable efforts (but without any payment of money by the Buyer) to obtain such license, consents or agreement from the other parties on or before the Closing Date or claim any right or any benefit arising thereunder for the assignment thereof to the Buyer as the Buyer may request.

9.3 Without prejudice to Clauses 2.2 and 4, if such license, consent or agreement is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of the Seller thereunder so that Buyer would not in fact receive or otherwise be entitled to the full benefit of all such rights, the Seller shall, to the extent not prohibited under applicable agreements, enter into such arrangement with the Buyer at the Buyer’s reasonable direction under which the Buyer will obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or subleasing to the Buyer, or under which the Seller would enforce for the benefit of the Buyer, with the Buyer assuming Seller’s obligations, any and all rights of the Seller against a third party thereto. The Seller shall promptly pay to the Buyer when received all monies received by the Seller under any Purchased Asset or any claim, right or any benefit arising thereunder. The foregoing provisions do not affect Buyer’s rights and remedies against the Seller in respect of a Contract which they have warranted is assignable, or may be performed by Buyer instead of the Seller without any novation or transfer agreement.

9.4 Subject to Clauses 9.1 to 9.4, with effect from the Closing Date, the Buyer shall observe and perform all obligations and commitments of the Seller under the Contracts and the liabilities incurred from such obligations and commitments provided that nothing in this Agreement:

9.4.1 shall require the Buyer to perform any obligation falling due for performance or which should have been performed before the Closing Date; or

9.4.2 shall make the Buyer liable for any act, neglect, default or omission in respect of any Contracts or for any claim, expense, loss or damage arising from any failure to obtain the consent or agreement of any third party to the entry into of this Agreement or from any breach of any of the Contracts caused by this Agreement or its Closing; or

9.4.3 shall impose any obligation on the Buyer for or in respect of any goods supplied by the Seller or any service performed by the Seller.

9.5 The Seller shall indemnify the Buyer against all actions, proceedings, costs, damages, claims and demands in respect of:

9.5.1 any act or omission on the part of the Seller in relation to the Contracts;

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9.5.2 any alleged fault, defect or error of any kind arising from goods supplied or services provided by the Seller.

10. WARRANTIES BY SELLER AND CDC

10.1 The Seller hereby warrants and represents to the Buyer that the matter set forth in Clauses 10.1.1 to 10.1.59 (“Warranties”) are true, accurate and complete (a) as of the date of this Agreement and (b) as of the Closing Date.

GENERAL WARRANTIES

The Accounts

10.1.1 General

the Accounts and Management Accounts:

(a) have been prepared in accordance with US GAAP;

(b) are accurate and show a true and fair view of the affairs of the Seller and the Business as at the specified accounting date and of its results for the accounting reference period ended on that date;

(c) comply with the requirements of all applicable statutes, laws, rules and regulations;

(d) are prepared on consistent bases and policies of accounting; and

(e) are not affected by any unusual or non-recurring items except as may be referenced in the notes associated therewith.

10.1.2 Provision for liabilities, capital commitments and bad debts

the Accounts and Management Accounts make adequate provisions or reserves for, or disclose, all liabilities (including contingent, deferred and disputed liabilities) and whether liquidated or unliquidated and all capital commitments of the Seller and the Business as at the specified accounting date, indicate clearly which of those liabilities are not usually provided for or reserved, and make adequate provision or reserve for all bad and doubtful debts. All accounts and notes receivables of the Seller are, individually and in the aggregate, collectible in full, net of reserves therefore. All accounts and notes receivable of the Seller represent sales actually made in the ordinary course of business or valid claims as to which full performance has been rendered by the Seller. To the Seller’s knowledge, no counter claims, defences or offsetting claims with respect to the accounts or notes receivable of the Seller are pending or threatened. Save as Disclosed, all of the accounts and notes receivable of the Seller relate solely to sales of goods or services to customers of the Seller, none of whom are Affiliates of the Seller or any of its Affiliates.

10.1.3 [Intentionally left blank]

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10.1.4 Valuation and depreciation as in previous accounts

the method of valuing work in progress adopted in the Accounts and Management Accounts and the basis of depreciation adopted in respect of fixed assets are the same as the corresponding accounts for the preceding years (if any).

10.1.5 Rate of depreciation

save as Disclosed, the rate of depreciation adopted in the Accounts and Management Accounts is sufficient for the value of each of the fixed assets of the Business to be written down to nil by the end of its useful working life.

10.1.6 Profits

save as Disclosed, the profits shown in the Accounts and Management Accounts have not to a material extent been affected (except as disclosed in those accounts) by any extraordinary or exceptional event or circumstance or by any other factor rendering them unusually high or low except as may be referenced therein.

10.1.7 Position since Accounts Date

save as Disclosed, since the Accounts Date:

(a) the Business has been carried on in the ordinary course and so as to maintain it as a going concern;

(b) there has been no Material Adverse Change in the financial or trading position or prospects of the Seller and the Business;

(c) there has been no reduction amounting to a Material Adverse Change in the value of the net tangible assets of the Seller and the Business on the basis of the valuations adopted in the Accounts;

(d) the Seller has not entered into any transaction which has given rise or shall give rise to a liability to Taxation on the Seller (or would have done so or would or might do so but for the availability of any relief, allowance, deduction or credit) other than profits tax on actual income (and not chargeable gains or deemed income) of the Seller arising from transactions entered into in the ordinary course of business;

(e) the Business has not been affected by the loss of any important customer or source of supply or by any abnormal factor not affecting similar businesses to a similar extent and the Seller are not aware of any facts likely to give rise to any such effect whether before or after Closing;

(f) the Seller has not acquired or disposed of or agreed to acquire or dispose of any business or any asset;

(g) no debtor has been released by the Seller on terms that he pays less than the book value of any debt (subject to settlement discounts on the usual terms which have been Disclosed to the Buyer) and no debt has been written off or has proved to be irrecoverable to any extent;

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(h) the Seller has not paid any service, management or similar charges or any interest or amount in the nature of interest to any other person or incurred any liability to make such a payment other than in the ordinary course of business;

(i) the Seller does not have any known, material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, regardless of when asserted) arising out of transactions or events entered into prior to the date of this Agreement, or any action or inaction, or any state of facts existing, with respect to or based upon transactions or events occurring prior to the date of this Agreement, except (i) liabilities reflected in the Accounts or Management Accounts, or (ii) liabilities that have arisen after the Accounts or Management Accounts Date in the ordinary course of business (none of which relates to breach of contract, breach of warranty, tort, infringement, legal violation or environmental liability).

(j) Schedule 9 sets forth a true, accurate and complete list of the name and address of each bank with which the Seller has an account or safe deposit box and the name of each person authorized to draw thereon or have access thereto.

Assets

10.1.8 Title to Assets

the assets included in the Accounts and Management Accounts or acquired by the Seller since the Accounts Date and all Purchased Assets are the absolute property of the Seller free from any mortgage, charge, lien, bill of sale or other Encumbrance and are not the subject of any leasing, hiring or hire-purchase agreement or agreement for payment on deferred terms or assignment or factoring or other similar agreement or any interests of the third parties, and all such assets are in the possession or under the control of the Seller.

10.1.9 Condition of plant machinery and equipment

the machinery, office equipment, computer systems and vehicles used by the Seller for the Business are in good repair, regularly maintained and fully serviceable and comply in all material respects with any applicable legal requirement or restriction, and the vehicles are duly licensed and suitable for the purposes for which they are used.

10.1.10 Control of records and information

all records and information belonging to the Seller (whether or not held in written form) relating to the Business and the Purchased Assets are in its exclusive possession, under its direct control and subject to unrestricted access by it.

10.1.11 Acquisition at arm’s length

the Seller has not acquired any Purchased Asset on terms which were not by way of bargain at arm’s-length.

10.1.12 [intentionally left blank]

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10.1.13 Nature of debts

the Seller is not owed any money other than trade debts incurred in the ordinary course of business and cash at bank under the Business.

10.1.14 (a) Realisation of book debts

the book debts shown in the Accounts and Management Accounts have realised, or shall realise within twelve months from the date of this Agreement, their full nominal amount less any reserve for bad or doubtful debts included in the Accounts and Management Accounts; and the book debts of the Seller which have arisen since the Accounts Date shall realise within the same period.

(b) Sufficiency of Assets

the Purchased Assets constitute assets, properties and rights used exclusively in the Business as heretofore conducted.

Borrowings, Grants and Loans to Directors

10.1.15 Borrowings

(a) save as Disclosed the Seller does not have outstanding any obligation for the payment or repayment of money, whether present or future, actual or contingent, relating to the Business in respect of:

(i) monies borrowed or raised (whether from banks or otherwise and including, without limitation, any revolving lines of credit or term loans);

(ii) any recourse to a company selling or discounting receivables in respect of receivables sold or discounted;

(iii) moneys raised under any bond, note, stock, or other security;

(iv) moneys raised under or in respect of acceptance credit and documentary credit facilities;

(v) the acquisition cost of assets or services to the extent payable after the time of acquisition or possession;

(vi) rental payments under capital leases, chattel leases and hire purchase agreements; or

(vii) any guarantee, indemnity or other assurance against or arrangement intended to prevent or limit loss in respect of any obligation for the payment or repayment of money described in paragraphs (i) to (vii) above whether by the Seller, its Affiliates, shareholders, managers, officers, employees, agents, representatives or any other third party (any such obligation being referred to under this Agreement as a “Borrowing”);

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(b) save as Disclosed the Seller does not have subsisting over the whole or any part of its present or future revenues or assets under the Business any Encumbrance, mortgage, charge, pledge, lien or other security interest or any other agreement or arrangement having a similar effect.

(c) save as Disclosed no Borrowing of the Seller relating to its Business has become or is now due and payable, or capable of being declared due and payable, before its normal or originally stated maturity and no demand or other notice requiring the payment or repayment of money before its normal or originally stated maturity has been received by the Seller.

(d) no event or circumstance has occurred, or may occur with the giving of notice or lapse of time determination of materiality or satisfaction of any other condition, such as to entitle any person to require the payment or repayment of any Borrowing relating to the Seller’s Business before its normal or originally stated maturity or which is or shall be such as to terminate, cancel or render incapable of exercise any entitlement to draw money or otherwise exercise the rights of the Seller under an agreement relating to Borrowing relating to the Seller’s Business.

10.1.16 Grants and subsidies

the Seller has not done or agreed to do anything in respect of its Business as a result of which:

(a) any investment grant or other grant or any subsidy received by the Seller is or may be liable to be refunded wholly or partly; or

(b) any application made by the Seller for such a grant or subsidy shall or may be refused wholly or partly

and neither the signature nor the performance of the Agreement shall have any such result.

10.1.17 Connected transactions

there is not outstanding any agreement or arrangement between the Seller and any company of which it is a subsidiary or another subsidiary of any such company relating to the Business (including, but not limited to, any such agreement or arrangement under which the Seller is, or may in the future become, liable to pay any service, management or similar charge or to make any payment of interest or in the nature of interest).

Environment

10.1.18 the Seller has complied in all material respects with Environmental Law in respect of the Business and:

(a) there are no circumstances in relation to the Seller or the Business which would reasonably be expected to give rise to or to the Seller’s knowledge have given rise to any civil, criminal, administrative or other action, claim, suit, complaint, proceeding, investigation, decontamination, remediation or expenditure by any person or competent authority under Environmental Law in relation to any properties now owned or formerly owned by the Seller or used in the Business;

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(b) the Seller has obtained and there are in full force and effect and the Seller has at all times complied in all material respects with all environmental Permits necessary for the Business, there are no circumstances which could reasonably be expected to lead to the revocation, cancellation, suspension, modification, variation or alteration of such environmental Permits and there are no circumstances which necessitate any works, remediation or expenditure (other than routine maintenance) in order to continue to comply with the environmental Permits;

(c) at no time has the Seller received any notice alleging a breach of the terms of an environmental Permit or any other breach of Environmental Law;

(d) all assessments reviews reports returns information and audits required by Environmental Law or any environmental Permit have been properly carried out and submitted to the appropriate authorities and their recommendations and requirements implemented where required by Environmental Law;

(e) to the Seller’s knowledge, there are no further environmental Permits to be obtained in connection with the current business of the Seller which require works, remediation or additional expenditure to ensure compliance with such environmental Permits.

Intellectual Property Rights

10.1.19 Intellectual Property

(a) the Intellectual Property as listed on Schedule 6 comprises all of the intellectual property rights necessary for the operation of the Business as conducted by the Seller prior to the date hereof and the Closing Date;

(b) Schedule 6 sets forth a complete and correct list of all:

(i) patented or registered Intellectual Property and pending patent applications or other applications for registrations of Intellectual Property owned or filed by the Seller;

(ii) all trade names and unregistered trademarks, service marks and domain names owned or used by the Seller;

(iii) all copyrights and copyrightable works owned or used by the Seller; and

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(iv) all licenses or similar agreements for the Intellectual Property to which the Seller is a party, either as licensee or licensor;

(c) save as Disclosed the Seller owns and possesses all right, title and interest in and to, or has a valid and enforceable license to use, the Intellectual Property necessary for the operation of its Business as conducted by it prior to the date hereof and the Closing Date, free and clear of all liens, licenses, security interests, encumbrances and other restrictions;

(d) to the Seller’s knowledge no claim by any third party contesting the validity, enforceability, use or ownership of any of the Intellectual Property has been made, is currently outstanding or, is threatened and to the Seller’s knowledge, there are no grounds for the same;

(e) to the Seller’s knowledge, no loss or expiration of any part of the Intellectual Property is pending or reasonably foreseeable;

(f) the Seller has not received any notices of, and is not aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to the Intellectual Property (including, without limitation, any demand or request that the Seller license any rights from a third party);

(g) the Seller has not infringed, misappropriated or otherwise conflicted with any intellectual property rights or other rights of any third parties and the Seller is not aware of any infringement, misappropriation or conflict which will occur as a result of the continued operation of its business as conducted by the Seller prior to the date hereof and the Closing Date; and

(h) the transactions contemplated by this Agreement will have no effect on the Seller’s right, title and interest in and to the Intellectual Property. The Seller has taken all necessary action, in its reasonable business judgment, to maintain and protect the Intellectual Property so as to not affect the validity or enforceability of the Intellectual Property.

10.1.20 Web site

save as Disclosed, with respect to the Seller’s Web site used for the Business, the Seller has taken all commercially reasonable steps in connection with the creation and operation of the Web site, including, without limitation, the following:

(a) the Seller (i) has obtained the following Universal Resource Locators (“URLs”): theglobe.ionglobal.com; (ii) has maintained adequate computer resources and system redundancies to ensure that no service outages will occur due to insufficient data-storage, memory, server or other related reasons at operations levels consistent with the Business as currently conducted; and (iii) has in place, prior to activation of the Web site, a plan to permit and accommodate anticipated increases in traffic levels (e.g., additional servers, hardware, software and/or personnel); and

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(b) to the Seller’s knowledge, the Seller has complied in all material respects with all current privacy standards regarding data collection of site visitors and customers, including without limitation, obtaining certification from eTrust and BBBOnline as applicable (if global—then must also be in compliance with the European Privacy Directive and register accordingly, as well as other countries’ privacy policies).

Commercial Arrangements and Conduct

10.1.21 Material contracts

save as Disclosed, in relation to the Business and the Purchased Assets, there is not outstanding:

(a) any contract of guarantee, indemnity or suretyship or any contract to secure any obligation of any person;

(b) any agreement or arrangement between the Seller and a major distributor, supplier or customer of the Seller which involves total revenue or total expenditure in excess of US$25,000;

(c) any joint venture, consortium or partnership agreement or arrangement to which the Seller is a party;

(d) any sale or purchase option or similar agreement or arrangement affecting any assets owned or used by the Seller or by which it is bound;

(e) any liability, obligation or commitment of any kind (other than those listed in (a) to (d) above) on the part of the Seller (including a capital commitment) which:

(i) is incapable of complete performance within three months from the date of Agreement; or

(ii) has not been incurred in the ordinary course of business; or

(iii) is, or is likely to be, of major significance to the Company; or

(iv) exceeds, or is likely to exceed, in aggregate a sum of US$25,000.

10.1.22 Effect of Agreement on other agreements

save as Disclosed there is no agreement or arrangement in relation to the Business and the Purchased Assets involving a total revenue or total expenditure in excess of US$25,000 between the Seller and any other person which shall or may be terminated as a result of this Agreement or Closing or which shall be affected by it or which includes any provision with respect to a change in the control, management or shareholders of the Seller.

10.1.23 Commercial position

save as Disclosed, so far as the Seller is aware:

(a) there is no substantial customer or supplier of the Seller in relation to the Business who has ceased purchasing or ordering from or supplying to it or who to the Seller’s knowledge is likely after the date of this Agreement or Closing to reduce substantially or terminate purchases or orders from or supplies to it;

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(b) there are no special circumstances which might lead to the supply by the Seller or to it of any goods or services, in relation to the Business being restricted or hindered.

10.1.24 Restrictive agreements and anti-competitive behaviour

(a) the Seller does not violate and has not violated any law or regulation applicable in any jurisdiction relating to anti-competitive agreements or practices or behaviour or any similar matter;

(b) the Seller is not in relation to the Business, bound by or party to any order or decision made or undertakings (binding or not) given to or any court or tribunal of competent jurisdiction or any similar authority in any jurisdiction, under or in any law, regulation or administrative process relating to unfair competition, anti-trust, monopolies, mergers or other similar matters;

(c) except as contemplated by this Agreement and the related agreements, the Seller has not in relation to the Business, within the last two years been party to any merger, acquisition, reorganization or other similar arrangement which was capable of review by any anti-trust or similar authorities in any jurisdiction.

10.1.25 Notice of official action

the Seller is not aware of any process, notice or communication, formal or informal, by or on behalf of any authority of any country having jurisdiction in anti-trust matters, in relation to any aspect of the Business or the conduct of the Seller or any agreement or arrangement to which the Seller is or was, or is alleged to be or have been, a party, and so far as the Seller are aware it is not likely to receive any such process, notice or communication.

Litigation, Defaults and Insurance

10.1.26 Legal proceedings

save as Disclosed the Seller is not engaged or proposing to engage in any litigation, arbitration, prosecution or other legal proceedings, and there are no claims or actions (whether criminal or civil) in progress, outstanding, pending or threatened against the Seller, any of its assets or to the Seller’s knowledge, against any of its directors or officers or in respect of which the Seller is liable to indemnify any party concerned.

10.1.27 Unlawful acts by the Seller

to the Seller’s knowledge, neither the Seller nor any of its directors or any of its Affiliate’s, officers or employees has by any act or default committed:

(a) any criminal or unlawful act in connection with the business of the Seller, other than minor road traffic offences;

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(b) any breach of trust, fraud or other willful misconduct in relation to the business or affairs of the Seller or misappropriation or infringement of any Intellectual Property; or

(c) any breach of contract or statutory duty or any tortious act which could entitle any third party to terminate any contract to which the Seller is a party or could lead to a claim against the Seller for damages, compensation or an injunction.

10.1.28 Defaults by others

save as Disclosed no party with whom the Seller has entered into any contract in relation to the Business or the Purchased Assets is in default under it, and there are no circumstances likely to give rise to such a default.

10.1.29 Official investigations

to the Seller’s knowledge, no governmental or official investigation or inquiry concerning the Seller is in progress or threatened and, so far as the Seller is aware, there are no circumstances which are likely to give rise to any such investigation or inquiry.

10.1.30 Adequacy of cover

the Seller has, and at all times has had, valid insurance coverage in respect of the Business and Purchased Assets:

(a) against all risks (including product liability and loss of profits for a period of at least six months) normally insured against by companies carrying on the same type of business as the Seller or having similar assets;

(b) for the full replacement value of its assets and for such amount in respect of its business as would in the circumstances be prudent for such a business; and

(c) from a well-established and reputable insurer.

10.1.31 Policies

all policies of insurance taken out in connection with the Business or Purchased Assets of the Seller have been Disclosed to the Buyer, are written in the name of the Seller and are in full force and effect; and the Seller has not done or omitted to do or allowed anyone to do or not to do anything which might render any of those policies void or voidable and has complied with all conditions attached to them.

10.1.32 Claims

no claim under any policy of insurance taken out in connection with the Business or Purchased Assets of the Seller is outstanding and, so far as the Seller is aware, there are no circumstances likely to give rise to such a claim.

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Corporate Organisation and Business

10.1.33 Corporate Status

(a) the Seller (including any of its representative office or branch) has been duly incorporated and validly existing under the laws of the jurisdiction of its incorporation, and is duly authorized, qualified or licensed to do business as a foreign corporation in each of the jurisdictions that it is now carrying on business;

(b) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Seller and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based;

(c) so far as the Seller is aware, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Seller has been or is likely to be adversely affected; and

(d) neither the execution of this Agreement or the other documents hereunder, nor the performance by the Seller or CDC of their respective obligations hereunder or thereunder will (a) violate or conflict with the Articles of Incorporation or the bylaws of the Seller or any applicable law, (b) violate, conflict with or result in a breach or termination of, or otherwise give any person or entity additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any note, deed, lease, instrument, security agreement, mortgage, commitment, contract, agreement, license or other instrument or oral understanding to which the Seller or any of its Affiliates is a party or by which any of the assets or the properties of the Seller are bound or (c) result in the creation or imposition of any Encumbrance with respect to, or otherwise have an adverse effect upon, any of the assets or properties of the Seller.

10.1.34 Articles of Incorporation

the copies of the articles of incorporation, bylaws and other constitutional documents of the Seller delivered to the Buyer are true and complete copies, and the Seller has complied with all the provisions of its articles of incorporation, bylaws and constitutional documents and, in particular, has not entered into any ultra vires transaction.

10.1.35 Minute books and registers

the minute books and registers of the Seller and all current books of account are written up to date and all such documents and other necessary records, deeds, agreements and documents relating to its affairs are in its possession or under its control.

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10.1.36 Compliance with applicable law and regulation

the Seller and its officers have complied in all material respects with the provisions of all applicable law and regulation in its place of incorporation, and the places where it carries on its business.

10.1.37 Title to Business and Purchased Assets

(a) the Seller has valid title to, and is the exclusive legal and beneficial owner of the Business and the Purchased Assets, and, therefore, has an absolute right to sell and transfer the Business and the Purchased Assets. All the Purchased Assets will be sold and transferred to the Buyer free and clear of any Encumbrance together with all accrued beneficial rights attached to them at the date of this Agreement or subsequently becoming attached to them;

(b) save as Disclosed, no consent, approval, authorization, permit or licence from any third party, government agency or regulatory body is necessary for the sale and transfer of the Business and the Purchased Assets by the Seller to the Buyer hereunder.

10.1.38 Powers of attorney

other than in the ordinary course of business, there are no powers of attorney given by the Seller except any given incidental to and for the purposes only of enforcement of any security.

10.1.39 Licences permissions or consents

all material licences, permissions and consents required for the carrying on of the Business of the Seller have been obtained by it and are in full force and effect and the Seller is not aware of any circumstances indicating that any of those licences, permissions or consents is likely to be revoked or not renewed in the ordinary course.

10.1.40 Other aspects of carrying on business

the Seller:

(a) does not use on its stationery or vehicles or otherwise carry on Business under any name other than its corporate name and the name “Ion Global”; and

(b) has complied in all material respects with all requisite corporate powers, its articles of incorporation, bylaws and legal requirements applicable to its business, whether in the US (including any state, municipality or any other jurisdiction thereof) or in any other country or jurisdiction.

10.1.41 Existence of Subsidiaries and other business

the Seller` does not have, and has never had, any Subsidiary. Save for the Business and the Dae Business, the Seller has not carried on any other business.

10.1.42 [intentionally left blank]

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Employees

10.1.43 Disclosure of Material Facts

(a) the name and title of all existing employees of the Seller for the operation of the Business are set out in Part 1 of Schedule 1 and all the information set out thereunder are true and accurate;

(b) all facts and matters relating to the employment of all Employees of the Seller (including but not limited to their respective salaries, ages, length of service, notice periods, terms and conditions of employment, employment or benefits policies, share incentive schemes, share option schemes or profit-share schemes and entitlements under these schemes, all rights, and any other agreement or arrangement relating to the employment of the employees of the Seller) have been provided to the Buyer;

(c) all facts and matters relating to all collective agreements, arrangements or other understandings with any trade union, staff association or other body representing the employees of the Seller have been Disclosed to the Buyer;

(d) the amounts of the bonuses for the financial year 2007 for Employees will be substantially similar to the amounts of the bonuses for the financial year 2006 granted to Employees.

10.1.44 Compliance with Requirements

the Seller has in relation to each of its Employees:

(a) complied in all material respects with all law, regulations and codes of practice or employment rules relevant to its relations with the Employee and with any recognised trade union representing him and all collective agreements from time to time in force relating to such relations or the conditions of service of the Employee and has maintained adequate and suitable records regarding the service of the Employee;

(b) discharged fully its obligations to pay or deduct, as applicable, all salaries, wages, withholdings, commissions, bonuses, overtime pay, holiday pay, sick pay, accrued entitlement under incentive schemes and insurance contributions and other benefits of or connected with employment;

(c) without prejudice to paragraph 10.1.44(a) above, complied in all material respects with all its obligations under statute and otherwise concerning the health and safety at work of each of the Employees and has not incurred any liability to any Employee in respect of any accident or injury which is not fully covered by insurance.

10.1.45 Agreements

save as Disclosed, the Seller has not entered into:

(a) any agreement or arrangement to make any payments (other than emoluments) to or on behalf of any of its directors or Employees;

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(b) any contract of service with any Employee which is not terminable by the Seller by one month’s notice or less without payment of compensation (except as provided by statute);

(c) any agreement or arrangement for the provision of services in return for remuneration;

(d) any agreement imposing an obligation on the Seller to increase the rates of remuneration of, or to make any bonus or incentive payments or any benefits in kind or any payments under a profit-sharing scheme to or on behalf of, any of its Employees at any future date;

(e) any negotiation for a change in the emoluments or other terms of engagement of any grade of any of the Seller’s Employees;

(f) any agreement or arrangement for the provision of compensation on the termination of employment of any Employee of the Seller beyond the minimum required by law.

10.1.46 Disputes

(a) no material dispute has arisen since the date of incorporation of the Seller between the Seller and its Employees or former employees and there are no present circumstances which are likely to give rise to any such dispute;

(b) to the Seller’s knowledge there are no complaints pending or threatened against the Seller of whatsoever nature in relation to any of its Employees or former employees and there is no industrial action or dispute threatened or existing or anticipated in respect of or concerning any of the Seller’s Employees or former employees;

(c) no Employee or former employee has any right to ownership of any Intellectual Property in any invention or improvement made or discovered by him in the course of employment with the Seller or otherwise any compensation or payment in respect of or right to use any such invention or improvement;

(d) to the Seller’s knowledge there are no enquiries or investigations existing, pending or threatened affecting the Seller by any regulatory body or authority concerning any Employee;

(e) no Employee has given notice of termination of his contract of employment or is under notice of dismissal;

(f) the Seller has not offered any contract of employment to any person under the Business, which offer remains outstanding; and

(g) there is no person employed or previously employed by the Seller under the Business who is on maternity leave, absent on grounds of disability or other leave of absence and have a statutory or contractual right to return to work for the Seller.

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Miscellaneous

10.1.47 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Seller and no petition has been presented and no meeting has been convened for the purpose of winding up the Seller;

(b) no receiver has been appointed in respect of the Seller, the Business or the Purchased Assets;

(c) the Seller is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Seller has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside of California; and

(e) no unsatisfied judgment is outstanding against the Seller.

10.1.48 Consents

save as Disclosed, all consents, permissions, approvals and agreements of third parties which are necessary for the Seller to obtain in order to enter into and perform this Agreement in accordance with its terms have been unconditionally obtained in writing and have been Disclosed to the Buyer.

10.1.49 Material information

all material information relating to the Seller, the Business and the Purchased Assets which is known or would on reasonable enquiry be known to the Seller and which should be known by a reasonable Buyer for value of the Purchased Assets has been Disclosed or provided to the Buyer.

10.1.50 Brokers and Finders

No person or entity acting on behalf or under the authority of the Seller is or will be entitled to any broker’s, finder’s or similar fee or commission in connection with the transactions contemplated hereby.

10.1.51 Recitals and disclosures

the recitals, Exhibits and Schedules to the Agreement and all information and documents relating to the Business and Purchased Assets supplied by the Seller or any agent of any of them to the Buyer, its solicitors, accountants or other agents or advisers during or with a view to the negotiations leading up to the Agreement, are true and accurate in all respects, and there is no fact not Disclosed which would render any such information or document inaccurate or misleading or which, if Disclosed, might reasonably affect the willingness of the Buyer to purchase the Purchased Assets for the consideration or otherwise on the terms specified in the Agreement. All budgets and forecasts provided to the Buyer have been prepared using

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reasonable and customary assumptions. Neither the Seller nor CDC has withheld from the Buyer any material facts relating to the assets, properties, liabilities, business operations, financial condition, results of operations or prospects of the Seller, the Business or the Purchased Assets. Neither this Agreement (including the Exhibits, Schedules, certificates and other documents delivered hereto) nor any other agreement, document, certificate or written statement furnished to the Buyer by or on behalf of the Seller in connection with this Agreement, the other documents or the transactions contemplated hereunder or thereunder contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.

Authority of the Seller and CDC

10.1.52 Each of the Seller and CDC has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Seller and CDC, in accordance with its terms;

10.1.53 the execution and delivery of, and the performance by each of the Seller and CDC of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Seller or CDC is a party or by which it is bound;

10.1.54 neither the Seller nor any of its respective agents or advisers is aware of any fact or matter which would or may constitute a breach of any of the Warranties and which failure to disclose by such agents or advisers is deemed fraudulent.

TAX WARRANTIES

Accounts

10.1.55 the Seller has no liability in respect of Taxation (whether actual or contingent) or any liability for interest, penalties or charges imposed in relation to any Taxation arising in any part of the world that is not adequately Disclosed or provided for in full in the Accounts and Management Accounts.

10.1.56 the amount of the provision for deferred Taxation contained in the Accounts and Management Accounts was, at the date the Accounts and Management Accounts were prepared in accordance with US GAAP.

Events since the Accounts Date

Since the Accounts Date:

10.1.57 the Seller has not been involved in any transaction outside the ordinary course of business which has given or may give rise to a liability to Taxation on the Seller or in relation to the Business (or would have given or might give rise to such a liability but for the availability of any relief, allowance, deduction or credit).

10.1.58 no disposal has taken place or other event occurred which will or may have the effect of crystallising a liability to Taxation which should have been included in the provision for deferred Taxation contained in the Accounts and Management Accounts if such a disposal or other event had been planned or predicted at the date on which the Accounts and Management Accounts were drawn up.

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Payments by the Seller

10.1.59 the Seller have paid all Taxation in relation to or in connection with the Company for which it is liable to account to the Tax Authority on the due date for payment thereof and is under no liability to pay any penalty or interest in connection therewith and without prejudice to the generality of the foregoing the Seller has made all deductions and withholdings in respect or on account of Taxation which it is required by any relevant legislation to make from any payments made by it in relation to or in connection with the Seller and has accounted in full to the appropriate Tax Authorities for all amounts so deducted or withheld.

10.2 The Seller acknowledges that, in entering into this Agreement and in purchasing the Purchased Assets, the Buyer has relied and will rely upon the Warranties given herein and the Warranties as confirmed by the Seller according to Clause 6.2.1(g).

10.3 The Warranties are given subject to the matters Disclosed in the Disclosure Letter but no other information relating to the Business, the Purchased Assets and the Seller of which the Buyer has knowledge (actual or constructive) and no investigation by or on behalf of the Buyer shall prejudice any claim made by the Buyer in respect of the Warranties or operate to reduce any amount recoverable and it shall not be a defence to any claim against the Seller that the Buyer knew or ought to have known or had constructive knowledge of any information (other than as Disclosed in the Disclosure Letter) relating to the circumstances giving rise to such claim.

10.4 The Seller and CDC shall not (in the event of any claim being made against them in connection with the sale of the Purchased Assets to the Buyer) make any claim against its officer, director, employee or Affiliate on whom the Seller and CDC may have relied before agreeing to any term of this Agreement.

10.5 Each of the Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Warranty or any other term of this Agreement.

10.6 The Seller shall procure that the Warranties are true, accurate and complete at the date of this Agreement and, for this purpose the Warranties shall be deemed to be repeated at the Closing Date and any express or implied reference therein to the date of this Agreement shall be replaced by a reference to the Closing Date. Subject to Clause 11.1.7, the Warranties shall remain in full force and effect notwithstanding Closing.

10.7 Except as may be provided herein, the rights and remedies of the Buyer in respect of a breach of any of the Warranties shall not be affected by Closing, by any investigation made by or on behalf of the Buyer into the affairs of the Seller and the Business, by the giving of any time or other indulgence by the Buyer to any person, by the Buyer rescinding or not rescinding this Agreement, or by any other cause whatsoever except a specific waiver or release by the Buyer in writing; and any such waiver or release shall not prejudice or affect any remaining rights or remedies of the Buyer.

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10.8 All representations and warranties made by any party contained in this Agreement, any Exhibit, Schedule, certificate or other instrument specifically referred to in the Warranties pursuant hereto or made in writing by or on behalf of a party in connection with the transactions contemplated by this Agreement, and all indemnification obligations under this Agreement shall survive the execution and delivery of this Agreement and the Closing of the transactions contemplated hereunder until the expiration of the applicable statute of limitations or, if Clause 11.1.7 (subject to Clause 11.1.8) is applicable, until the expiry of the period of eighteen (18) months after the date of this Agreement.

10.9 The Seller undertakes with the Buyer that it will before and after Closing promptly notify the Buyer in writing of any event or circumstance of which they become aware which is or may be inconsistent with any of the Warranties or which might make any of the Warranties untrue or misleading if given at Closing.

11. INDEMNIFICATION – GENERAL AND TAX

11.1 General Indemnification

11.1.1 As used in this Clause 11.1, the following terms shall have the following meanings:

(a) “Claim” means any claim, demand, dispute, action, suit, investigation or legal or analogous proceedings.

(b) “General Event of Indemnification” with respect to:

(i) the Seller shall mean:

(aa) any breach of any representation or Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation, indemnity or covenant of the Seller contained in this Agreement (including the Exhibits and Schedules) or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach;

(bb) any Claims, liabilities or obligations of any kind or nature relating to the Business or the Purchased Assets arising from, relating to or in connection with the Business, operations or affairs of the Seller or any of the assets, properties, interests in assets or properties or rights of the Seller which were existing at or as of Closing or arising in whole or in part out of any acts, transactions, conditions, circumstances or facts which occurred or existed on or prior to Closing, and which were not Disclosed on or before the execution of this Agreement; and

(cc) any Claims, liabilities or obligations of any kind or nature arising from, relating to or in connection with the Excluded Assets or the Excluded Liabilities whether existing at or as of Closing or at any time thereafter;

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(ii) the Buyer shall mean any breach of any representation, Buyer Warranty, or any breach or failure of observance or performance of any agreement, undertaking, commitment, obligation, indemnity or covenant of the Buyer contained in this Agreement or in any certificate or other writing delivered in connection herewith at, before or after Closing or any facts or circumstances constituting such untruth, inaccuracy or breach.

(c) “Special Event of Indemnification” with respect to:

(i) the Seller shall mean any Claims, liabilities or obligations of any kind or nature arising from, relating to or in connection with any of the events set out in Schedule 13 whether existing at or as of Closing or at any time thereafter, and whether Disclosed or not on or before the execution of this Agreement; and

(ii) the Buyer, shall mean any Claims, liabilities or obligations arising from the Buyer’s failure to pay the applicable Taxes to the appropriate tax authority in accordance with Clause 3.3 after deducting or withholding such payment from the Purchase Price.

(d) “Losses” in this Clause 11 shall mean any and all Losses (as defined in Clause 1.1) sustained, suffered or incurred by the Buyer Indemnified Person or Seller Indemnified Person.

11.1.2 “Buyer Indemnified Persons” shall mean and include the Buyer and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns; and “Seller Indemnified Persons” shall mean and include the Seller and its respective officers, directors, employees, Affiliates, parents, subsidiaries, successors and assigns.

11.1.3 The Seller shall indemnify, defend and hold harmless the Buyer Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification except to the extent such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Buyer Indemnified Persons.

11.1.4 The Buyer shall indemnify, defend and hold harmless the Seller Indemnified Persons, and each of them, from and against any and all Losses and Claims (including Claims by third party) arising from or in connection with any General Event of Indemnification or Special Event of Indemnification, except to the extent any such Losses or Claims are due to fraud, gross negligence or wilful misconduct of any Seller Indemnified Person.

11.1.5 This indemnity is to be a continuing security to the Buyer and Seller for all representations, Warranties, agreements, undertakings, commitments, obligations, indemnities or covenants on the part of the Seller or the Buyer (as the case may be) under or pursuant to this Agreement notwithstanding settlement of account or other matter or thing whatsoever.

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11.1.6 This indemnity is in addition and without prejudice to and not in substitution for any rights or security which the Buyer and the Seller may now or hereafter have or hold for performance and observance of any agreement, undertaking, commitment, obligation, indemnity or covenant on the part of the Seller or the Buyer (as the case may be) under or in connection with this Agreement.

11.1.7 Limitation of Liability in respect of the Warranties or the Buyer Warranties

Notwithstanding anything contained herein to the contrary but subject to Clause 11.1.8, (i) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 11 or Clause 14.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) for Losses the amount of which is less than US$35,000 (“Minor Losses”) even if such Minor Losses in the aggregate exceed the Basket (as defined below); (ii) neither the Buyer nor the Seller may make a claim for indemnification pursuant to Clause 11 or Clause 14.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) unless and until Losses in an aggregate amount (excluding the Minor Losses) exceed US$75,000 (the “Basket”) in which case the Buyer or the Seller may make such claim(s) for indemnification for any and all Losses (excluding the Minor Losses) and not merely for the excess of the Basket; (iii) in no event shall the aggregate liability of (a) the Buyer or the Seller pursuant to this Clause 11.1 or (b) CDC pursuant to Clause 14.1 in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) exceed one hundred percent (100%) of the Purchase Price; and (iv) the period during which claims for any breach of a Warranty and/or indemnification pursuant to this Agreement in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) may be made shall commence from the date of this Agreement to the expiry of the period of eighteen (18) months after the date of this Agreement.

11.1.8 None of the limitations regarding any Loss or Claim in respect of a breach of any of the Warranties or the Buyer Warranties (as the case may be) whether as to the amount or time set forth in Clause 11.1.7 shall apply if in any case the Losses and Claims have arisen from or in connection with:

(a) any Special Event of Indemnification;

(b) any breach of the Tax Warranties set out in Clauses 10.1.55 to 10.1.59; or

(c) any breach of the Warranties set out in Clauses 10.1.14(b), 10.1.19, 10.1.33(a), 10.1.36, 10.1.37, 10.1.52 to 10.1.54.

For avoidance of doubt, no claim for any Loss or Claim arising from or in connection with items (a), (b) or (c) of this Clause 11.1.8 above shall be brought after the expiry of the applicable statute of limitation.

11.2 Covenant in Respect of Tax

11.2.1 In this Clause unless the context otherwise requires:

(a) “Tax Event” includes (without limitation) any omission, event, action or transaction whether or not the Seller is a party thereto, the death of any person,

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a change in the residence of any person for any Tax purpose, a failure to make sufficient dividend payments to avoid an apportionment or deemed distribution of income and the entering into and Closing of this Agreement and references to the result of events on or before Closing shall include the combined result of two or more events one or more of which shall have taken place on or before Closing;

(b) “relief” includes (without limitation) any relief, allowance, credit, set off, deduction or exemption for any Tax purpose; and

(c) reference to income or profits or gains earned, accrued or received shall include income or profits or gains deemed to have been or treated as or regarded as earned, accrued or received for the purposes of any legislation.

11.2.2 Subject as hereinafter provided, the Seller hereby covenants with and undertakes to indemnify the Buyer (at its election, for itself, its Affiliates and as trustee for its successors in title) against:

(a) any Tax liability of the Seller or in relation to the Business or Purchased Assets resulting from or by reference to any income, profits or gains earned accrued or received on or before the Closing Date or any Tax Event on or before such date whether alone or in conjunction with other circumstances and whether or not such Tax is chargeable against or attributable to any other person;

(b) any Tax liability of the Seller or in relation to the Business or Purchased Assets that arises after Closing as a result of an act, omission or transaction by a person other than the Seller and which liability to Tax falls upon the Seller or in relation to the Business or Purchased Assets as a result of its having been in the same group for Tax purposes as that person at any time before Closing;

(c) any Tax liability of the Seller or in relation to the Business or Purchased Assets that would not have been payable had there been no breach of any Tax Warranties and which is not the subject of the covenants in sub-clauses (a) and (b) above; and

(d) all costs and expenses which are incurred by the Buyer or any of its Affiliates or the Seller in connection with any of the matters referred to in this Clause 11.2 or in taking or defending any action under the covenants contained in this Clause 11.2 (including, without prejudice to the generality of the foregoing, all legal and other professional fees and disbursements).

11.2.3 The Purchase Price shall be allocated among the Purchased Assets in accordance with their values as determined by the Buyer; provided that no portion of the Purchase Price beyond the minimum portion required by the Buyer’s accountants shall be allocated to the non-solicitation provisions under Clause 13.1 hereof. Each of the parties hereto shall (i) report the purchase and sale of the Purchased Assets in accordance with the allocations determined by the Buyer for all Tax purposes (including the filing of IRS Form 8594), (ii) not take a Tax position which is inconsistent with such allocation, and (iii) cooperate with each other in preparing IRS Form 8594 or any other statements, Tax returns or reports required by the IRS or any other Tax Authority.

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12. BUYER’S RIGHTS

12.1 Without prejudice to any other right or remedy of the Buyer hereunder, if before Closing:

(a) the Buyer becomes aware that any of the Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Seller or CDC is in breach of any term of this Agreement; or

(b) any Tax Event occurs which has, or is likely to have, any effect on the financial position or business prospects of the Business or Purchased Assets as a whole, not being a Tax Event which affects generally all companies carrying on business similar to that of the Seller in a part or parts of the world where the Business is conducted,

the Buyer shall be entitled to terminate this Agreement without incurring liability to the Seller or CDC.

12.2 Without prejudice to any other right or remedy of the Seller hereunder, if before Closing the Seller becomes aware that any of the Buyer Warranties was at the date of this Agreement, or has since become, untrue or misleading or that the Buyer is in breach of any term of this Agreement, the Seller shall be entitled to terminate this Agreement without incurring liability to the Buyer.

12.3 The rights, including rights of rescission, conferred on the Buyer and Seller by this Agreement are in addition and without prejudice to all other rights and remedies available to the Buyer and the Seller; and no exercise or failure to exercise a right under this Agreement or otherwise or to invoke a remedy shall constitute a waiver of that right or remedy by the Buyer or the Seller.

13. PROTECTION OF THE BUYER’S INTERESTS

13.1 Competing Business and Restricted Services, etc.

13.1.1 In this clause:

(a) “competing business” means any business which competes with the Business.

(b) “restricted services” means services of the same type as or similar to or performs the same or similar functions of any services provided by the Seller under the Business at Closing.

(c) “Restricted Period” means the period of 3 years commencing from the Closing Date.

(d) references to acting directly or indirectly include (without prejudice to the generality of that expression) references to acting alone or jointly with or by means of any other person.

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13.1.2 Each of the Seller and CDC covenants with the Buyer that during the Restricted Period:

(a) it shall not directly or indirectly:

(i) solicit, canvass or approach or endeavour to solicit, canvass or approach any person, firm or company for the purpose of offering to that person, firm or company restricted services or provide on behalf of a competing business any restricted services to any person, firm or company:

(aa) who was provided with services under the Business by the Seller or the Buyer at any time during the previous two (2) year period immediately preceding Closing; or

(bb) who was negotiating with the Seller or the Buyer for the provision of services under the Business at any time during the previous twelve (12) month period immediately preceding Closing.

(ii) solicit or entice away or endeavour to solicit or entice away from the Buyer any person employed by the Buyer in any capacity with a view to inducing that person to leave such employment and to act for another person in the same or a similar capacity in relation to a competing business or restricted services whether or not such person would commit a breach of contract by reason of leaving such employment except that the foregoing restriction does not apply to any general solicitation for employees or public advertising of employment opportunities not specifically directed at any person employed by the Buyer;

(b) it shall not at any time disclose or use, for his own benefit or that of any other person any confidential information which it possesses concerning the Business or of any person having dealings with the Business.

13.1.3 Each of the restrictions set out in Clause 13.1.2 above are separate and severable and in the event of any such restriction being determined as unenforceable in whole or in part for any reason, such unenforceability shall not affect the enforceability of the remaining restrictions or (in the case of restrictions unenforceable in part) the remainder of that restriction.

13.1.4 The parties agree that in connection with the circumstances and transactions contemplated by this Agreement, the restrictive covenants herein contained are reasonable in time and scope, necessary for the protection of the Business and the legitimate interests of the Buyer, and supported by adequate consideration and further agree that having regard to those circumstances the said covenants do not work harshly or unreasonably upon the parties. However, it is recognized that restrictions of the nature in question may fail for technical reasons currently unforeseen and accordingly it is hereby agreed and declared that if any of such restrictions shall be adjudged to be void as going beyond what is reasonable in all the circumstances for the protection of the Business or the Buyer’s legitimate interests but would be valid if

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part of the wording thereof were deleted or the periods thereof reduced or the range of activities or area dealt with thereby reduced in time or scope the said restriction shall apply with such modifications as may be necessary to make it valid and effective under applicable law.

13.2 Trademarks, Tradenames, etc.

13.2.1 Each of the Seller and CDC hereby covenants with the Buyer that save as required for the performance of their obligations as contemplated in this Agreement, immediately after Closing and except as otherwise directed by the Buyer, the Seller and CDC shall cease and shall procure that each of their respective Affiliates and other persons authorized by them or such Affiliates shall cease the use of all or any of the trademarks, service marks, logos, trade names, Internet domain names and corporate names forming part of the Purchased Assets or otherwise used in the Business (including without limitation “Ion Global” or any part of parts thereof), in any of their forms or spellings (or in forms or spellings similar or resemble to the same) (whether registered or unregistered) for any purpose whatsoever.

13.3 The obligations and liabilities of the Seller and CDC under this Clause 13 are the joint and several obligations and liabilities of the Seller and CDC.

14. GUARANTEE AND INDEMNITY BY CDC

14.1 In consideration of the Buyer entering into this Agreement, CDC hereby unconditionally and irrevocably guarantees to the Buyer the due and punctual performance and observance by the Seller of all the Seller’s obligations, commitments, undertakings, warranties, indemnities and covenants under or pursuant to this Agreement and subject to the provisions of Clauses 11.1.7 and 11.1.8 agrees to indemnify the Buyer and its Affiliates against all Losses, damages, costs and expenses (including reasonable legal costs and expenses) which the Buyer or any of its Affiliates may suffer through or arising from any breach by the Seller of such obligations, commitments, warranties, undertakings, indemnities or covenants. The liability of CDC as aforesaid shall not be released or diminished by any arrangements or alterations of terms (whether of this Agreement or otherwise) or any forbearance, neglect or delay in seeking performance of the obligations hereby imposed or any granting of time for such performance.

14.2 If and whenever the Seller defaults for any reason whatsoever in the performance of any obligation or liability undertaken or expressed to be undertaken by the Seller under or pursuant to this Agreement, CDC shall forthwith upon demand unconditionally perform (or procure performance of) and satisfy (or procure the satisfaction of) the obligation or liability in regard to which such default has been made in the manner prescribed by this Agreement and so that the same benefits shall be conferred on the Buyer and its Affiliates as they would have received if such obligation or liability had been duly performed and satisfied by the Seller. CDC hereby waives any right which it may have to require the Buyer to proceed first against or claim payment from the Seller to the intent that as between the Buyer and CDC the latter shall be liable as principal debtor as if CDC had entered into all undertakings, agreements and other obligations jointly and severally with the Seller.

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14.3 This guarantee and indemnity is to be a continuing security to the Buyer for all obligations, commitments, warranties, undertakings, indemnities and covenants on the part of the Seller under or pursuant to this Agreement notwithstanding any settlement of account or other matter or thing whatsoever.

14.4 This guarantee and indemnity is in addition to and without prejudice to and not in substitution for any rights or security which the Buyer may now or hereafter have or hold for the performance and observance of the obligations, commitments, undertakings, covenants, indemnities and warranties of the Seller and CDC under or in connection with this Agreement.

14.5 CDC shall not, after any claim has been made pursuant to this Clause 14, claim from the Seller any sums which may be owing to them from the Seller or have the benefit of any set-off, counter-claim or proof against or dividend, composition or payment by the Seller until all sums owing to the Buyer in respect hereof shall have been paid in full.

14.6 As a separate and independent stipulation, CDC agree that any obligation expressed to be undertaken by the Seller under this Agreement (including, without limitation, any moneys expressed to be payable under this Agreement) which may not be enforceable against or recoverable from the Seller by reason of any legal limitation, disability or incapacity of any of them or any other fact or circumstance shall nevertheless be enforceable against or recoverable from CDC as though the same had been incurred by CDC and CDC was sole or principal obligors in respect thereof and shall be performed or paid by CDC on demand.

15. WARRANTIES BY BUYER

15.1 The Buyer hereby warrants and represents to the Seller that the matter set forth below (“Buyer Warranties”) are true and accurate (a) as of the date of this Agreement and (b) as of the Closing Date:

15.1.1 Corporate Status

(a) the Buyer has been duly incorporated and constituted, and is legally subsisting under the laws of its place of incorporation;

(b) there has been no resolution, petition or order nor has any step been taken for the winding-up of the Buyer and no receiver has been appointed in respect thereof or any part of the assets thereof and no such resolutions, orders and appointments are imminent or likely nor are there any grounds upon which such resolutions, orders and appointments could be based; and

(c) so far as the Buyer is aware after making all due enquires, no events or omissions which is not capable of remedy have occurred whereby the constitution subsistence or corporate status of the Buyer has been or is likely to be adversely affected.

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15.1.2 Insolvency

(a) no order has been made and no resolution has been passed for the winding up of, or a provisional liquidator to be appointed in respect of, the Buyer and no petition has been presented and no meeting has been convened for the purpose of winding up the Buyer;

(b) no receiver has been appointed in respect of the Buyer;

(c) the Buyer is not insolvent or unable to pay its debts within the meaning of the applicable legislation to which it is subject and the Buyer has not stopped paying its debts as they fall due;

(d) no event analogous to any of the foregoing has occurred in any jurisdiction outside Hong Kong;

(e) no unsatisfied judgment is outstanding against the Buyer.

15.1.3 Authority of the Buyer

(a) the Buyer has full power and authority to enter into and perform this Agreement and the provisions of this Agreement, when executed, will constitute valid and binding obligations on the Buyer, in accordance with its terms;

(b) the execution and delivery of, and the performance by the Buyer of its obligations under, this Agreement will not result in a breach of any order, judgment or decree of any court or governmental agency to which the Seller or CDC is a party or by which it is bound.

15.1.4 The Buyer acknowledges that, in entering into this Agreement and in selling the Purchased Assets, the Seller has relied and will rely upon the Buyer Warranties given herein and the Buyer Warranties as confirmed by the Buyer according to Clause 6.4 upon Closing.

15.1.5 The Buyer Warranties are given subject to the matters Disclosed in the Buyer Disclosure Letter.

15.1.6 Each of the Buyer Warranties shall be construed as a separate warranty and shall not be otherwise limited or restricted by reference to or inference from the terms of any other Buyer Warranty.

15.1.7 The Buyer represents that the Buyer Warranties are true, accurate and complete at the date of this Agreement and, for this purpose, such Buyer Warranties shall be deemed to be repeated at the Closing Date.

16. MISCELLANEOUS

16.1 Where in this Agreement, any liability is undertaken by two or more persons, the liability of each of them shall be joint and several.

16.2 No party may assign or transfer, or purport to assign or transfer, any of its rights or obligations under this Agreement without prior written consent of the other parties (except for an assignment or transfer by the Buyer to any of its Affiliates) and this

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Agreement shall be binding on and enure for the benefit of the parties’ successors, permitted assigns and personal representatives. In the event that an Affiliate of the Buyer to whom the Buyer’s rights or obligations under this Agreement have been assigned, ceases to be an Affiliate of the Buyer, the Buyer shall promptly procure such entity to assign or transfer such rights or obligations back to the Buyer (as the case may be).

16.3 This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.

16.4 This Agreement represents the entire understanding, and constitutes the whole agreement, in relation to its subject matter and supersedes any previous agreement between the parties with respect thereto and, without prejudice to the generality of the foregoing, excludes any warranty, condition or other undertaking implied at law or by custom.

16.5 Each party confirms that, except as provided in this Agreement, no party has relied on any representation or warranty or undertaking which is not contained in this Agreement, without prejudice to any liability for fraudulent misrepresentation, no party shall be under any liability or shall have any remedy in respect of misrepresentation or untrue statement unless and to the extent that a claim lies under this Agreement.

16.6 Subject to the terms hereof, so far as it remains to be performed, this Agreement shall continue in full force and effect notwithstanding Closing.

16.7 The Seller shall after Closing execute all such deeds and documents and do all such things as the Buyer may require for perfecting the transactions intended to be effected under or pursuant to this Agreement and for vesting in the Buyer the full benefit of the Purchased Assets. Furthermore, the parties hereto hereby agree to be bound by the provisions set forth in this Agreement even in the event that any provision set forth herein were determined to be unenforceable or ineffective vis-à-vis third parties.

16.8 In the case that any provision or part of a provision of this Agreement is declared invalid, not binding or not enforceable, then, such declaration shall be effective only in connection with such provision or part of a provision and therefore shall not impair the validity, binding effects and enforceability of the other parts of such provision and/or the other provisions of this Agreement.

16.9 The transfer of any Purchased Assets pursuant to this Agreement shall be together with all rights and benefits attached thereto as at the date of transfer and shall be free from all liens, charges and Encumbrance.

16.10 This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Facsimile or electronic signatures shall be treated as original signatures.

17. CONFIDENTIALITY OF INFORMATION RECEIVED

17.1 The parties undertake with each other that they shall treat as strictly confidential all proprietary, non-public information received or obtained by them or their employees,

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agents or advisers as a result of entering into or performing this Agreement including information relating to the provisions of this Agreement, the negotiations leading up to this Agreement, the subject matter of this Agreement or the business or affairs of the Seller, the Buyer or any member of Aegis Group and that it will not at any time hereafter make use of or disclose or divulge to any person any such information without consent of the other parties and shall use its best endeavours to prevent the publication or disclosure of any such information.

17.2 The restrictions contained in Clause 17.1 shall not apply so as to prevent the parties from making any disclosure required by law or by any securities exchange or supervisory or regulatory or governmental body pursuant to rules to which the parties are subject or from making any disclosure to any professional adviser for the purposes of obtaining advice (providing always that the provisions of this Clause 17 shall apply to and the parties shall procure that they apply to and are observed in relation to, the use or disclosure by such professional adviser of the information provided to them) or from making any disclosure for the purpose of exercising their rights or performing their obligations hereunder, nor shall the restriction apply in respect of any information which comes into the public domain otherwise than by a breach of this Clause 17 by any party.

17.3 For a period of six (6) months after Closing, the Seller shall procure an announcement to be posted on the website www.dae.com in relation to the sale of the Business to the Buyer the content of which shall be mutually agreed between the Buyer and Seller and shall procure a link to website www.molecular.com to be posted on the website www.dae.com.

18. COSTS

18.1 The parties shall pay their own costs in connection with the preparation, negotiation, execution and completion of this Agreement. Notwithstanding the foregoing, the Buyer agrees to pay 50% of the costs for preparation of the legal opinion by Cayman counsel required to be delivered by the Seller pursuant to Clause 6.2.1(j).

18.2 Any stamp or transfer duty or similar tax of and incidental to this Agreement and the transfer of the Purchased Assets hereunder shall be borne by the Seller absolutely. The Buyer shall be entitled to deduct or withhold from the Purchase Price on account of such tax according to Clause 3.3.

19. NOTICES

19.1 A notice, approval, consent or other communication in connection with this Agreement:

19.1.1 must be in writing; and

19.1.2 must be left at the address of the addressee, or sent by prepaid registered post (airmail if posted to or from a place outside the US) to the address of the addressee or sent by facsimile to the facsimile number of the addressee which is specified in this clause or if the addressee notifies another address or facsimile number in the US then to that address or facsimile number.

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The address and facsimile number of each party is:

The Seller
Address	:	88 Kearny St., 9th Floor San Francisco, CA 94108
Facsimile	:	1-415-398-2940
Attn		Managing Director
CDC
Address	:	2 Concourse Parkway, Ste 800 Atlanta GA 30328
Facsimile	:	1-678-259-8737
Attn		General Counsel
The Buyer
Address	:	343 Arsenal Street Watertown, MA 02472
Facsimile	:	617-218-6500
Attn	:	Chief Financial Officer
With a copy to
Address	:	Three Park Avenue, 32nd Floor New York, NY 10016 USA
Facsimile	:	1 310 907 1345
Attn	:	Head of Legal Affairs, Aegis Media

19.2 A notice, approval, consent or other communication shall take effect from the time it is received (or, if earlier, the time it is deemed to be received in accordance with Clause 19.3) unless a later time is specified in it.

19.3 A letter or facsimile is deemed to be received:

19.3.1 in the case of a posted letter, unless actually received earlier, on the third (seventh, if posted to or from a place outside the US) day after posting; and

19.3.2 in the case of facsimile, on production of a transmission report from the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient.

20. GOVERNING LAW AND ARBITRATION

20.1 This Agreement shall be governed by, and construed in accordance with, Delaware law without reference to any conflicts of law principles thereto.

20.2 Arbitration

20.2.1 Save for the matters provided under Clause 6.6, any and all disputes arising out of or in connection with the negotiation, execution, interpretation, performance or non-performance of this Agreement shall be solely and finally settled by binding arbitration conducted pursuant to the rules of the American Arbitration Association

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(the “AAA Rules”) by one or more arbitrators appointed in accordance with the AAA Rules. The parties agree that the award of the arbitrators shall be the sole and exclusive remedy between them regarding any claims, counterclaims, issues or accountings presented to the arbitrators, irrespective of the magnitude thereof.

20.2.2 All arbitration proceedings shall be conducted in the English language pursuant to the AAA Rules. The arbitration shall take place in San Francisco, California or such other place as the parties may mutually agree in writing. The parties hereto agree to facilitate the arbitration by (i) making available to each other and to the arbitrators all documents, books, records and personnel under their control as the arbitrators shall determine to be relevant to the dispute; (ii) conducting arbitration hearings to the greatest extent possible on successive, contiguous days; and (iii) observing strictly the time periods established by the AAA Rules or by the arbitrators for the submission of evidence and briefs.

20.2.3 Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereby waive to the fullest extent permitted by law any rights to appeal or to review such award by any court or tribunal. The parties agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgement on the arbitration award may be entered in any court having jurisdiction over the parties or their assets.

20.2.4 Notwithstanding anything herein contained, either party shall be entitled to seek injunctive relief, if possible, from any court of competent jurisdiction to protect its rights under this Agreement pending the constitution of the arbitral tribunal pursuant to this Clause 20.2.

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be signed on their behalf in the places and on the date hereinafter written.

The Seller
SIGNED by	)
on behalf of	)	/s/ Robert B. Webster
ION GLOBAL (CALIFORNIA), INC.	)
in the presence of:        /s/ Christine Wienand	)
The Buyer
SIGNED by /s/ David Bruce Holtham, CFO	)
on behalf of MOLECULAR, INC.	)
in the presence of:        /s/ Donald S. Bell	)
CDC
SIGNED by	)
on behalf of	)	/s/ Simon Wong
CDC SOFTWARE CORPORATION	)
in the presence of:        /s/ Nicole Lo	)

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EX-4.(A)22

Exhibit 4(a).22

MERGER AGREEMENT

BY AND AMONG

CDC SOFTWARE CORPORATION

AND

C I ACQUISITION CORPORATION

AND

CATALYST INTERNATIONAL, INC.

AND

THE STOCKHOLDERS OF CATALYST

September 4, 2007

1

MERGER AGREEMENT

This MERGER AGREEMENT (this “Agreement”) is made and entered into as of September 4, 2007 by and among CDC Software Corporation (“Buyer”), C I Acquisition Corporation, a Delaware corporation (“Merger Subsidiary” or “Merger Sub”), Catalyst International, Inc, a Delaware corporation (the “Company”) and the stockholders of the Company listed on Schedule A attached hereto (collectively the “Stockholders”).

RECITALS

A. The Board of Directors of the Company has determined that the merger of Merger Subsidiary with and into the Company (the “Merger”) and this Agreement are fair to, and in the best interests of, the Company and the Stockholders and has declared its advisability to recommend that the Stockholders vote their shares in favor of the Merger; and

B. The Board of Directors of the Buyer and Merger Subsidiary have determined that the Merger and this Agreement are fair to, and in the best interests of, the Buyer and the Merger Subsidiary; and

C. As at the date of the Agreement, the Stockholders are the record holders and beneficial owners of 100% of the issued and outstanding shares in the capital of the Company as set out in Schedule 3.4(a) of the Company Disclosure Schedule (as defined herein) and have agreed to enter into this Agreement and the Merger on the terms and conditions contained in this Agreement; and

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, each intending to be bound hereby, agree as follows:

ARTICLE I

DEFINITIONS

1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” means an “affiliate” within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Audited Financial Statements” shall mean the audited consolidated financial statements of the Company comprising a consolidated balance sheet, profit and loss account, notes and reports thereon and a cashflow statement and the audited financial statements of the Company and each of the Subsidiaries, in each case for the period ended on December 31, 2006.

“Business” means any business conducted by the Company and/or any of its Subsidiaries as at the date of this Agreement and during the preceding calendar year.

“Business Day” shall mean a day other than Saturday, Sunday or any day on which banks located in California are authorized or obligated to close.

“Closing” shall have the meaning given to such term in Section 2.2(f).

“Closing Balance Sheet” means the unaudited consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP as at Closing, including, without limitation, all accruals and prepared as if such Closing Balance Sheet was a year end balance sheet.

2

“Closing Date” shall have the meaning given to such term in Section 2.2(f) “Closing Net Asset Value” means the Net Asset Value as of the Closing Date. “Code” means the Internal Revenue Code of 1986, as amended.

“Option” shall mean each outstanding stock option or similar rights to purchase shares of Company Stock and “Options” shall have a corresponding meaning.

“Company Balance Sheet” shall have the meaning set forth in Section 3.6.

“Company Stock” means the common stock of the Company, par value $.01 per share.

“Contract” means any contract, agreement, arrangement, commitment, undertaking, instrument, permit, mortgage, license, sublicense, lease, letter of intent, quotation or purchase order (in each case, whether oral or in writing).

“Effective Time” shall mean the time at which the Surviving Corporation files the Certificate of Merger with the Secretary of State of Delaware.

“Encumbrance” means, with respect to any asset, any mortgage, deed of trust, lien, pledge, charge, security interest, title retention device, conditional sale or other security arrangement, collateral assignment, claim, charge, adverse claim of title, ownership or right to use, restriction or other encumbrance of any kind in respect of such asset (including any restriction on (a) the voting of any security or the transfer of any security or other asset, (b) the receipt of any income derived from any asset, (c) the use of any asset, or (d) the possession, exercise or transfer of any other attribute of ownership of any asset).

“Environmental Laws” means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgement, order, decree, injunction, permit or governmental restrictions or requirement or any agreement with any governmental authority, whether now or hereafter in effect, relating to human health and safety, the environment or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

“Estimated Closing Net Asset Value” shall mean (negative) $2.4 million.

“Estimated Closing Net Asset Adjustment” shall have the meaning given to such term in Section 2.7(a).

“Escrow Account” shall mean the “Catalyst – CDC Escrow Account” held in an interest bearing account by the Escrow Agent for the benefit of the Stockholders and the Buyer jointly with Mellon Bank, N.A.

“Escrow Agent” shall mean Mellon Bank, N. A.

“Escrow Agent Fees” shall mean the fees of the Escrow Agent associated or in connection with the operation of the Escrow Account for the Holdback Period.

“Escrow Sum” shall mean the balance of the Escrow Account from time to time.

3

“GAAP” means United States generally accepted accounting principles.

“Governmental Entity” means any supranational, national, state, municipal, local or foreign government, any court, tribunal, arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental or private body exercising any regulatory, Tax or other governmental or quasi-Governmental Entity.

“Holdback Consideration” shall mean $4,500,000.

“Holdback Period” shall mean the period starting on the day following the Closing Date and ending of the day following twenty-four (24) months thereafter.

“Intellectual Property Rights” means worldwide industrial and intellectual property rights and all rights associated therewith, including all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof, all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data, proprietary processes and formulae, algorithms, specifications, customer lists and supplier lists, all industrial designs and any registrations and applications therefor, all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor, Internet domain names, Internet and World Wide Web URLs or addresses, all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto, all mask works, mask work registrations and applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures or topology, all computer software, including all source code, object code, firmware, development tools, files, records and data, all schematics, netlists, test methodologies, test vectors, emulation and simulation tools and reports, hardware development tools, and all rights in prototypes, breadboards and other devices, all databases and data collections and all rights therein, all moral and economic rights of authors and inventors, however denominated, and any similar or equivalent rights to any of the foregoing, and all tangible embodiments of the foregoing.

“IRS” means the Internal Revenue Service.

“Independent Expert” shall have the meaning set forth in Section 2.7(c).

“Knowledge” means, with respect to any fact, circumstance, event or other matter in question, the actual knowledge of such fact, circumstance, event or other matter of (a) an individual, if used in reference to an individual, or (b) with respect to any Person that is not an individual, the directors and officers of such Person including, without limitation, with respect to the Company the actual knowledge of the Executives, the Stockholders, or any employee, consultant or representative of the Company. Any such individual or Person shall be deemed to have actual knowledge of a particular fact, circumstance, event or other matter if such fact, circumstance, event or other matter is reflected in one or more documents (whether written or electronic) in, or that have been in, the possession of such individual or Person.

“Liability” shall mean any direct or indirect liability, indebtedness, obligation, expense, debt, claim, loss, damage, deficiency, guaranty or endorsement of any nature, of or by any Person, whether absolute or contingent, known or unknown, secured or unsecured, recourse or non-recourse, filed or unfiled, accrued or unaccrued, due or to become due, or liquidated or unliquidated.

“Loss” shall mean any and all damages, fines, fees, penalties, deficiencies, losses and expenses (including without limitation interest, reasonable court costs, reasonable fees of attorneys, reasonable retainers, reasonable fees of accountants and other experts or other reasonable expenses of litigation, reasonable witness costs/expenses or other proceedings or of any claim, default or assessment).

4

“Material Adverse Change” or “Material Adverse Effect” means when used with reference to (i) any Person, shall mean any event, change, violation, circumstance or effect (regardless of whether such event, change, violation, circumstance or effect is inconsistent with any representations or warranties made in this Agreement) that is or is reasonably likely to be, individually or in the aggregate, materially adverse to the condition (financial or otherwise), properties, assets (including intangible assets), business, operations or results of operations of such Person and its Subsidiaries, taken as a whole, and (ii) the Business, shall mean a material diminution in the value or condition (financial or otherwise) of such Business; provided, however, that none of the following, either alone or in combination, shall be deemed to be a ‘Material Adverse Change” or a “Material Adverse Effect”: (a) events, circumstances, changes or effects that generally affect the industries in which the Company and its Subsidiaries operate (including legal and regulatory changes), (b) general economic or political conditions or events, circumstances, changes or events affecting the securities markets generally, (c) changes arising from the consummation of the transactions contemplated by, or the announcement of the execution of, this Agreement, (d) any circumstance, change or effect that results from any action taken pursuant to or in accordance with this Agreement or at request of the Buyer and/or Merger Subsidiary and (e) changes caused by a material worsening of current conditions caused by acts of terrorism or war (whether or not declared) occurring after the date hereof.

“Merger” shall have the meaning set forth in the Recitals.

“Closing Consideration” shall have the meaning set forth in Section 2.2.

“Net Receivables” shall mean gross receivables less an allowance for uncollected receivables as determined in accordance with GAAP.

“NAV Adjustment” shall have the meaning set forth in Section 2.7.

“NAV Notice of Objection” shall have the meaning set forth in Section 2.7(b).

“Net Asset Value” shall mean the Company’s and its Subsidiaries’ total consolidated current assets less total current liabilities, as determined in accordance with GAAP excluding any debt, accrued and unpaid interest on debt, loans, bank overdrafts, credit lines, Transaction Incentives, all fees and expenses of any legal advisor, investment banker, broker, finder, accountant, financial advisor, tax advisor, or similar advisor.

“Person” means any natural person, company, corporation, limited liability company, general partnership, limited partnership, trust, proprietorship, joint venture, business organization or Governmental Entity.

“Permitted Encumbrances” means (i) statutory liens for Taxes to the extent that the payment thereof is not due, (ii) encumbrances in the nature of zoning restrictions, easements, rights or restrictions of record on the use of real property if the same do not impair its use in the Company’s business as currently conducted, (iii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented to the extent that no payment or performance under any such lease or rental agreement is in arrears or is otherwise due, (iv) deposits or pledges made in connection with, or to secure payment of, worker’s compensation, unemployment insurance, pension programs mandated under applicable laws or regulations or other social security, and (v) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other similar, non-consensual liens arising in the ordinary course of business, which secure obligations to the extent that payment thereof is not in arrears or otherwise due.

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“Review Period” shall have the meaning set forth in Section 2.7(b).

“Software” means, collectively, all of the software of the Company and/or its Subsidiaries in any form (including all software programs, objects, modules, routines, algorithms and code, in both source code and object code form) and includes without limitation (a) all past and current versions and releases software products, all work-in-process and developed but unreleased code, and all versions or releases under development as of the Closing Date, (b) any other software owned by the Company and/or any of its Subsidiaries or to which the Company (and/or its Subsidiaries) otherwise has rights that is, has been or is intended to be used by the Company (and/or its Subsidiaries) in connection with the Business and/or the design, development, testing, maintenance or utilization of the software described in this paragraph, and (c) all derivative works of any of the software described in this paragraph.

“Stockholders” shall mean the individuals and entities listed on Schedule A to this Agreement being the registered holders and beneficial owners of 100% of the issued and outstanding shares in the capital of the Company immediately prior to the Effective Time and “Stockholder” shall have a corresponding meaning.

“Stockholders’ Representative” shall mean ComVest Investment Partners II, LLC.

“Subsidiary” of a specified entity means any corporation, association, business entity, partnership, limited liability company or other Person of which the specified entity, either alone or together with one or more Subsidiaries or by one or more other Subsidiaries (a) directly or indirectly owns or controls securities or other interests representing more than 50% of the voting power of such Person or (b) is entitled, by contract or otherwise, to elect, appoint or designate directors constituting a majority of the members of such Person’s board of directors or other governing body.

“Surviving Corporation” means the Company as the surviving corporation in the Merger.

“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means (a) any income, alternative or add-on minimum tax, gross income, estimated, gross receipts, sales, use, ad valorem, value added, transfer, franchise, capital stock, profits, license, registration, withholding, payroll, social security (or equivalent), employment, unemployment, disability, excise, severance, stamp, occupation, premium, property (real, tangible or intangible), environmental or windfall profit tax, custom duty or other Tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to Tax or additional amount (whether disputed or not) imposed by any Governmental Entity responsible for the imposition of any such Tax (domestic or foreign), (b) any Liability for the payment of any amounts of the type described in clause (a) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any Taxable period, and (c) any Liability for the payment of any amounts of the type described in clause (a) or (b) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to assume such Taxes or to indemnify any other Person.

“Total Consideration” means, collectively, the Closing Consideration and the Holdback Consideration.

“Transaction Incentives” shall mean all amounts payable to current or former employees of the Company and/or any Subsidiary by way of bonuses, commissions, and other incentives associated with and payable as a result of transactions contemplated under this Agreement.

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“True-Up Net Asset Value” shall have the meaning set forth in Section 2.7(b).

“Warrants” shall mean a warrant (if any) or other contractual right to purchase or acquire shares of Company Stock; provided, however, that the Options shall not be considered Warrants.

Other capitalized terms defined elsewhere in this Agreement and not defined in this Article I shall have the meanings assigned to such terms in this Agreement.

ARTICLE II

THE MERGER

2.1 The Merger. Upon and subject to the terms and conditions of this Agreement, Merger Subsidiary shall merge with and into the Company at the Effective Time. From and after the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation. The Merger shall have the effects set forth in the Delaware General Corporation Law (the “DGCL”).

2.2 Closing Consideration and Conversion of Shares.

(a) The aggregate amount to be paid by Buyer on the Closing Date with respect to the outstanding shares of Company Stock on a fully-diluted basis (to be allocated as set forth in Sections 2.2(b),(c) and (d)) shall equal (such amount, as adjusted pursuant to Section 2.7, Section 2.8, Section 2.9, Section 2.10 and Section 2.11) (the “Closing Consideration”) $29,500,000, minus (i) the unpaid principal amount of, and accrued interest on, all indebtedness for borrowed money of the Company and/or its Subsidiaries not satisfied on or prior to the Closing by the Company or Buyer on behalf of the Company including, without limitation all outstanding debts, loans, bank facilities, credit facilities, lines of credit and similar liabilities of the Company and/or its Subsidiaries, minus (ii) the amount of all fees and expenses of the Company and/or its Subsidiaries payable, and due to be payable, in connection with the transactions contemplated by this Agreement including, without limitation, all fees and expenses associated with or relating to any legal advisor, investment banker, broker, finder, accounting advisor, financial advisor, tax advisor or similar party, minus (iii) the Estimated Closing Net Asset Adjustment, minus (iv) the Holdback Consideration, minus (v) one half of the Escrow Agents Fees, and minus (vi) any other adjustments provided for in Section 2.9, Section 2.10 and Section 2.11, minus (vii) amounts payable by Stockholders pursuant to Sections 6.6 and 7.3(i), minus any additional severance and benefit payments to be made to Douglas B. Coder and James G. Stowers pursuant to their respective agreements with the Company, and minus severance as a sale bonus payments made to Michael Eleftheriou after the Closing . Schedule 2.2(a) hereto sets forth (i) the estimated amount of the Closing Consideration calculated in accordance with this Section 2.2(a), and (ii) the estimated amount of Closing Consideration payable to each Stockholder (on a fully-diluted basis). To the extent an amount to be deducted under this section 2.2 is not known at the Closing, the stockholders authorize the Stockholders’ Representative to determine an amount to reserve from the Total Consideration for that deduction, and authorize the Stockholders Representative to maintain that reserve until such time that amount is known and paid.

(b) At the Effective Time, each share of Company Stock issued and outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive an amount in cash equal to the amount set forth in Schedule 2.2(a) hereto. Upon receipt of each Stockholders bank account details, the Buyer shall pay to each Stockholder (by wire transfer) in accordance with Sections 2.2(a) and 2.2(d), the pro-rata portion of the Closing Consideration as set forth in Schedule 2.2(a), in cash.

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(c) At the Effective Time, by virtue of the Merger and without any action on the part of any party or the holder of any of the following securities (A) each of the Company Stock held in the Company’s treasury immediately prior to the Effective Time shall be cancelled and retired without payment of any consideration thereto except as may be expressly set forth in this Agreement, (B) all Company Stock shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate representing any such share of Company Stock shall cease to have any rights with respect thereto, except the right to receive such holder’s share of the Closing Consideration pursuant to this Section 2.2 upon the surrender of such certificate in accordance with this Agreement, without interest, and (C) each share of common stock, no par value per share, of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into and thereafter evidence one share of common stock, $0.01 par value per share, of the Surviving Corporation.

(d) At the Effective Time, but prior to the distribution of any Closing Consideration to the Stockholders, the Buyer shall have received, in addition to all required closing documentation as set forth in Article VII hereto, the surrender of the certificates representing all Company Stock, along with a customary letter of transmittal, from the Stockholders for cancellation. If payment under this Section 2.2 is to be made to a Person other than the Person in whose name the surrendered certificate formerly evidencing Company Stock is registered in the stock transfer books of the Company, it shall be a condition of payment that the certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the Person requesting such payment shall have paid all transfer and other taxes required by reason of the payment of the Closing Consideration to a Person other than the registered holder of the certificate surrendered. After the Effective Time, the holders of the certificates representing all of the Company Stock shall cease to have any rights whatsoever with respect to such certificates.

(e) All amounts paid to the Stockholders under this Agreement (including both the Closing Consideration and the Holdback Consideration (if any)) shall be apportioned between the Stockholders in accordance with their pro-rata shareholding in the Company immediately prior to the Effective Time as set forth in Schedule 2.2(a).

(f) The closing of the Merger (the “Closing”) shall take place as soon as practicable after the satisfaction or waiver of each of the conditions set forth in Article VII or at such other time as the parties hereto agree in writing. The Closing shall take place at the offices of the Buyer, located at Two Concourse Parkway, Suite 800, Atlanta, GA, or at such other location as the parties hereto agree. The date on which the Closing actually occurs is herein referred to as the “Closing Date.”

(g) Subject to Closing, each Stockholder hereby releases and forever discharges any and all known or unknown claims, causes of action, promises or similar rights of any type (however described and however arising) that existed prior to the Effective Time that it or any of its Affiliates may have against or relating to the Company or any Subsidiaries including without limitation those existing under (i) the Stockholders Agreement dated September 8, 2004, by and among William G. Nelson, Terrance L. Mealy, the Stockholders’ Representative, and any other signatories to such agreement; (ii) the Subscription and Stockholders’ Agreement, dated November 30, 2004, by and among James Treleaven, John Gorman, David Jacobson, Nigel Davies, S. Michael Godshall, the Company, and the Stockholders’ Representative, and (iii) the Subscription and Stockholders’ Agreement, dated August 15, 2004, by and between Peter Kight, CLYS Holdings, LLC, a Nevada limited liability company, CAT Acquisition Corp., a Delaware corporation, and the

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Stockholders’ Representative (collectively, the “Stockholders Agreements”) other than such claims or causes of action relating to or arising out of this Agreement and/or the transactions contemplated hereby. Without limiting the preceding sentence, each Stockholder hereby confirms that he is not, and will not following Closing, in any way be entitled to any payment from the Company or any Subsidiary except as may be expressly set forth in this Agreement. The Stockholders hereby covenant and agree that effective as at the Effective Time, the Stockholders Agreements shall be terminated and have no further force or effect.

2.3 No Dissenting Shares – Stockholders Consent.

(a) The Stockholders, being the holders of 100% of the issued and outstanding Company Stock immediately prior to Effective Time, hereby consent to the Merger. Accordingly, the Company and each Stockholder hereby covenant and agrees that no Stockholder shall be exercising its appraisal rights under the DGCL and each Stockholder’s Company Stock shall be converted into the right to receive the respective portion of the Closing Consideration determined pursuant to this Agreement and each of such Stockholder’s Company Stock shall upon Closing be deemed to have been converted into and to have become, as of the Effective Time, the right to receive, without interest or dividends thereon, the respective portion of the Closing Consideration determined pursuant to this Agreement.

2.4 Options and Company Stock Plans.

(a) Release. In connection with the Merger, effective at the Effective Time, each of the Company and each Stockholder hereby covenants and agrees that each holder of an Option shall (in a form reasonably acceptable to the Buyer) release and forever discharge the Company, its Subsidiaries, the Buyer, the Merger Subsidiary and the Surviving Corporation from any and all known or unknown claims, causes of action, promises or similar rights of any type (however described and however arising) that such holder of an Option may have against such entities in relation to, or in connection with, any Option.

(b) Cancellation. The Company and each Stockholder covenants and agrees to use their respective best efforts to cause each Option to be cancelled in accordance with its terms and, prior to the Effective Time, the Stockholders and the Board of Directors of the Company shall adopt appropriate resolutions and take all other actions necessary to terminate all equity-compensation plans maintained by the Company and/or its Subsidiaries including without limitation to Catalyst International, Inc. 2004 Stock Option Plan (the “Company Stock Plans”) and all individual option agreements outside of the Company Stock Plans as of the Effective Time. Each Option, to the extent unexercised as of the Effective Time, shall thereafter cease to be exercisable, and shall entitle the holder of such option (“Optionholder”), in cancellation and settlement therefor, to a payment in cash, at the Effective Time, equal to the extent to which the per share Total Consideration exceeds the per share “strike” or “exercise” price of such Option “share”. Such payment, if any, shall be made by the Company at the Effective Time of the Merger.

2.5 Certificate of Incorporation and By-laws.

(a) The Certificate of Incorporation (as amended) of the Company (the “Company Certificate”) shall be amended at the Effective Time and, as so amended, such Company Certificate shall be the Restated Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

(b) The By-laws of the Company as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

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2.6 Closing of Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Company Stock shall thereafter be made. If, after the Effective Time, certificates formerly representing Company Stock are presented to Buyer or the Surviving Corporation, they shall be cancelled.

2.7 NAV Adjustment. The “NAV Adjustment” (if any) shall be determined as follows:

(a) Immediately prior to the Effective Time, the Buyer and the Stockholders shall together prepare and agree a good faith estimate of the Closing Net Asset Value determined in accordance with GAAP (the “Estimated Closing Net Asset Value”) and the Closing Balance Sheet.

(b) If the Estimated Closing Net Asset Value is less than (worse than) negative $2,400,000, then such difference shall be deducted from the Closing Consideration to be paid by Buyer at Closing (such amount deducted to be the “Estimated Closing Net Asset Adjustment”).

(c) Within 75 days after the Closing Date, Buyer shall use reasonable best efforts to prepare, or cause to be prepared, and deliver to the Stockholders’ Representative an unaudited statement which shall set forth Buyer’s calculation of the Closing Net Asset Value (which shall include where possible, actual numbers rather than accruals) (the “True-up Net Asset Value”). Upon receipt from Buyer, the Stockholders’ Representative shall have 10 days to review the True-Up Net Asset Value (the “Review Period”). If the Stockholders’ Representative disagrees with the True-Up Net Asset Value, the Stockholders’ Representative may, on or prior to the last day of the Review Period, deliver a notice to Buyer (the “NA V Notice of Objection”), which sets forth the Stockholders’ Representative’s objection to the True-Up Net Asset Value. Any NAV Notice of Objection shall specify those items or amounts with which the Stockholders’ Representative disagrees, and shall set forth the Stockholders’ Representative’s calculation of the Closing Net Asset Value and the Closing Balance Sheet based on such objections.

(d) Unless the Stockholders’ Representative delivers the NAV Notice of Objection to Buyer within the Review Period, the Stockholders’ Representative and the Stockholders shall be deemed to have accepted the True-Up Closing Net Asset Value, and the True-Up Net Asset Value shall be final, conclusive and binding and the Escrow Agent shall be immediately directed by the Stockholders and the Buyer to release to the Buyer the difference (if any) between the Estimated Closing Net Asset Value and the True-up Net Asset Value. If the Stockholders’ Representative delivers the NAV Notice of Objection to Buyer within the Review Period, Buyer and the Stockholders’ Representative shall, during the 30 days following such delivery (or any mutually agreed extension thereof), use their commercially reasonable efforts to reach agreement on the disputed items and amounts in order to determine the amount of the Closing Net Asset Value and the Closing Balance Sheet. If, at the end of such period (or any mutually agreed extension thereof), Buyer and the Stockholders’ Representative are unable to resolve their disagreements, they shall jointly retain and refer their disagreements to an independent certified public accounting firm mutually acceptable to Buyer and the Stockholders’ Representative (the “Independent Expert”). The parties shall instruct the Independent Expert promptly to review this Section 2.7 and to determine solely with respect to the disputed items and amounts so submitted whether and to what extent, if any, the Closing Net Asset Value and the Closing Balance Sheet set forth in the True-Up Net Asset Value requires adjustment. The Independent Expert shall base its

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determination solely on written submissions by Buyer and the Stockholders’ Representative and not on an independent review. Buyer and the Stockholders’ Representative shall make available to the Independent Expert all relevant books and records and other items reasonably requested by the Independent Expert. As promptly as practicable, but in no event later than 30 days after its retention, the Independent Expert shall deliver to Buyer and the Stockholders’ Representative a report which sets forth its resolution of the disputed items and amounts and its calculation of the Closing Net Asset Value and the Closing Balance Sheet. The decision of the Independent Expert shall be final, conclusive and binding on the parties. The costs and expenses of the Independent Expert shall be shared equally by Buyer and the Stockholders, provided, however, that if the Independent Expert determines a less than or equal to 10% variation in the Buyer’s calculation of the Closing Net Asset Value, the Stockholders’ shall pay the costs and expenses of the Independent Expert in full.

(e) Within ten (10) Days after the final determination of the Closing Net Asset Value and the Closing Balance Sheet if (x) the finally determined Closing Net Asset Value is worse than (y) the Estimated Net Asset Value, (i.e., the finally determined Net Asset Value is a greater negative number (i.e., -$2,400,001, -2,400,002, etc.), the Escrow Agent shall be immediately directed to release to the Buyer such difference between the Estimated Closing Net Asset Value and the finally determined Closing Net Asset Value on a dollar for dollar basis. If the Closing Net Asset Value is negative (-$2,400,000) or better (e.g. - -$2,399,999) there will be no additional adjustments, no claims against the Holdback Consideration and no action required by the Escrow Agent.

2.8 Holdback, Escrow and Release of Escrow.

(a) The Buyer and the Stockholders agree to execute the Escrow Agreement as attached hereto as Exhibit A as required by the Escrow Agent in relation to the establishment and dealings of the Escrow Account.

(b) The Holdback Consideration shall be paid by Buyer to the Escrow Account on the Closing Date and shall be held for the purpose and to the extent and satisfaction of any Loss arising during the Holdback Period in respect of the amount of any claim by the Buyer: (i) for breaches of, or inaccuracies in, the representations and warranties given by the Company and/or the Stockholders herein or the nonfulfillment of, or failure to perform, any covenant or agreement on the part of the Stockholders and/or the Company contained in this Agreement; and/ or (ii) pursuant to the indemnifications granted under Section 9.; and/or (iii) pursuant to Sections 2.9, 2.10 and/or 2.11 hereof (a “Claim”).

(c) At any time during the Holdback Period, the Buyer may forward to the Stockholders’ Representative a notice of a Claim (“Claim Notice”) which sets forth in reasonable detail the nature and amount of the Claim (“Amount Claimed”). Upon receipt from Buyer, the Stockholders’ Representative shall have 10 days to review the Claim Notice (the “Claim Review Period”). If the Stockholders’ Representative disagrees with the Amount Claimed, the Stockholders’ Representative may, on or prior to the last day of the Review Period, deliver a notice to Buyer (the “Claim Notice of Objection”) (with a copy to the Escrow Agent), which sets forth the Stockholders’ Representative’s objection to the Amount Claimed. Any Claim Notice of Objection shall specify those items and amounts with which the Stockholders’ Representative disagrees and detailed reasons for such disagreement. If the Stockholders’ Representative fails to deliver a Claim Notice of Objection within the Review Period, the Stockholders’ Representative and the Stockholders shall be deemed to have accepted the Claim and the Amount Claimed shall be final, conclusive and binding and the Escrow Agent shall be immediately directed by the Buyer and the Stockholders to release to the Buyer the Amount Claimed. If the Stockholders’ Representative

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delivers a Claim Notice of Objection to Buyer within the Claim Review Period, and such Claim Notice of Objection shows that only a portion of the Amount Claimed is disputed, then such undisputed portion of the Amount Claimed shall be deemed to have been accepted by the Stockholders and the Escrow Agent shall be immediately directed by the Buyer and the Stockholders to release to the Buyer the undisputed portion of the Amount Claimed. Buyer and the Stockholders’ Representative shall, during the 30 days following delivery of a Claim Notice of Objection (or any mutually agreed extension thereof), use their commercially reasonable efforts to reach agreement on the disputed items and amounts in order to agree upon the disputed Amount Claimed. If, at the end of such period (or any mutually agreed extension thereof) Buyer and the Stockholders’ Representative are unable to resolve their disagreements, either shall be entitled to refer the matter to the American Arbitration Association of Delaware for determination (“AAA”), in accordance with the commercial arbitration rules of the AAA governing the arbitration, and if following either agreement between the Buyer and the Stockholders’ Representative or a determination by the AAA, the Buyer and the Stockholders’ Representative shall jointly instruct the Escrow Agent in writing to release the agreed or determined Amount Claimed to the Buyer. In the event that either the Stockholders or the Buyer fails to give direction to the Escrow Agent in accordance with this Section, for whatever reason, the other may obtain an order from a court of competent jurisdiction that such instructions are given or treated as given.

(d) Each of the Buyer and the Stockholders shall ensure, during such period of time as the Escrow Agent is holding any Escrow Sum, that all of its respective rights to such Escrow Sum remain free from any Encumbrance (other than that such Escrow Sums are held in escrow), set off or counterclaim.

(e) Interest accruing from time to time on the Escrow Sum shall be added to the money standing to the credit of the Escrow Account. Any portion of interest shall be owned by and attributed to the party or parties who are ultimately adjudged in accordance with this Section to be the rightful owner of the respective amounts so held in escrow.

(f) The Buyer, on the one hand, and the Stockholders, on the other hand, shall equally pay the Escrow Agent’s Fees.

(g) The Escrow Agent may withdraw from the Escrow Account an amount equal to any tax payable in respect of the interest earned in respect of the Escrow Sum for which it is or may become liable.

(h) In the event that the Buyer has not issued, or has no outstanding Claim Notices or Claimed Amounts at the end of the Holdback Period, the Escrow Agent shall be directed by both the Buyer and the Stockholders Representative to return any remaining Escrow Sum to the Stockholders in accordance with their pro-rata shareholdings in the Company immediately prior to the Effective Time as set forth in Section 2.2(e).

2.9 Transaction Incentives. The Stockholders covenant and agree to pay from the proceeds of the Closing Consideration all amounts (if any) payable to current employees of the Company and/or any of its Subsidiaries (“Transaction Incentives”) by way of bonuses, commissions, and other incentives associated with the transactions contemplated under this Agreement as set out in Schedule 2.9. Except as set out in Schedule 2.9, the Company and each Stockholder represents and warrants to Buyer that the Company has no obligations to any of its current employees, officers or directors for any bonus, commission, option payment or similar incentive associated with or relating to the transactions contemplated under this Agreement.

2.10 Receivables. In the event that less than the full amount of the Net Receivables contained in

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the finally determined Company Balance Sheet (“Company Balance Sheet Net Receivables”) are actually received by the Company within one hundred eighty (180) days following Closing, the difference between the Company Balance Sheet Net Receivables and the portion of the Net Receivables actually received by the Company shall be released to the Buyer on a one-to-one basis from the Holdback Consideration and the Escrow Agent shall be immediately directed by the Stockholders and the Buyer accordingly. During the 180 day period of time referred to above, Buyer shall allow the Stockholders at their own expense to designate a collection agent suitable to Buyer, who shall be provided with all books and records related to the Net Receivables, including an account receivables ledgers, and contact lists, and shall be permitted to contact related third party accounts, for purposes of collecting said receivables so long as such appointed agent complies with Buyers procedures. With respect to any receivables which are not so collected during said 180 day period of time, Buyer shall cause the Company to immediately transfer (by way of assignment and any other instrument reasonably requested by the Stockholder Representative) all right, title and interest in and to such receivable to the Stockholders. During such 180 day period of time, the Company shall use all commercially reasonable best efforts to pursue the collection of Company accounts receivable existing as of the Closing Date.

2.11 Severances.

(a) If the employment of any of the employees of the Business is terminated prior to the expiration of twelve (12) months following Closing, Buyer shall be entitled to immediately receive from the Holdback Consideration any severance, notice and/or other similar payment required to be paid to such employee which is over and above the minimum statutory obligations (if any) and the Escrow Agent shall immediately be directed by the Stockholders and the Buyer accordingly.

(b) Notwithstanding anything to the contrary contained herein, Buyer shall not be entitled to receive from the Holdback or elsewhere an amount (in the aggregate) in excess of $250,000 pursuant to the provisions set forth in this Section 2.11.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company and each Stockholder jointly and severally represents and warrants to the Buyer that each statement contained in this Article III is true and correct as of the date hereof, except for the exceptions set forth in the disclosure letter of the Company (the “Company Disclosure Letter”) (each of which exceptions, in order to be effective, shall clearly indicate the section and, if applicable, the subsection to which it relates; however, any information disclosed under any section number shall be deemed to be disclosed and incorporated into any other section number where there is an appropriate cross reference or where it would otherwise be reasonably appropriate):

3.1 Organization and Good Standing.

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Except as set forth on Section 3.1 of the Company Disclosure Letter. The Company has the corporate power and authority to own, operate and lease its properties and to carry on its business as now conducted. The Company is duly qualified to do business, and is in good standing, in each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification.

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(b) Each of the Companies’ Subsidiaries are corporations duly organized, validly existing, and in good standing under laws of their jurisdictions of incorporation and have all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on their businesses as now conducted and to own, use and lease their assets and properties. Each of the Companies’ Subsidiaries is duly qualified to do business in each jurisdiction where they carry on business and are in good standing in each jurisdiction where they carry on business.

(c) During the preceding twelve (12) months from the Closing Date, the Company and its Subsidiaries have only conducted business in the countries listed in Section 3.1 of the Company Disclosure Letter and are duly qualified, licensed or admitted to do business in each of such jurisdiction to the extent that such qualification, license or admission is required by that jurisdiction’s laws. The Company and its Subsidiaries have full corporate power to own their properties, assets and business and to carry on their business operations.

(d) The name of each director and officer of the Company and its Subsidiaries on the Closing Date, and the position with the Company and/or Subsidiaries held by each, are listed in Schedule 3.1(d) of the Company Disclosure Letter.

(e) The Company and its Subsidiaries have filed and/or registered all company filings where required to be filed and/or registered.

3.2 No Subsidiaries. Except as set forth in Schedule 3.2 of the Company Disclosure Letter, the Company does not have any Subsidiaries or any equity or ownership interest, whether direct or indirect, in any Person. The Company is not obligated to make, and is not bound by any agreement or obligation to make, any investment in or capital contribution in or on behalf of any other Person, and the Company is not a party to any joint venture.

3.3 Authorization; Noncontravention; Enforceability.

(a) Authorization. The Company has all requisite corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and all other agreements, transactions and actions contemplated hereby have been duly and validly approved and authorized by the Company’s Board of Directors, and will be on the Closing Date, duly and validly approved and authorized by the Company’s stockholders.

(b) Noncontravention. The execution and delivery by the Company of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) result in the creation of any Encumbrance, other than Permitted Encumbrances, on any of the asset of the Company, or (ii) conflict with, or result in any violation of or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under, or require any consent, approval or waiver from any Person pursuant to, (A) any provision of the Certificate of Incorporation or Bylaws of the Company, in each case as amended to date, or (B) any material Contract, concession, franchise, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company. Except as listed in Section 3.3 of the Company Disclosure Letter. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any other Person is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

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(c) Enforceability. This Agreement has been duly executed and delivered by the Company and the Stockholders. This Agreement is a valid and binding obligation of the Company and the Stockholders, enforceable against the Company and the Stockholders in accordance with its terms, subject only to the effect, if any, of (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to rights of creditors generally and (ii) rules of law and equity governing specific performance, injunctive relief and other equitable remedies.

(d) No Liens. Except as listed in Schedule 3.3(d) of the Company Disclosure Letter, the Company Stock and any ownership interest in any Subsidiary is not, and shall not be, encumbered by any lien, encumbrance or other interests of any other third party whatsoever. The Stockholders, collectively, are the registered and beneficial owners of all of the Company Stock, and the Company is the registered and beneficial owner of all of the ownership interests in the Subsidiaries, free and clear of any lien, encumbrance and any other limitation or restriction (including without limitation, any restriction on the right to vote, sell or otherwise dispose of such ownership interests). None of the Company Stock or any ownership interest in any Subsidiary has been transferred, sold, exchanged, assigned or given as a gift, granted as a security interest, pledged or encumbered, made part of any voting trust or other agreement or arrangement with respect to the transfer of voting rights therein.

3.4 Capitalization.

(a) The authorized capital stock of the Company consists solely of 1,000 shares of preferred stock and 1,000,000 shares of common ordinary shares of Company Stock, of which a total of 1,097.84 shares of Common Stock are issued and outstanding. Subject to the preceding sentence, there are no other types of shares in the Company whatsoever including without limitation any preferred stock. The number of issued and outstanding shares of Company Stock held by each Stockholder are set forth on Schedule 3.4(a) of the Company Disclosure Letter, and no shares of Company Stock are issued or outstanding as of the date of this Agreement, or will be at the Closing Date, that are not set forth on Schedule 3.4(a) of the Company Disclosure Letter and no such shares will be issued or outstanding as of the Closing Date that are not set forth on Schedule 3.4(a) of the Company Disclosure Letter. Except as set forth on Schedule 3.4(a), there are no outstanding options or Warrants to purchase any shares of the Company, including without limitation, any Company Stock. Except as set forth on Schedule 3.4(b) of the Company Disclosure Letter, there are no stock appreciation rights, options, warrants, calls, rights, commitments, conversion privileges or preemptive or other rights or agreements outstanding to purchase or otherwise acquire any shares of the Company capital stock or any securities or debt convertible into or exchangeable for the Company capital stock. Except as contemplated by this Agreement, there are no voting agreements, voting trusts or proxies applicable to any of the Company’s outstanding capital stock or to the conversion of any shares of the Company’s capital stock to which the Company is a party or pursuant to any other agreement or obligation.

(b) The authorized capital stock of Catalyst WMS International Limited consists solely of 500,000 ordinary shares, of which a total of 1,000 shares are issued and outstanding. Subject to the preceding sentence, there are no other types of shares each of the Company’s Subsidiaries whatsoever including without limitation any preferred stock. Except as set forth on Schedule 3.4(a), there are no outstanding options or Warrants to purchase any shares

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of any of the Company’s Subsidiaries. Except as set forth on Schedule 3.4(b) of the Company Disclosure Letter, there are no stock appreciation rights, options, warrants, calls, rights, commitments, conversion privileges or preemptive or other rights or agreements outstanding to purchase or otherwise acquire any shares of any of the Company Subsidiaries’ capital stock or any securities or debt convertible into or exchangeable for Subsidiaries such capital stock. Except as contemplated by this Agreement, there are no voting agreements, voting trusts or proxies applicable to any of the Company’s Subsidiaries’ outstanding capital stock or to the conversion of any such shares.

3.5 Litigation.

(a) Except as set forth on Schedule 3.5 of the Company Disclosure Letter, there is no action, suit, arbitration, proceeding, inquiry, claim or investigation pending against, or threatened against or affecting either the Company, any Subsidiary, any Stockholder or any of their respective properties or assets before any court or arbitrator or any governmental body, agency or official (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) whatsoever and there is no reasonable basis for any such action, suit, proceeding, claim, arbitration, mediation or investigation (any “Proceeding”). To the Company’s Knowledge, there are no facts existing as at the Closing Date which would likely give rise to any material Proceeding.

(b) There is no judgment, decree, injunction, rule or order against the Company. To the Company’s Knowledge, there is no reasonable basis for any Person to assert a claim against the Company based upon: (A) the Company entering into this Agreement or any of the other transactions or agreements contemplated hereby; (B) any confidentiality or similar agreement entered into by the Company; or (C) any claim that the Company has agreed to sell or dispose of its assets to any party other than Buyer, whether by way of merger, consolidation, sale of assets or otherwise. Except as set forth on Schedule 3.5 of the Company Disclosure Letter, the Company has no action, suit, proceeding, claim, arbitration or mediation against any other Person. Neither the Company nor any Subsidiary have commenced or settled any legal proceedings within the last five (5) years.

(c) Except as set forth on Section 3.5 of the Company Disclosure Letter. No claim has been made against the Company or any Subsidiary in connection with any defective product or services supplied by it in the course of carrying on its business and the Company and each Subsidiary has maintained insurance that is customary to the applicable industry and type of business, for at least the last five (5) years against any such claim.

(d) Except as set forth on Section 3.5 of the Company Disclosure Letter. Each of the products produced or sold by the Company and each Subsidiary is, and at all times up to and including the Closing Date, has been: (i) in compliance in all material respects with all applicable federal, state, local and foreign Laws and regulations; and (ii) fit for the ordinary purposes for which it is intended to be used and conforms to any promises or affirmations of fact made in respect of such product or in connection with such sale. There is no design defect with respect to any such products the existence of which could have a Material Adverse Effect on the Company and each of such products contains adequate warnings, presented in a reasonably prominent manner, in accordance with all applicable laws, rules and regulations and current industry practice with respect to its content and use.

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3.6 Financial.

(a) The Company has delivered to Buyer as attachments to Schedule 3.6 of the Company Disclosure Letter (i) an unaudited consolidated balance sheet for the Business dated June 30, 2007 (the “Balance Sheet Date” and such unaudited consolidated balance sheet, the “Company Balance Sheet”), (ii) an unaudited consolidated income statement and statement of cash flows for the seven months ended June 30, 2007, (iii) audited consolidated balance sheets of the Company dated December 31, 2005 and 2006, and (iv) audited consolidated income statements and statements of cash flows for the years ended December 31, 2005 and 2006 (all such financial statements of the Company and any notes thereto are hereinafter collectively referred to as the “Company Financial Statements”). The Company Financial Statements for June 30, 2007 and year end audited statements: (i) correct and complete in all material respects, (ii) are derived from and are in accordance with the books and records of the Company in all material respects; (iii) fairly and accurately represent in all material respects the financial condition of the Business or the Company, as the case may be, at the respective dates specified therein and the results of operations for the respective periods specified therein in conformity with GAAP applied on a consistent basis; and (iv) have been prepared in accordance with GAAP applied on a basis consistent with prior periods, except for any absence of notes thereto and normal year-end adjustments. There has been no material change in the Company’s accounting policies other than as specifically described in the notes to the Company Financial Statements. The Company has no Liabilities other than (a) Liabilities set forth on the Company Balance Sheet or elsewhere in the Company’s Financial Statements, and (b) Liabilities set forth on Schedule 3.6.

(b) The Maintenance Revenue projections for calendar year 2007 and 2008 provided to the Buyer by or on behalf of the Company or any Subsidiary, were prepared in good faith and were based upon reasonable assumptions. There was at the time of the Closing no matters or circumstances that were known by the Company, or any Stockholder that would reasonably have had a material impact on the actual and projected financial results of the Company or any Subsidiary set forth therein. For the avoidance of doubt, financial results for calendar year 2007 have differed from those projections set forth on the Company’s 2007 calendar year budget, a copy of which has been provided to Buyer.

(c) The Company and each of its Subsidiaries is not directly or indirectly obliged in any way to guarantee, assume or provide funds to satisfy an obligation of any Person. No letter of comfort has been given by the Company or any of its Subsidiaries.

3.7 Taxes. Except as set forth on Schedule 3.7:

(a) The Company and each Subsidiary (i) has properly completed and timely filed all Tax and information returns and reports (collectively, “Tax Returns”) required to be filed by it, (ii) has timely paid all Taxes required to be paid in respect of all periods whether or not shown on a Tax Return, (iii) has established an adequate accrual or reserve for the payment of all unpaid Taxes up to the Balance Sheet Date, and (iv) has withheld all amounts required by any applicable laws or regulations to be withheld from compensation paid or owed to the Company’s (or respective Subsidiaries’) employees, consultants, directors or other third parties.

(b) Neither the Company nor any Subsidiary has received any written notice that a Tax Return is under audit by the IRS or other Governmental Entity, and any such past audits (if any) have been completed and fully resolved to the satisfaction of the applicable Governmental Entity conducting such audit and all Taxes and any penalties or interest determined by such audit to be due from the Company (or such Subsidiary) have been paid in full to the applicable Governmental Entities.

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(c) No Tax liens are currently in effect against the Company or any Subsidiary, except Permitted Encumbrances and Encumbrances for such Taxes not yet due and payable.

(d) There is not in effect any waiver by the Company or any Subsidiary of any statute of limitations with respect to any Taxes nor has the Company (or any Subsidiary) agreed to any extension of time for filing any such Tax Return that has not been filed, and neither the Company nor any Subsidiary has not consented to extend to a date later than the date hereof the period in which any such Tax may be assessed or collected by any Governmental Entity; and

(e) No benefit payable or which may become payable by the Company or any Subsidiary pursuant to any employee plan or as a result of or arising under this Agreement will constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code) which is subject to the imposition of an excise Tax under Section 4999 of the Code or which would not be deductible by reason of Section 280G of the Code.

3.8 Title to Assets; Sufficiency of Assets; Permits; Compliance. The Company and each of its Subsidiaries has good and marketable title to, or a valid leasehold interest in, all of the Company’s (and such Subsidiary’s) assets, free and clear of any Encumbrances except Permitted Encumbrances, and as otherwise set forth in the Company Balance Sheet or on Schedule 3.8 of the Company Disclosure Letter. All of the Company’s and each of its Subsidiaries’ tangible personal property is in good operating condition and repair, normal wear and tear excepted. All leases of real or personal property to which the Company or any Subsidiary is a party are fully effective. The Company and its Subsidiaries do not own any real property, and, since its inception, the Company has not been a “United States real property holding corporation,” as defined in Section 897(c)(2) of the Code. Neither the Company nor any Subsidiary is in violation of any zoning, building, safety or environmental ordinance, regulation or requirement applicable to the operation of its owned or leased properties or of any other applicable material law, nor has the Company or any Subsidiary received any written notice of any such violation. Except as set forth in Schedule 3.8 of the Company Disclosure Letter, none of the Company’s (or any Subsidiaries’) assets is licensed or leased from any third party and no royalties, license fees or similar payments are due or payable (or may become due or payable) to any third party under any contract. The Company and each of its Subsidiaries is in possession of all registrations, , authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and others of any Government Entity necessary for the Company (and such Subsidiary) to own, lease and operate its properties or to carry on its business as it is now being conducted (“Permits”). As of the date hereof, no suspension or cancellation of any of the Permits is pending, or to the Company’s Knowledge, threatened.

3.9 Absence of Certain Changes. Except as set forth on Schedule 3.9 of the Company Disclosure Letter, since the Balance Sheet Date, the Company and each of its Subsidiaries has conducted the Business in the ordinary course substantially in accordance with the procedures and practices in effect on the Balance Sheet Date, and since the Balance Sheet Date there has not been with respect to the Company and each Subsidiary any:

(a) Material Adverse Change;

(b) material revaluation by the Company of any of the Company’s or its Subsidiaries’ assets;

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(c) incurrence, creation or assumption by the Company or any Subsidiary of (i) any Encumbrance on any of the Company’s (or Subsidiary’s) assets, other than Permitted Encumbrances and as set forth in Schedule 3.9, (ii) any Liability or any indebtedness for borrowed money, or (iii) any contingent liability as a guarantor or surety with respect to the obligations of others;

(d) purchase, license, sale, assignment or other disposition or transfer, or any contract or other arrangement for the purchase, license, sale, assignment or other disposition or transfer, of any of the Company’s or any Subsidiaries’ assets outside the ordinary course of business;

(e) damage, destruction or loss of any of the Company’s (or any Subsidiaries’) assets, whether or not covered by insurance;

(f) payment or discharge by the Company (or any Subsidiary) of any Encumbrance on any of the Company’s (or any Subsidiaries’) assets or payment or discharge of any Liability of the Company (or such Subsidiary), in each case that was not shown on the Company Financial Statements; outside the ordinary course of business;

(g) entering into, amendment of, relinquishment, termination or non-renewal by the Company or any Subsidiary of any material Contract, transaction, commitment or other right or obligation (or any waiver by the Company or any Subsidiary of a valuable right or of a material debt) or any written or oral indication or assertion by the other party thereto of any material problems with the Company’s (or any Subsidiaries’) products or services or performance under such Contract, transaction, commitment or other right or obligation or its desire to so amend, relinquish, terminate or not renew any such Contract, transaction, commitment or other right or obligation outside the ordinary course of business;

(h) license, transfer or grant of a right under any Company or any of its Subsidiaries’ IP Rights (as defined in Section 3.12(a)) outside the ordinary course of business;

(i) change or amendment to the Company’s or any Subsidiaries’ Certificate of Incorporation or Bylaws;

(j) material change in the manner in which the Company or any Subsidiary extends discounts, credits or warranties to its customers or otherwise deals with its customers;

(k) change or increase in the compensation payable or to become payable to any of the directors, officers, employees or consultants of the Company or any Subsidiary or in any bonus, pension, severance, retention, insurance or other benefit payment or arrangement (including stock awards, stock option grants, stock appreciation rights or stock option grants) made to or with any of such directors, officers, employees or consultants; or

(l) other event or condition of any character which would materially and adversely affect the Company or any Subsidiary.

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3.10 Material Contracts. Except as specifically identified in subsections (a) through (l) of Schedule 3.10 of the Company Disclosure Letter, neither the Company nor any Subsidiary is a party or subject to any of the following in connection with the Business:

(a) any Contract providing for payments (whether fixed, contingent or otherwise) by or to the Company in an aggregate amount of $75,000 or more;

(b) any dealer, distributor, OEM (original equipment manufacturer), VAR (value added reseller), marketing, sales representative or similar agreement under which any third party is authorized to sell, sublicense, lease, distribute, market or take orders for, any product, service or technology of the Company;

(c) any Contract providing for the development of any software, content (including textual content and visual, photographic or graphics content), technology or Intellectual Property Right for (or for the benefit or use of) the Company or any Subsidiary, or providing for the purchase by (or for the benefit or use of) or license to the Company or any Subsidiary of any software, content (including textual content and visual, photographic or graphics content), technology or Intellectual Property Right, which software, content, technology or Intellectual Property Right is in any manner used or incorporated (or is presently contemplated by the Company or any Subsidiary to be used or incorporated) in connection with any aspect or element of any Software, product, service or technology of the Company or any Subsidiary (other than software generally available to the public at a per copy license fee of less than $500 per copy);

(d) any Contract which has involved, or is reasonably expected to involve, a sharing of revenues, profits, cash flows, expenses or losses by the Company or any Subsidiary with any other Person;

(e) any Contract for or relating to the employment of any officer, employee or consultant of the Company or any Subsidiary or any other type of Contract with any officer, employee or consultant of the Company or any Subsidiary;

(f) any Contract pursuant to which the Company or any Subsidiary has acquired a business or entity, or material portion of the assets of a business or entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, exclusive license or otherwise;

(g) any lease or other agreement under which the Company or any Subsidiary is lessee of or holds or operates any items of tangible personal property or real property owned by any other Person;

(h) any Company IP Rights Agreement (as defined in Section 3.12(b));

(i) any Governmental Permit (as defined in Section 3.13); or

(j) any other Contract to which the Company or any Subsidiary is a party or by which the Company, any Subsidiary or any of its assets or properties are bound.

A true and complete copy of each Contract and document (or, with respect to subsection (i), Governmental Permit) required by subsections (a) through (j) of this Section 3.10 to be listed on Schedule 3.10 of the Company Disclosure Letter (the “Material Contracts”) has been made available to Buyer.

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3.11 No Default; No Restrictions.

(a) Except as set forth on Section 3.11 of the Company Disclosure Letter. Each Material Contract is valid and in full force and effect. Neither the Company nor any Subsidiary, nor to the Company’s Knowledge, any other party is in material breach or default under any Material Contract. To the Company’s Knowledge, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time, or both) will (i) result in a material violation or breach by the Company, any of its Subsidiaries or any other party of any of the provisions of any Material Contract or (ii) give any third party (A) the right to declare a default or exercise any remedy under any Material Contract, (B) the right to a rebate, chargeback or penalty under any Material Contract, (C) the right to accelerate the maturity or performance of any obligation of the Company or any Subsidiary under any Material Contract, or (D) the right to cancel, terminate or modify (in a manner materially adverse to the Company or any of its Subsidiaries) any Material Contract. Neither the Company nor any Subsidiary has received any written notice regarding any actual or possible material violation or breach of, or default under, any Material Contract and to the Company’s Knowledge, does not reasonably expect to receive any such notice.

(b) Except as set forth on Section 3.11 of the Company Disclosure Letter. Neither the Company nor any Subsidiary is a party to, and none of the Company’s (or any Subsidiaries’) assets is bound or affected by, any judgment, injunction, order, decree, covenant or Contract (noncompete or otherwise) that materially restricts or prohibits, or purports to materially restrict or prohibit, the Company or its Subsidiaries from freely engaging in any business now conducted by the Company or any of its Subsidiaries or from competing anywhere in the world (including any covenants or Contracts restricting the geographic area in which the Company or any of its Subsidiaries may sell, license, market, distribute or support any products or technology or provide services or restricting the markets, customers or industries that the Company or any of its Subsidiaries may address in operating the Business or restricting the prices that the Company or any of its Subsidiaries may charge for its products, technology or services) or includes any grants by the Company or any of its Subsidiaries of exclusive rights or licenses.

(c) To the extent any Material Contract provides for services to be performed by the Company or any of its Subsidiaries: (i) such services have been timely and properly completed in all material respects in accordance with the terms of such Material Contracts, and to the Company’s Knowledge, it has no liability arising out of any prior deliverables; (ii) neither the Company nor any of its Subsidiaries have received any written communication of non-compliance in relation to any Material Contract; and (iii) the Company and its Subsidiaries are in material compliance with all maintenance and enhancement obligations contained in all Material Contracts.

3.12 Intellectual Property Rights.

(a) The Company (i) owns, or (ii) has the valid right or license to use, possess, develop, sell, license, copy, distribute, market, advertise and/or dispose of, all Intellectual Property Rights and Software used in the conduct of the Business (such Intellectual Property Rights being hereinafter collectively referred to as the “Company IP Rights”). Such Company IP Rights are sufficient for the conduct of the Business as conducted prior to the Closing.

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(b) Neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated by this Agreement will, in accordance with their terms: (i) constitute a material breach of or default under any Material Contract governing any Company IP Right (collectively, the “Company IP Rights Agreements”); (ii) cause the forfeiture or termination of, or give rise to a right of forfeiture or termination of, any Company IP Right; or (iii) materially impair the right of the Company or Buyer, to use, possess, sell or license any Company IP Right or portion thereof. There are no royalties, honoraria, fees or other payments payable by the Company to any third Person (other than salaries payable to employees and independent contractors not contingent on or related to use of their work product) as a result of the ownership, use, possession, license-in, sale, marketing, advertising or disposition of any Company IP Rights by the Company, and none will become payable as a result of the consummation of the transactions contemplated hereby.

(c) To the Company’s Knowledge, neither the use, marketing, license, sale, distribution or intended use of any product or service currently licensed, utilized, sold, provided or distributed by the Company: (i) violates any license or other Contract between the Company and any third party, or (ii) infringes or misappropriates any Intellectual Property Right of any other party.

(d) Schedule 3.12(d) of the Company Disclosure Letter contains a true and complete list of all registered Intellectual Property Rights, as well as all pending applications to register any of the same that are owned by the Company. To the Company’s Knowledge, all registered Intellectual Property Rights owned by the Company are valid, enforceable and subsisting.

(e) To the Company’s Knowledge, there has not been any infringement of any Company IP Rights.

(f) To the Company’s Knowledge, there has not been any infringement by the Company of any third party’s Intellectual Property rights.

(g) Schedule 3.12(g) of the Company Disclosure Letter lists all software or other material that is distributed as “free software”, “open source software” or under a similar licensing or distribution model (“Open Source Materials”) that is included in any Software or other intellectual property assets owned by the Company or any of its Subsidiaries, or that, to Company’s Knowledge, is included in any Software or other intellectual property assets used by Company or any of its Subsidiaries in any way, and describes the manner in which such Open Source Materials were used (such description shall include whether (and, if so, how) the Open Source Materials were modified and/or distributed by Company or any of its Subsidiaries.) Except as explicitly set forth in the Disclosure Letter, the Company or any of its Subsidiaries has not (i) incorporated Open Source Materials into, or combined Open Source Materials with, any Software or other intellectual property assets owned or licensed by the Company or any of its Subsidiaries; (ii) distributed Open Source Materials in conjunction with any Software or other intellectual property assets owned or licensed by the Company or any of its Subsidiaries; or (iii) used Open Source Materials that create, or purport to create, obligations for Company or any Subsidiary with respect to any of its/their Software or Company IP Rights or grant, or purport to grant, to any third party, any rights or immunities under any Software or Company IP Rights (including using any Open Source Materials that require, as a condition of use, modification and/or distribution of such

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Open Source Materials that other software incorporated into, derived from or distributed with such Open Source Materials be (A) disclosed or distributed in source code form, (B) be licensed for the purpose of making derivative works, or (C) be redistributable at no charge.)

3.13 Compliance with Laws. Except as set forth on Section 3.13 of the Company Disclosure Letter the Company and its Subsidiaries have complied in all material respects with, and to its knowledge, has not received any written notices of violation with respect to, any federal, state, local or foreign statute, law or regulation, including United States export control laws and regulations. The Company and each of its Subsidiaries has obtained each federal, state, county, local or foreign governmental consent, license, permit, grant or other authorization of a Governmental Entity (i) pursuant to which the Company and/or such Subsidiary currently operates or holds any interest in any of its assets or (ii) that is required for the operation of the Business in material compliance with all applicable federal, state, local or foreign statutes, laws or regulations (all of the foregoing consents, licenses, permits, grants and other authorizations, collectively, the “Governmental Permits”), and all of the Governmental Permits are in full force and effect, except where the failure to have such Governmental Permits or for such Governmental permits to be in full force and effect, as applicable, would not have a Material Adverse Effect on the Company or any of its Subsidiaries. Neither the Company nor any Subsidiary has received any written notice from any Governmental Entity regarding (i) any actual or possible violation of any Governmental Permit or any failure to comply with any term or requirement of any Governmental Permit or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Permit. The Company and each of its Subsidiaries are in compliance in all material respects with the terms of all Governmental Permits. Since inception, neither the Company, any Subsidiary, nor, to the Company’s Knowledge, any director, officer, agent or employee of the Company or any of its Subsidiaries, has given, offered, paid, promised to pay or authorized payment of any money, any gift or anything of value, with the purpose of influencing any act or decision of the recipient in his or her official capacity or inducing the recipient to use his or her influence to affect an act or decision of a government official or employee, to any (i) governmental official or employee, (ii) political party or candidate thereof, or (iii) Person while knowing that all or a portion of such money or thing of value would be given or offered to a governmental official or employee or political party or candidate thereof.

3.14 Employee Matters.

(a) General.

(i) The Company and each of its Subsidiaries is in material compliance with all applicable laws and Contracts relating to employment, employment practices, immigration, wages, hours and terms and conditions of employment, including employee compensation matters, and has correctly classified employees as exempt employees and non-exempt employees under the Fair Labor Standards Act.

(ii) Neither the Company nor any of its Subsidiaries is liable for any arrears of wages or any employee related Taxes or any penalty for failure to comply with any of the foregoing.

(iii) Neither the Company nor any of its Subsidiaries is liable for any payment to any trust or other fund or to any Governmental Entity with respect to unemployment compensation contributions, social security or other benefits or obligations for any of its employees (other than routine payments to be made in the ordinary course of business and consistent with its past practice). Schedule 3.14(a) of the Company Disclosure Letter contains true and correct details of all remuneration payable (including any bonus or commission entitlements) and any other benefits provided or which the Company or any of its Subsidiaries is bound to provide (whether now or in the future) for all employees and consultants, other than those employees and consultants are to be terminated prior to Closing, including

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without limitation, accrued vacation and accrued sick leave. There are no controversies or claims pending or, to the Company’s Knowledge, threatened between the Company, any of its Subsidiaries and any of its respective employees, other than as listed on Schedule 3.14(a).

(b) Employee Plans. Schedule 3.14(b) of the Company Disclosure Letter sets forth a complete list or summary of each “employee pension benefit plan,” as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), each material “employee welfare benefit plan,” as defined in Section 3(1) of ERISA, each material employment, consulting, severance or similar contract, plan, program, arrangement or policy and each other material plan, program, policy or arrangement providing for benefits, compensation, retention payments, bonuses, fees, profit-sharing, stock option, stock purchase or other stock related rights or other forms of incentive or deferred compensation, change in control benefits, vacation benefits, other “fringe” benefits, insurance (including any self-insured arrangements), health or medical benefits, employee assistance programs, disability or sick leave benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits that is has been, within the six calendar years preceding the Closing Date, maintained, administered or contributed to by the Company or any of its Subsidiaries (such plans, collectively, the “Company Benefit Plans”). The Company has made available to Buyer true and complete copies of each Company Benefit Plan or a summary of such plan.

(c) Except as set forth on Schedule 3.14 of the Company Disclosure Letter, to the Company’s Knowledge, all Company Benefit Plans are, by their terms and in operation, in material compliance with ERISA and the Code (as amended through the Closing Date), the regulations and published authorities thereunder, and all other applicable legal requirements.

(d) Neither the Company nor any Subsidiaries maintains or contributes to, and neither have maintained or contributed to (or been obligated to contribute to) within the six calendar years preceding the Closing Date, any employee pension benefit plan (within the meaning of Section 3(2) of ERISA) that is a defined benefit plan, any multiemployer plan (within the meaning of Section 3(37) of ERISA), any “multiple employer plan” (within the meaning of Section 4063 or 4064 of ERISA or Section 413(c) of the Code), any employee benefit plan, fund, program, contract or arrangement that is subject to Section 302 of ERISA or Title IV of ERISA or Section 412 of the Code, or any “multiple employer welfare arrangements” (within the meaning of Section 3(40) of ERISA). Except as set forth on Schedule 3.14 of the Company Disclosure Letter, none of the Company Benefit Plans provides for post-termination benefits of any kind with respect to any of the Company’s or any of its Subsidiaries’ current or former officers, employees, agents, directors or independent contractors, except as otherwise required by Sections 601 through 608 of ERISA and Section 4980B(f) of the Code or comparable state laws.

3.15 No Brokers. Except as set forth on Schedule 3.15, none of the Company, or any of its Subsidiaries or any Affiliate of the Company or any of its Subsidiaries is obligated for the payment of any fees or expenses of any investment banker, broker, finder or similar party in connection with the origin, negotiation or execution of this Agreement or in connection with the transactions contemplated hereby. None of the Buyer, Merger Subsidiary, Surviving Corporation or the Company will incur any Liability, either directly or indirectly, to any such investment banker, broker, finder or similar party as a result of this Agreement, the transactions contemplated hereby or any act or omission of the Company or any of its employees, officers, directors, stockholders, agents or Affiliates.

3.16 Books and Records. The minute books of the Company and each of its Subsidiaries in all material respects reflect all meetings of directors and stockholders or actions by written consent since the

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time of incorporation of such entity. The minute books, statutory books and registers and other similar records of the Company and its Subsidiaries: (i) are true and complete in all material respects, and (ii) have been maintained in accordance with reasonable business practices on a basis consistent with prior years.

3.17 Insurance. The Company and its Subsidiaries maintain policies of insurance and bonds (each, an “Insurance Policy”) of the type and in amounts reasonably and customarily carried by Persons conducting businesses or owning assets similar in type and size to those entities, including all legally required workers’ compensation insurance and errors and omissions, casualty, fire and general liability insurance. Each Insurance Policy now held by the Company and/or its Subsidiaries is set forth on Schedule 3.17 of the Company Disclosure Letter, together with the name of the insurer, the type of policy or bond and the coverage amount. There is no claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds, and all such policies and bonds are in full force and effect. All premiums due and payable under all such policies and bonds have been paid, and the Company and its Subsidiaries are otherwise in material compliance with the terms of such policies and bonds.

3.18 Certain Transactions. Except as set forth on Schedule 3.18, to the Company’s Knowledge, none of the directors or officers of the Company or its Subsidiaries (i) has or ever had any direct or indirect ownership, participation, royalty or other interest in, or is a director, officer, employee, consultant or contractor for, any firm, partnership, entity or corporation that competes with, or does business with, or has any contractual arrangement with, the Company or any of its Subsidiaries (except with respect to any interest in less than 1% of the stock of any corporation whose stock is publicly traded), (ii) is or ever was a party to, or is or ever was otherwise directly or indirectly interested in, any Contract or formal or informal arrangement or understanding with the Company or any of its Subsidiaries, except for normal compensation for services as a director, officer or employee that has previously been disclosed in writing to Buyer, (iii) has or ever had any interest in any of the Company’s (and/or its Subsidiaries’) assets, except for the rights of stockholders under applicable law, or (iv) has or ever had, either directly or indirectly, a material interest in any Contract to which the Company or any of its Subsidiaries is a party or by which the Company (or any of its Subsidiaries) or any of their assets or properties may be bound or affected.

3.19 Real Property and Business Premises. Neither the Company nor any of its Subsidiaries owns any real property whatsoever. All commercial leases and subleases executed by the Company and/or any of its Subsidiaries are in full force and effect, and neither the Company nor any of its Subsidiaries has received written notice of any claim of any sort that is currently outstanding and that has been asserted by anyone adverse to the rights of the Company (or such Subsidiary) under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company (or such Subsidiary) to the continued possession of the commercial leases or subleases premises under any such commercial lease or sublease.

3.20 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the Company and/or any of its Subsidiaries.

3.21 No Bankruptcy or Insolvency. No order has been made, or petition presented, for the winding-up or bankruptcy of any of the Stockholders, the Company or any of its Subsidiaries. None of the Company, any of its Subsidiaries or any Stockholder has had: (i) any petition or order for winding-up or bankruptcy filed against it; (ii) any appointment of a receiver over the whole or part of the undertaking of its assets; (iii) any petition or order for administration against it; (iv) any distress or execution or other process levied in respect of it which remain undischarged; or (v) any unfulfilled or unsatisfied judgment or court order against it over the amount of $5,000.

3.22 Dividends. All dividends payable with respect to the Company Stock have been fully and properly paid to the holders of such Company Stock.

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3.23 Environmental Matters. No written notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, claim, suit, proceeding or review is pending, or threatened by any government entity or other Person with respect to any matters relating to the Company or any Subsidiary and relation to or arising out of any Environmental Law. There are no facts, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis for any liability of or relating to the Company or any Subsidiary arising under or relating to any Environmental Law.

3.24 Disclosure. To the Company’s Knowledge, none of the representations or warranties made herein contains any untrue statement of material fact or omits to state any material fact necessary in order to make the statements contained herein, in the light of the circumstances under which such statements were made, not misleading. There have been no events or transactions or information that, to the Company’s Knowledge, could reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY

Each of Buyer and Merger Subsidiary jointly and severally represents and warrants to the Stockholder Parties that each statement contained in this Article IV is true and correct as of the date hereof, except as set forth in the disclosure letter of the Buyer (collectively, the “Buyer Disclosure Letter”). The Buyer Disclosure Letter has been arranged for purposes of convenience only, as sections corresponding to the Sections of this Article IV. Each section of the Buyer Disclosure Letter shall be deemed to incorporate by reference all information disclosed in any other section of the Buyer Disclosure Letter.

4.1 Organization and Good Standing. Each of Buyer and Merger Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Buyer has the corporate power to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification.

4.2 Authorization. The Buyer and Merger Subsidiary have all requisite corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Buyer and Merger Subsidiary of this Agreement and all other agreements, transactions and actions contemplated hereby have been duly and validly approved and authorized by the Buyer and Merger Subsidiary’s Board of Directors.

4.3 No Brokers. None of the Buyer or Merger Subsidiary, or any Affiliate of the Buyer or Merger Subsidiary is obligated for the payment of any fees or expenses of any investment banker, broker, finder or similar party in connection with the origin, negotiation or execution of this Agreement or in connection with the transactions contemplated hereby. Neither Buyer or Merger Subsidiary will incur any Liability, either directly or indirectly, to any such investment banker, broker, finder or similar party as a result of this Agreement, the transactions contemplated hereby or any act or omission of the Buyer or Merger Subsidiary or any of its employees, officers, directors, stockholders, agents or Affiliates.

4.4 Closing Consideration. Each of Buyer and Merger Subsidiary has available to it, and at the

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Closing will have available to it, sufficient cash and other financial resources sufficient to make full payment of the aggregate Closing Consideration and pay all associated costs and expenses contemplated by this Agreement.

ARTICLE V

CONDUCT PRIOR TO THE CLOSING

5.1 Company Stockholder Approval. Promptly after the date of this Agreement, the Company will take all action necessary in accordance with its Certificate of Incorporation and Bylaws, each as currently in effect, and all applicable laws to call, notice, convene, hold and conduct a meeting of the Company’s stockholders (the “Company Stockholders Meeting”) to be held as soon as practicable for the purpose of voting upon the Merger. In lieu of the Company Stockholders Meeting, such approval by the Company’s stockholders may be obtained by the written consent of the Company’s stockholders (the “Company Stockholders Consent”) where authorized by the Certificate of Incorporation and Bylaws of the Company. The Board of Directors of the Company will recommend that the Company’s stockholders vote in favor of the Merger at the Company Stockholders Meeting or pursuant to the Company Stockholders Consent and will not change such recommendation.

5.2 Advice of Changes. The Company will promptly advise Buyer in writing of any (a) event occurring subsequent to the date of this Agreement that would render any representation or warranty of the Company contained in this Agreement, if made on or as of the date of such event or the Closing Date, materially untrue or inaccurate, (b) material breach of any covenant or obligation of the Company pursuant to this Agreement, or (c) Material Adverse Change in the Business or operations. The Buyer will promptly advise Company in writing of any (a) event occurring subsequent to the date of this Agreement that would render any representation or warranty of the Buyer contained in this Agreement, if made on or as of the date of such event or the Closing Date, materially untrue or inaccurate, or (b) material breach of any covenant or obligation of the Company pursuant to this Agreement.

5.3 Conduct of Business. During the time period from the date of this Agreement until the earlier to occur of (i) the Closing and (ii) the termination of this Agreement in accordance with the provisions of Article VIII, the Company covenants and agrees that, except as expressly contemplated by this Agreement, or by the Company or any of its Subsidiaries in accordance with their ordinary course of business, the Company and each Subsidiary will continue to conduct the Business in the ordinary and usual course, and neither the Company or any of its Subsidiaries will, without Buyer’s prior written consent except as may occur in the ordinary course of business: (i) enter into any material transaction or agreement or take any other action not in the ordinary course of business, consistent with its past practice; (ii) grant or permit any Encumbrance on any of its assets; (iii) sell, transfer, assign, convey, lease, license, move, relocate or otherwise dispose of any of its assets; (iv) enter into any material Contract for the purchase or sale of any of its assets; (v) amend or terminate any material Contract to which the Company or any of its Subsidiaries is a party; (vi) waive or release any material right or claim; (viii) license any of its technology or Intellectual Property Rights or acquire any Intellectual Property Rights (or any license thereto) from any third party; or (viii) agree to do any of the things described in the preceding clauses (i) through (vii).

5.4 No Other Negotiations.

(a) The Company will not, and will not authorize, encourage or permit any other Person, including any of its directors, officers, agents, advisors and other representatives (all of the foregoing Persons collectively being the “Company Representatives”), on its behalf to, directly or indirectly: (i) solicit, initiate, encourage, induce or facilitate the making, submission or

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announcement of any inquiry, expression of interest, offer or proposal from any Person concerning any Alternative Transaction (as defined below) or take any other action that could reasonably be expected to lead to an Alternative Transaction or a proposal therefor; (ii) furnish any information regarding the Business to any Person (other than Buyer) in connection with, or enter into, participate in, maintain or continue, any discussions or negotiations with any Person (other than Buyer) regarding, any inquiry, offer or proposal concerning any Alternative Transaction; (iii) cooperate with, facilitate or encourage any effort or attempt by any Person (other than Buyer) to effect any Alternative Transaction; or (iv) enter into or become bound by any letter of intent, agreement, commitment or understanding between the Company and any Person (other than Buyer) that is related to, provides for or concerns any Alternative Transaction. As used herein, the term “Alternative Transaction” means any commitment, agreement or transaction with any party other than Buyer or any of its Affiliates involving or providing for the possible disposition of the Business, whether by way of merger, consolidation, sale of assets, sale of stock, stock exchange, tender offer and/or any other form of business combination or strategic transaction.

(b) The Company shall immediately notify Buyer after receipt by the Company (or, to the Company’s Knowledge, by any of the Company Representatives) of any inquiry, expression interest, offer or proposal that constitutes, or could reasonably be expected to lead to, an Alternative Transaction or any other notice that any Person is considering an Alternative Transaction or any request for information relating to the Company or the Business or for access to any of the properties, books or records of the Company by any Person or Persons other than Buyer (which notice shall identify the Person or Persons making, or considering making, such inquiry, expression of interest, proposal, offer or request) and shall keep Buyer fully informed of the status and details of any such inquiry, expression of interest, proposal, offer or request and any correspondence or communications related thereto and shall provide to Buyer a true, correct and complete copy of such inquiry, expression of interest, proposal, offer or request and any amendments, correspondence and communications related thereto, if it is in writing, or a written summary thereof, if it is not in writing. The Company shall immediately cease and cause to be terminated any and all existing activities, discussions and negotiations with any Persons conducted heretofore with respect to an Alternative Transaction.

ARTICLE VI

ADDITIONAL AGREEMENTS

6.1 Access to Information. During the period commencing on the date of this Agreement and continuing until the earlier of the termination of this Agreement in accordance with the provisions of Article VIII and the Closing, the Company shall afford Buyer and its accountants, counsel and other representatives reasonable access during normal business hours to all of the Company’s properties, books, Contracts and records and all other information concerning the Business as Buyer may reasonably request. Subject to compliance with applicable law, from the date of this Agreement until the earlier of the termination of this Agreement in accordance with the provisions of Article VIII and the Closing, the Company shall confer from time to time as reasonably requested by Buyer with one or more representatives of Buyer to discuss any material changes or developments in the Business. No information or knowledge obtained in any investigation pursuant to this Section 6.1 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties hereto to consummate the Merger.

6.2 Confidentiality. The Company and each Stockholder covenants and agrees with Buyer that, from and at all times after the Closing, all confidential and/or proprietary information relating to the Company and the Business, including any trade secrets, will be held in strict confidence by the Company and will not be disclosed by the Company, any Subsidiary, any Stockholder or any director, officer,

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employee or agent of or on behalf of the Company, and Subsidiary or any Stockholder, other than as may be required under applicable law. The Buyer and Merger Subsidiary covenants and agrees with Company and the Stockholders that, from and at all times after the date hereof, all confidential and/or proprietary information relating to the Company and the Business, including any trade secrets, will be held in strict confidence by the Buyer and Merger Subsidiary and will not be disclosed by the Buyer, the Merger Subsidiary or any director, officer, employee or agent of or on behalf of the Buyer or Merger Subsidiary, other than as may be required under applicable law.

6.3 Public Disclosure. The Company shall not directly or indirectly, issue any press release or other public statement relating to the terms of this Agreement or the transactions contemplated hereby without Buyer’s prior written approval. The Company shall not directly or indirectly, use Buyer’s name or refer to Buyer directly or indirectly in connection with Buyer’s relationship with the Company in any media interview, advertisement, news release, press release or professional or trade publication, or in any print media, whether or not in response to an inquiry, unless otherwise required by applicable law or with Buyer’s prior written consent. Buyer shall provide the Company with an advance copy of any press releases issued by Buyer pertaining to this Agreement or the transactions contemplated hereby at least 24 hours prior to its release, for the Company’s approval, which approval shall not be unreasonably withheld.

6.4 Consents. The Company shall use its commercially reasonable efforts to obtain at or prior to Closing, the consents, waivers and approvals set forth on Schedule 6.4, in each case in a form that is reasonably acceptable to Buyer.

6.5 Legal Requirements. Buyer and the Company shall (i) take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on it with respect to the consummation of the transactions contemplated by this Agreement (ii) promptly cooperate with and furnish information to the other party hereto necessary in connection with any such requirements imposed upon such other party in connection with the consummation of the transactions contemplated by this Agreement, and (iii) take all reasonable actions necessary to obtain (and shall cooperate with the other party hereto in obtaining) any consent, approval, order or authorization of, or any registration, declaration or filing with, any Governmental Entity or other Person required to be obtained or made in connection with the taking of any action contemplated by this Agreement.

6.6 Expenses. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense provided however, that if the Merger is consummated, all costs and expenses incurred by the Company in connection with this Agreement and the transactions contemplated hereby shall be paid by the Stockholders and shall be deducted from the Closing Consideration.

6.7 Further Assurances. On the terms and subject to the conditions set forth in this Agreement, each of the parties hereto shall use commercially reasonable efforts, and shall cooperate with each other party hereto, to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, reasonably appropriate or reasonably desirable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated hereby. Notwithstanding the foregoing, none of the Buyer, the Company or the Stockholders shall be obligated to contest or litigate any proposed injunction or other order preventing the consummation of the Merger. Each party hereto, at the reasonable request of any other party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary or reasonably desirable to the consummation of the Merger and the other transactions contemplated hereby. In addition to the foregoing the Company and the Stockholders shall use commercially reasonable efforts to cause Michael Eleftheriou to remain employed by the Company until September 15, 2007

6.8 Cooperation on Tax Matters. Buyer, the Company and the Stockholders shall cooperate

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fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon another party’s request) the provision of records and information which are reasonably relevant to any such Tax Return, audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Company and the Stockholders agree (A) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, to allow the other party to take possession of such books and records. With respect to any and all tax matters set forth on Schedule 3.7(a), on and after the Closing, the Surviving Corporation and Buyer shall promptly confer and consult with the Stockholders’ Representative, with respect to any potential liability exceeding $50,000, as to the status of the negotiations with respect to these matters. Buyer and Surviving Corporation agree to use their reasonable best efforts when working with taxing authorities and other governmental entities to which the tax matters relate so as to minimize the amount of interest, penalties and taxes due. This covenant shall survive the closing.

In the case of any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured by income or receipts of the Company for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which the Company or any of its Subsidiaries holds a beneficial interest shall be deemed to terminate at such time) and the amount of other Taxes of the Company for a Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on the Closing Date, and the denominator of which is the number of days in such Straddle Period.

Buyer shall prepare or cause to be prepared and file or cause to be filed all Tax Returns for the Company that are filed after the Closing Date other than income Tax Returns with respect to periods for which a consolidated, unitary or combined income Tax Return of Seller will include the operations of the Company. Buyer shall permit Sellers to review and comment on each such Tax Return described in the preceding sentence prior to filing.

All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement shall be paid by the Stockholders when due, and the Stockholders shall, at their own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable law, Buyer shall, and shall cause its affiliates to, join in the execution of any such Tax Returns and other documentation.

ARTICLE VII

CONDITIONS TO THE MERGER

7.1 Conditions to Obligations of Each Party. The respective obligations of each party hereto to consummate the transactions contemplated hereby shall be subject to the fulfillment or satisfaction, at or prior to the Closing, of each of the following conditions, any of which, to the extent lawful, may be waived, in writing, by agreement of the parties hereto (it being understood that each such condition is solely for the benefit of the parties hereto and may be so waived in writing by their mutual agreement without notice, Liability or obligation to any Person):

(a) No Injunctions or Restraints; Illegality. No temporary restraining order,

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preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall be in effect, nor shall any proceeding seeking any of the foregoing be pending. No action taken by any Governmental Entity, and no statute, rule, regulation or order shall have been enacted, entered, enforced or deemed applicable to the Merger, which makes the consummation of the Merger illegal.

(b) Governmental Approvals. Buyer and the Company shall have timely obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for the consummation of, the Merger and the other transactions contemplated hereby.

(c) Company Stockholder Approval. The Company Stockholder Approval shall have been obtained.

(d) Certificate of Merger. At the Effective Time, the Certificate of Merger shall be accepted for filing with the Secretary of State of the State of Delaware.

7.2 Additional Conditions to Obligations of the Company. The obligations of the Company to consummate the transactions contemplated hereby shall be subject to the fulfillment or satisfaction, at or prior to the Closing, of the following conditions, each of which, to the extent lawful, may be waived, in writing, by the Company (it being understood that such conditions are solely for the benefit of the Company and may be so waived in writing by the Company in its sole discretion without notice, Liability or obligation to any Person):

(a) Representations and Warranties. The representations and warranties of Buyer and Merger Subsidiary in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of such date (except for representations and warranties which address matters only as to a specified date, which representations and warranties shall be true and correct with respect to the specified date) and at the Closing the Company will have received a certificate to such effect executed by the Buyer’s President.

(b) Covenants. Buyer and Merger Subsidiary shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by it at or prior to the Closing and at the Closing the Company will have received a certificate to such effect executed by the Buyer’s President.

7.3 Additional Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated hereby shall be subject to the fulfillment or satisfaction, at or prior to the Closing, of each of the following conditions, any of which may be waived, in writing, by Buyer (it being understood that each such condition is solely for the benefit of Buyer and may be waived by Buyer in its sole discretion without notice, Liability or obligation to any Person):

(a) Representations and Warranties. The representations and warranties of the Company and the Stockholders in this Agreement shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of such date (except for representations and warranties which address matters only as to a specified date, which

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representations and warranties shall be true and correct with respect to the specified date), and at the Closing Buyer will have received a certificate to such effect executed by the Company’s Chief Executive Officer.

(b) Covenants. The Company and each Stockholder shall have performed and complied in all material respects with all covenants, obligations and conditions of this Agreement required to be performed and complied with by it at or prior to the Closing, and at the Closing Buyer will have received a certificate to such effect executed by the Company’s Chief Executive Officer.

(c) Release of Encumbrances. Buyer shall have received a release of any and all Encumbrances (other than Permitted Encumbrances) on the Company’s or any of its Subsidiaries’ assets.

(d) Change of Directors. The members of the board of directors of the Company in office immediately prior to the Effective Date shall have resigned.

(e) Cancellation/Termination of Options. Buyer shall have received evidence that all outstanding Options of the Company and any of its Subsidiaries have been fully exercised, cancelled or terminated in accordance with their terms.

(f) Delivery of Company Seal and Books & Records. Buyer shall have received the Company’s (and each of its Subsidiaries’) original corporate books and records and any company seals of the Company (and its Subsidiaries).

(g) Material Adverse Effect. No Material Adverse Effect in relation to the Company shall have occurred since the date of this Agreement.

(h) Dissenting Shares. There shall be no Dissenting Shares.

(i) Termination of Certain Employees. Each of the Chief Executive Officer of the Company shall have been terminated by the Company, and the Stockholders’ shall be responsible for a severance payment to be made to such employee from the Closing Consideration.

(j) Company Board Approval. The board of directors of the Company shall have approved the execution of this Agreement and the transactions contemplated hereby.

(k) Secretary Certificate. The Company shall have delivered to Buyer a certificate, dated the Closing Date, signed by the company secretary of the Company in form reasonably acceptable to Buyer.

(l) Financial Statements. On the Closing Date, the Stockholders shall deliver to the Buyer true and complete copies of the Audited Financial Statements and other financial statements contemplated to be delivered at the Closing pursuant to Section 2.7 hereof.

(m) Termination of Rights and Certain Securities. Any and all registration rights, rights of first refusal, rights of first offer, co-sale, tag-along, drag-along, voting rights, rights to any liquidation preference or redemption rights, or any similar rights relating to the Company Stock or any of the Company’s or any Subsidiary’s capital, will either be fully terminated, satisfied or irrevocably waived as of the Closing Date.

(n) Third Party Consents. The Buyer shall have received copies of the consents to the change of control of the Company from each third party contract requiring such consent.

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(o) Surrender of Certificates and Customary Letter of Transmittal. At the Closing, the Buyer shall receive the documents required to be received by it in accordance with Section 2.2(d) hereto, including, but not limited to, a standard letter of transmittal.

(p) Legal Opinion. The Buyer shall have a received a legal opinion substantially in the form of Exhibit B.

(q) United Kingdom Premises Lease. The Company shall have terminated the real property lease covering the premises occupied by the Company in the United Kingdom.

ARTICLE VIII

TERMINATION

8.1 Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Closing by the mutual written consent of Buyer and the Company.

8.2 Unilateral Termination.

(a) Either Buyer, on the one hand, or the Company, on the other hand, by giving written notice to the other, may terminate this Agreement if a court of competent jurisdiction or other Governmental Entity shall have issued an injunction, order, decree or ruling or taken any other action to restrain, enjoin, make illegal or otherwise prohibit the Merger.

(b) Either Buyer, on the one hand, or the Company, on the other hand, by giving written notice to the other, may terminate this Agreement if the Merger shall not have been consummated by midnight Pacific Time on September 15, 2007; provided, however, that the right to terminate this Agreement pursuant to this Section 8.2(b) shall not be available to any party whose failure to perform in any material respect any of its obligations or covenants under this Agreement results in the failure of any condition set forth in Article VII or if the failure of such condition results from facts or circumstances that constitute a material breach of a representation or warranty or covenant made under this Agreement by such party.

(c) Either Buyer, on the one hand, or the Company, on the other hand, by giving written notice to the other, may terminate this Agreement at any time prior to the Closing if the other has committed a material breach of (i) any of such party’s representations and warranties contained in this Agreement or (ii) any of such party’s covenants contained in this Agreement, and has not cured such material breach within twenty days after the party seeking to terminate this Agreement has given the other party written notice of the material breach and its intention to terminate this Agreement pursuant to this Section 8.2(c).

8.3 No Liability for Termination. Termination of this Agreement by a party (the “Terminating Party”) in accordance with the provisions of this Article VIII will not give rise to any Liability on the part of the Terminating Party on account of such termination; provided, however, that nothing herein shall relieve a party from liability for a willful breach of this Agreement. The provisions of this Article VIII and Article IX shall survive any termination of this Agreement.

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ARTICLE IX

INDEMNIFICATION

9.1 Survival of Representations. The representations and warranties of the Company and Buyer contained in this Agreement (including the Exhibits to this Agreement) shall survive the Closing and shall remain operative and in full force and effect, from the Closing Date until the end of the Holdback Period (the “Release Date”); provided, however, that such expiration shall not affect claims of fraud, willful misrepresentation, willful misconduct or any criminal activity.

9.2 Indemnification.

(a) (i) By the Stockholders. Subject to the limitations set forth in this Article IX, from and after the Closing, by virtue of the Merger, the Stockholders shall jointly and severally, to the extent of their interest in the Holdback and not personally, indemnify and hold harmless Buyer, the Merger Subsidiary, the Company and the Surviving Corporation and its directors, officers and agents (each of the foregoing being referred to individually as an “Indemnified Buyer Party” and collectively as “Indemnified Buyer Parties”) from and against any and all Losses, Liabilities, damages, costs and expenses, including reasonable costs of investigation and defense, reasonable legal fees and expenses and other professionals’ and experts’ reasonable fees and reasonable expenses (collectively, “Damages”) arising from assessments, claims, demands, assertions of liability or actual or threatened actions, suits or proceedings (whether civil, criminal, administrative or investigative) directly or indirectly incurred, paid or accrued in connection with, resulting from or arising out of (i) any breach of any representation or warranty made by the Company and/or any of the Stockholders in this Agreement (and the Schedules and Exhibits to this Agreement), (ii) any breach of or default in connection with any of the covenants or agreements made by the Company and/or any Stockholders in this Agreement, (iii) any of the matters set forth on Schedule 3.5 of the Company Disclosure Letter, (iv) any Liability of the Business not set forth on the Company Balance Sheet, (v) any suit, action, claim or Loss by any holder of any Options, and/or (vi) any suit, action, proceeding, claim or Loss resulting from an action initiated by any State of the United States of America for unpaid sales tax on all software license, service and maintenance sells conducted by the Company prior to the Closing.

(ii) By the Buyer and Merger Subsidiary. Subject to the limitations set forth in this Article IX, from and after the Closing, by virtue of the Merger, the Buyer and the Surviving Corporation shall jointly and severally indemnify and hold harmless the Stockholders (the “Indemnified Seller Party” “Indemnified Seller Parties”) from and against any and all Losses, Liabilities and Damages arising from assessments, claims, demands, assertions of liability or actual or threatened actions, suits or proceedings (whether civil, criminal, administrative or investigative) directly or indirectly incurred, paid or accrued in connection with, resulting from or arising out of (i) any breach of any representation or warranty made by the Buyer and/or Merger Subsidiary in this Agreement (and the Schedules and Exhibits to this Agreement) and (ii) any breach of or default in connection with any of the covenants or agreements made by the Buyer and/or Merger Subsidiary in this Agreement.

(b) Limitations. In no event shall the Stockholders’ or the Company’s obligations pursuant to this Article IX exceed the Holdback Consideration with respect to all Indemnified Buyer Party claims for indemnification for damages (the “Indemnification Cap”) provided, however, that the Indemnification Cap shall not apply to claims of fraud, willful misrepresentation, willful misconduct or any criminal activity.

(c) Exclusive Remedy. The indemnification remedies provided in this Article IX shall not create any personal liability for the Stockholders, other than to the extent of their interest in the Holdback and shall constitute the sole and exclusive remedy of the parties for any claim in

34

connection with this Agreement or any other transaction documents, including any claim for any Damages resulting from a breach of any party of any representation, warranty, covenant or agreement.

9.3 Claims Period. The period during which claims of an Indemnified Buyer Party for indemnification pursuant to this Agreement may be initiated (the “Claims Period”), shall commence at the Closing and terminate on the Release Date.

9.4 Resolution of Objections to Claims.

(a) Any Person who desires to seek indemnification under any part of this Article IX (each, an “Indemnified Party”) shall give written notice in reasonable detail (a “Indemnification Claim Notice”) to the party responsible or alleged to be responsible for indemnification hereunder (an “Indemnitor”) prior to the end of any applicable Claims Period. Such notice shall briefly explain the nature of the claim and the parties known to be involved, and shall specify the amount thereof. If the matter to which a claim relates shall not have been resolved as of the date of the Indemnification Claim Notice, the Indemnified Party shall estimate the amount of the claim in the Indemnification Claim Notice. Each Indemnitor to which an Indemnification Claim Notice is given shall respond to any Indemnified Party that has given a Indemnification Claim Notice (a “Claim Response”) within fifteen (15) days (the “Response Period”) after the date that the Indemnification Claim Notice is given. Any Claim Response shall specify whether or not the Indemnitor giving the Claim Response disputes the claim described in the Indemnification Claim Notice. If any Indemnitor fails to give a Claim Response within the Response Period, such Indemnitor shall be deemed not to dispute the claim described in the related Indemnification Claim Notice. If any Indemnitor elects not to dispute a claim described in an Indemnification Claim Notice, whether by failing to give a timely Claim Response in accordance with the terms hereof or otherwise, then the amount of such claim shall be conclusively deemed to be an obligation of such Indemnitor.

(b) If, during the Response Period, an Indemnified Party receives a Claim Response from the Indemnitor, then for a period of twenty (20) days (the “Resolution Period”) after the Indemnified Party’s receipt of such Claim Response, the Indemnified Party and the Indemnitor shall endeavor to resolve any dispute arising therefrom. If such dispute is resolved by the parties during the Resolution Period, the amount that the parties have specified in writing as the amount to be paid by the Indemnitor, if any, as settlement for such dispute shall be conclusively deemed to be an obligation of such Indemnitor. If the parties are unable agree upon a resolution to such dispute prior to the expiration of the Resolution Period (or any extension thereto to which the Indemnitor and Indemnified Party agree in writing), the issue shall be presented to the AAA for determination. The arbitration shall be before a panel of three arbitrators, one selected by Buyer, one selected by the Stockholders’ Representative and one selected by the two selected arbitrators, and the commercial arbitration rules of the AAA shall govern such arbitration. The written determination of the AAA shall be binding upon the parties and not subject to any appeal.

9.5 Third-Party Claims. An Indemnified Party that desires to seek indemnification under any part of this Article IX with respect to any actions, suits or other administrative or judicial proceedings (each, an “Action”) that may be instituted by a third party shall give each Indemnitor notice after having knowledge of such Action, of a third party’s institution of such Action, and copies of all documents and information relating to such Action after receipt thereof. After such notice, any Indemnitor may, at its sole option and expense, participate in such Action or assume the defense thereof, with counsel of its own choice. The Indemnified Party shall not consent to the entry of any judgment or enter into any settlement, except with the written consent of the Indemnitor. Any failure to give notice under this Section 9.5 shall not bar an

35

Indemnified Party’s right to claim indemnification under this Article IX, except to the extent that an Indemnitor shall have been harmed by such failure. If a firm written offer is made to settle any such Action, the Indemnitor proposes to accept such settlement and the Indemnified Party refuses to consent to such settlement, then: (i) the Indemnitor shall be excused from, and the Indemnified Party shall be solely responsible for, all further defense of such Action, and (ii) provided that only monetary damages may be recovered in such Action (and the Indemnified Party is not subject to any injunctive relief, equitable or other non-monetary relief in connection with such Action), the maximum liability of the Indemnitor relating to such Action shall be the amount of the proposed settlement if the actual monetary amount thereafter recovered from the Indemnified Party on such Action is greater.

9.6 Stockholders’ Representative.

(a) Upon approval of the Merger and this Agreement by the Stockholders, each Stockholder will be deemed to have irrevocably appointed ComVest Investment Partners II LLC, as its, his or her true and lawful attorney-in-fact and agent (the “Stockholders’ Representative”), each with full power of substitution or resubstitution, to act solely and exclusively on behalf of such Stockholder with respect to the transactions contemplated by this Agreement, including the Merger, and to act on behalf of such Stockholder in any litigation or arbitration involving this Agreement, to do or refrain from doing all such further acts and things, and to execute all such documents as the Stockholders’ Representative shall deem necessary or appropriate in connection with the transactions contemplated hereby, including the power:

(i) to act for such Stockholder with regard to matters pertaining to indemnification referred to in this Agreement, including the power to compromise any indemnity claim on behalf of such Stockholder;

(ii) to act for such Stockholder with regard to matters pertaining to litigation;

(iii) to execute and deliver all documents in connection with the transactions contemplated hereby or amendments thereto that the Stockholders’ Representative deems necessary or appropriate;

(iv) to receive funds, make payments of funds, and give receipts for funds;

(v) to receive funds for the payment of expenses of such Stockholder and apply such funds in payment for such expenses;

(vi) to do or refrain from doing any further act or deed on behalf of such Stockholder that the Stockholders’ Representative deems necessary or appropriate in his sole discretion relating to the subject matter of this Agreement as fully and completely as such Stockholder could do if personally present; and

(vii) to receive service of process in connection with any claims under this Agreement.

(b) The appointment of the Stockholders’ Representative shall be deemed coupled with an interest and shall be irrevocable, and Buyer, Merger Subsidiary and Surviving Corporation and any other person may conclusively and absolutely rely, without inquiry, upon any action of the Stockholders’ Representative in all matters referred to herein. Any notices required to be made or delivered to the Company or any of the Stockholders shall be made to the Stockholders’ Representative and shall discharge in full all notice requirements, as applicable, to such

36

Stockholder and/or the Company with respect thereto. By their appointment of the Stockholders’ Representative, the Stockholders thereby confirm all that the Stockholders’ Representative shall do or cause to be done by virtue of his appointment as the representatives of the Stockholders hereunder. The Stockholders’ Representative shall act for the Stockholders on all of the matters set forth in this Agreement in the manner the Stockholders’ Representative believes to be in the best interest of the Stockholders and consistent with the obligations of the Stockholders under this Agreement, but the Stockholders’ Representative shall not be responsible to any Stockholder for any damages which the Stockholders may suffer by the performance of the Stockholders’ Representative’s duties under this Agreement, other than damages arising from willful violation of applicable law or gross negligence in the performance of such duties under this Agreement. The Stockholders’ Representative shall not have any duties or responsibilities except those expressly set forth in this Agreement, and no implied covenants, functions, responsibilities, duties or liabilities shall be read into this Agreement or shall otherwise exist against the Stockholders’ Representative.

ARTICLE X

GENERAL PROVISIONS

10.1 Governing Law; Dispute Resolution; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed in that state and without regard to any applicable conflicts of law. Except as otherwise provided in Sections 2.7, 2.8 and 9.4, any dispute directly or indirectly based upon, arising out of, connected to or relating to this Agreement, the transactions contemplated hereby or any right or obligation created hereby, irrespective of the legal theory or claims underlying any such dispute (including any tort and statutory claims), shall be resolved in any court of competent jurisdiction located in the County of New Castle, Delaware. Each of the parties to this Agreement hereby irrevocably (a) consents to submit itself to the personal jurisdiction of any state or federal court located in the State of Delaware in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, including a motion for forum of non conveniens or other actions or other motions asserting the aforementioned forum is inconvenient, and (c) agrees that it will not bring any action in relation of this Agreement or any of the other transactions contemplated hereby in any court other than a state or federal court located in the State of Delaware. Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues, and therefore EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ISSUE WITHIN ANY ACTION AT LAW OR SUIT IN EQUITY DIRECTLY OR INDIRECTLY BASED UPON, ARISING OUT OF, CONNECTED TO OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY RIGHT OR OBLIGATION CREATED HEREBY.

10.2 Notices. All notices and other communications required or Permitted under this Agreement will be in writing and will be either hand delivered in person, sent by facsimile, sent by certified or registered first-class mail, postage pre-paid, or sent by nationally recognized express courier service. Such notices and other communications will be effective upon receipt if hand delivered or sent by facsimile, five days after mailing if sent by mail, and one day after dispatch if sent by express courier, to the following addresses, or such other addresses as any party may notify the other parties in writing in accordance with this Section 10.2.

37

(i) if to Buyer:

Two Concourse Parkway

Suite 800

Atlanta, Georgia 30328

Attn: Eric Musser

With a copy to:

Two Concourse Parkway

Suite 800

Atlanta, Georgia 30328

Attn: Verome Johnston

(ii) if to the Stockholders’ Representative:

ComVest Partners II LLC

One North Clematis Street

Suite 300

West Palm Beach, FL 33401

Attn: Inder Tallur

10.3 Interpretation; Rules of Construction. When a reference is made in this Agreement to Articles, Sections or Exhibits, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,” “hereunder” and derivative or similar words refer to this entire Agreement. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The parties hereto have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, hereby waive, with respect to this Agreement and each Exhibit attached hereto, the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document. Each reference herein to a law, statute, regulation, document or agreement will be deemed in each case to include all amendments thereto.

10.4 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

10.5 Entire Agreement; Parties in Interest. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including all the Exhibits attached hereto and the Company Disclosure Letter, (i) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof and (ii) are not intended to confer, and shall not be construed as conferring, upon any Person other than the parties hereto any rights or remedies hereunder unless specifically provided otherwise herein. The express terms of this Agreement control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

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10.6 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties hereto, and any such assignment without such prior written consent shall be null and void, except that Buyer may assign this Agreement to any direct or indirect wholly owned subsidiary of Buyer without the Company’s prior consent; provided, however, that Buyer shall remain liable for all of its obligations under this Agreement. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns.

10.7 Amendment; Extension; Waiver. Subject to the provisions of applicable law, the parties hereto may amend this Agreement at any time pursuant to an instrument in writing signed on behalf of each of the parties hereto. At any time, either Buyer or the Company may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other party hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Without limiting the generality or effect of the preceding sentence, no delay in exercising any right under this Agreement shall constitute a waiver of such right, and no waiver of any breach or default shall be deemed a waiver of any other breach or default of the same or any other provision in this Agreement.

10.8 No Joint Venture. Nothing contained in this Agreement will be deemed or construed as creating a joint venture or partnership between any of the parties hereto. No party is by virtue of this Agreement authorized as an agent, employee or legal representative of any other party. No party will have the power to control the activities and operations of any other, and their status is, and at all times will continue to be, that of independent contractors with respect to each other. No party will have any power or authority to bind or commit any other party. No party will hold itself out as having any authority or relationship in contravention of this Section 10.8.

10.9 Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile and upon such delivery the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other parties.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have caused this Merger Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

COMPANY:
CATALYST INTERNATIONAL, INC.
By:	/s/ Michael Eleftheriou
Name:	Michael Eleftheriou
Title:	President & CEO
MERGER SUBSIDIARY:
C I ACQUISITION CORPORATION
By:	/s/ Eric Musser
Name:	Eric Musser
Title:	President
BUYER:
CDC SOFTWARE CORPORATION
By:	/s/ Eric Musser
Name:	Eric Musser
Title:	President and Chief Executive Officer
STOCKHOLDERS
COMVEST INVESTMENT PARTNERS II LLC
By:	/s/ Inder Tallur
Name:	Inder Tallur
Title:	Partner
CLYS HOLDINGS, LLC
By:	/s/ Michael T. Davies
Name:	Michael T. Davies
Title:	Secretary & Treasurer
	/s/ Terrance L. Mealy
Name:	TERRANCE L. MEALY

CDC/Catalyst – Merger Agreement

	/s/ Peter Kight
Name:	PETER KIGHT
	/s/ William G. Nelson
Name:	WILLIAM G. NELSON
	/s/ John Gorman
Name:	JOHN GORMAN
	/s/ Nigel Davies
Name:	NIGEL DAVIES
	/s/ S. Michael Godshall    9/4/07
Name:	S. MICHAEL GODSHALL

Merger Agreement Signature Pages

CDC/Catalyst – Merger Agreement

EX-4.(A)23

Exhibit 4(a).23

LETTER AGREEMENT

November 13, 2007

Symphony Technology II-A, L.P.

c/o Symphony Technology Group

4015 Miranda Avenue, 2nd Floor

Palo Alto, California 94304

U.S.A.

Attention: Romesh Wadhwani

Dear Romesh:

Reference is hereby made to (i) the Promissory Note (the “Note”) dated as of November 14, 2003 pursuant to which Symphony Technology II-A, L.P., a Delaware limited partnership (“Symphony”), promised to pay to the order of Cayman First Tier, a Cayman Islands exempted company incorporated with limited liability (“Cayman First Tier”), the principal amount of US525,000,000 in accordance with the terms of the Note and (ii) the Share Pledge Agreement (the “Pledge Agreement”) dated as of November 14, 2003 by Symphony in favor of chinadotcom Capital Limited, a British Virgin Islands company (“CDC”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Note.

The maturity date of the Note is November 14, 2007.

Each of Cayman First Tier, CDC and Symphony hereby agree that (i) the Note, together with all unpaid interest and any other amounts due or payable thereunder, is hereby deemed to be discharged and repaid in full and (ii) Symphony’s obligations under the Pledge Agreement are hereby discharged and the Pledge Agreement is hereby terminated, each in exchange for and as a result of (a) the transfer by Symphony to Cayman First Tier of 24,500,000 Series A Preferred Shares of Cayman First Tier free and clear of any Liens and (b) the resignation of each of the directors appointed by Symphony to the board of directors of Cayman First Tier.

To effectuate the transfer and resignations described in the preceding paragraph, Symphony concurrently with the execution of this letter agreement has, and the directors appointed by Symphony to the board of directors of Cayman First Tier at such time have, executed and delivered the following (as the case may be) to Mr. Peter Yip, a director of Cayman First Tier:

(1) A stock power, executed in blank, for the transfer of such 24,500,000 Series A Preferred Shares of Cayman First Tier, substantially in the form attached hereto as Exhibit A.

(2) The resignation of Romesh Wadhwani as a director of Cayman First Tier in substantially the form attached hereto as Exhibit B.

(3) The resignation of Bryan Taylor as a director of Cayman First Tier in substantially the form attached hereto as Exhibit C.

Except for the obligations under this letter agreement, each of Symphony, on the one hand, and each of CDC and Cayman First Tier, on the other hand, each on behalf of itself, and its respective past and present officers, directors, employees, investors, shareholders, administrators, agents, attorneys, affiliates, divisions, subsidiaries, creditors, predecessor and

successor corporations, representatives, heirs, and assigns, hereby fully and forever releases Cayman First Tier and CDC, on the one hand, and Symphony, on the other hand, respectively, and each of their respective past and present representatives, heirs, executors, attorneys, agents, partners and assigns from any and all claims, whether presently known or unknown, suspected or unsuspected, that any of them may possess arising from any circumstances, omissions, acts or facts related to the Note or the Share Pledge Agreement.

Each of parties hereto agrees, at any time and from time to time, at the request of the other party, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the other party may reasonably request, in order to effectuate the agreements set forth herein.

All notices, demands and other communications which may need be delivered hereunder shall be in writing and shall be delivered pursuant to the provisions of Section 9 of the Note.

This Agreement shall be governed by and construed under the law of the State of New York, U.S.A., as such law is applied to agreements among New York residents entered into and performed entirely within the State of New York. The parties agree to and do hereby submit to the jurisdiction and venue of, any state or federal court located in the State of New York, City of New York, Borough of Manhattan.

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

Sincerely,
CAYMAN FIRST TIER
By	/s/ Peter Yip
Name:
Title:
CHINADOTCOM CAPITAL LIMITED
By	/s/ Kwong Chi Wong
Name:
Title:

Accepted and agreed:

SYMPHONY TECHNOLOGY II-A, L.P.
By	/s/ Romesh Wadhwani
Name:
Title:

EX-4.(C)3

Exhibit 4(c).3

AMENDMENT NO. 1 TO OPTION TRANSFER AGREEMENT

THIS AMENDMENT, dated as of October 2, 2007 (this “Amendment”), to the Option Transfer Agreement, effective as of July 15, 2005 (the “Option Transfer Agreement”), by and among CDC Corporation (formerly, chinadotcom corporation) located at 33/F Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong (the “Company”), Asia Pacific Online Limited located at Room 3302, 33/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, HongKong (“APOL”) and Peter Yip of c/o APOL, Room 3302, 33/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (“Mr. Yip”). Capitalized terms used but not defined herein have the meanings assigned to such terms in the Option Transfer Agreement.

Pursuant to the terms of the Option Transfer Agreement and in accordance with Section 5.2 thereof, the parties hereto agree to amend the Option Transfer Agreement as follows:

Section 1 Amendment to Schedule C-2. Schedule C-2 is amended by deleting the schedule in its entirety and replacing such schedule with the attached Schedule C-2.

Section 2 Full Force and Effect. Except as expressly amended hereby the Option Transfer Agreement shall continue in full force and effect in accordance with the provisions thereof on the date hereof.

Section 3 Governing Law. This Amendment shall be governed by and construed under the law of Hong Kong and each of the Parties hereby irrevocably agrees for the exclusive benefit of the Company that the Courts of Hong Kong are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Agreement.

Section 4 Counterparts. This Amendment may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same instrument.

IN WITNESS whereof this Amendment No. 1 to the Option Transfer Agreement has been signed by or on behalf of the Parties hereto and is effective as of the Effective Date.

SIGNED by Simon Wong	)
Director	) /s/ Simon Wong
on behalf of the CDC Corporation	)
in the presence of	)
Tang, Kwok Fung
Date:
SIGNED by Peter Yip	)
Director	) /s/ Peter Yip
on behalf of Asia Pacific Online Limited	)
in the presence of	)
/s/ Vanora Chiang
Vanora Chiang
Date: October 2, 2007
SIGNED by Peter Yip	)
in the presence of	) /s/ Peter Yip
/s/ Vanora Chiang
Vanora Chiang

Date: October 2, 2007

EX-8

Exhibit 8

Entity Name	Jurisdiction of Incorporation	Name Under Which Business is Done (if different)
Cayman First Tier	Cayman Islands	—
CDC Games Corporation	Cayman Islands	—
CDC Mobile Media Corp.	British Virgin Islands	—
CDC Software Acquisitionco I SRL	Barbados	—
CDC Software Corporation	Cayman Islands	—
CDC Software India Private Limited	India	—
CDC Software Japan K.K.	Japan	—
CDC Software, Inc.	Delaware	—
China.com Corp. Limited	Hong Kong	CDC Corporation Limited
DB Professionals, Inc.	Oregon	—
Equity Pacific, Limited	British Virgin Islands	—
hongkong.com Corporation	Cayman Islands	China.com Inc.
hongkong.com Ltd.	Hong Kong	China.com Corp. Limited
IMI Global Holdings Ireland Limited	Ireland	—
Industri-Matematik International Corporation	Delaware	—
Ion Global Limited	Hong Kong	iWeb Limited
Pivotal Corporation	British Columbia	—
Pivotal Corporation	Washington	—
Platinum Software Systems (Shanghai) Co. Ltd.	Shanghai	—
Ross Systems, Inc.	Delaware	—
Saratoga Systems, Inc.	California	—
TTG Asia Media Pte. Ltd.	Singapore	—

EX-12.1

Exhibit 12.1

CERTIFICATION

I, Peter Yip, certify that:

1. I have reviewed this annual report on Form 20-F of CDC Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 30, 2008

/s/ Peter Yip

Peter Yip

Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION

I, Michael Latimore, certify that:

1. I have reviewed this annual report on Form 20-F of CDC Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 30, 2008

/s/ Michael Latimore

Michael Latimore

Chief Financial Officer

EX-13.(A)1

Exhibit 13(a)1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS

ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of CDC Corporation (the “Company”) on Form 20-F for the period ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Form 20-F”), I, Peter Yip, chief executive officer of the Company, certify that:

(1) The Form 20-F fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 30, 2008

/s/ Peter Yip

Peter Yip

Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to CDC Corporation and will be retained by CDC Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-13.(A)2

Exhibit 13(a)2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS

ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of CDC Corporation (the “Company”) on Form 20-F for the period ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Form 20-F”), I, Michael Latimore, chief financial officer of the Company, certify that:

(1) The Form 20-F fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 30, 2008

/s/ Michael Latimore

Michael Latimore

Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to CDC Corporation and will be retained by CDC Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-15.(A).1

Exhibit 15(a).1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333–12958, No. 333–11288, No. 333–118619 and No. 333–123666 on Form S–8 and No. 333-145834 on Form F-3, of our reports dated June 30 2008, relating to the consolidated financial statements of the of CDC Corporation and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes explanatory paragraphs regarding the Company’s adoption of Statement Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” on January 1, 2007 and Statement of Financial Accounting Standards No. 123R, “Share Based Payment,” effective January 1, 2006) and relating to internal control over financial reporting (which report expresses an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of material weaknesses) appearing in this Annual Report on Form 20–F of CDC Corporation and subsidiaries for the year ended December 31, 2007.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

June 30, 2008

EX-15.(A).2

Exhibit 15(a).2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-12958, No. 333-11288, No. 333-118619 and No. 333-123666 on Form S-8 and No. 333-145834 on Form F-3 of CDC Corporation and subsidiaries of our report dated June 20, 2006 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement of the previously issued consolidated financial statements because of correction of misstatements, and our report is dated July 2, 2007 as to the effects of this restatement), relating to the consolidated financial statements of China.com Inc. and its subsidiaries as of and for the year ended December 31, 2005, appearing in this Annual Report on Form 20-F of CDC Corporation and subsidiaries for the year ended December 31, 2007.

/s/ Deloitte Touche Tohmatsu

Hong Kong

June 30, 2008

EX-15.(A).3

Exhibit 15(a).3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-12958, No. 333-11288, No. 333-118619 and No. 333-123666; and Form F-3 No. 333-145834) of CDC Corporation (formerly chinadotcom corporation) of our report dated June 20, 2006 with respect to the consolidated financial statements of CDC Corporation included in the Annual Report (Form 20-F) of CDC Corporation for the year ended December 31, 2007.

/s/ Ernst & Young

Hong Kong

June 30, 2008

EX-15.(A).4

Exhibit 15(a).4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-12958, No. 333-11288, No. 333-118619 and No. 333-123666 on Form S-8 and No. 333-145834 on Form F-3 of CDC Corporation and subsidiaries, of our report dated February 15, 2007, relating to the consolidated financial statements of Equity Pacific Limited for the year ended December 31, 2005 which appear in this Annual Report on Form 20-F of CDC Corporation and subsidiaries for the year ended December 31, 2007.

/s/ Deloitte Touche Tohmatsu CPA Ltd.

Beijing, the People’s Republic of China

June 27, 2008

EX-15.(A).5

Exhibit 15(a).5

EQUITY PACIFIC LIMITED

Report of Independent Registered Public Accounting Firm

and Consolidated Financial Statements

For the three months ended March 31, 2006 (unaudited) and

for the year ended December 31, 2005

EQUITY PACIFIC LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS	PAGE(S)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2006 (UNAUDITED) AND DECEMBER 31, 2005	F-2
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31, 2005	F-3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31, 2005	F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED) AND FOR THE YEAR ENDED DECEMBER 31, 2005	F-5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	F-6 – F-20

EQUITY PACIFIC LIMITED

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF EQUITY PACIFIC LIMITED

We have audited the accompanying consolidated balance sheet of Equity Pacific Limited and its subsidiaries (collectively the “Group”) as of December 31, 2005 and the related consolidated statements of operations, shareholders’ equity and cash flows for the year ended December 31, 2005. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Equity Pacific Limited and its subsidiaries as of December 31, 2005 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte Touche Tohmatsu CPA Ltd.

Deloitte Touche Tohmatsu CPA Ltd.

Beijing, China

February 15, 2007

F-1

EQUITY PACIFIC LIMITED

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share and per share data)

	As of March 31, 2006			As of December 31, 2005
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,273		$	2,255
Accounts receivable		44			—
Prepaid expenses and other current assets		367			241
Amounts due from related parties		57			27
Total current assets		4,741			2,523
Equipment, net		1,875			1,564
Acquired intangible assets, net		1,492			1,681
Rental deposits		72			28
Total assets	$	8,180		$	5,796
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	1,340		$	927
Accrued expenses and other current liabilities		1,639			1,616
Amounts due to related parties		211			61
Deferred revenues		1,427			1,238
Business tax payable		111			102
Total current liabilities		4,728			3,944
Commitment (Note 12)
Shareholders’ equity:
Ordinary shares (50,000 shares authorized; $1.00 par value; 47,248, 47,248 and 42,000 shares issued and outstanding as of March 31, 2006 (unaudited), December 31, 2005 and 2004, respectively)		47			47
Additional paid-in capital		5,683			5,683
Share subscription receivable		—			(30	)
Accumulated deficit		(2,301	)		(3,852	)
Accumulated other comprehensive income (loss)		23			4
Total shareholders’ equity		3,452			1,852
Total liabilities and shareholders’ equity	$	8,180		$	5,796

The accompanying notes are an integral part of these consolidated financial statements.

F-2

EQUITY PACIFIC LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of US dollars)

	Three months ended March 31, 2006		Year ended December 31, 2005
	(unaudited)
Revenues	$	5,144	$	6,234
Cost of revenues		2,103		3,407
Gross profit (loss)		3,041		2,827
Operating expenses:
Selling and marketing		816		2,391
General and administrative		676		1,652
Total operating expenses		1,492		4,043
Income (loss) from operations		1,549		(1,216	)
Other income		2		6
Net income (loss)	$	1,551	$	(1,210	)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

EQUITY PACIFIC LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME (LOSS)

(In thousands of US dollars, except share data)

	Ordinary Shares			Additional paid-in capital		Share subscription receivable			Accumulated deficit			Accumulated other comprehensive income			Total shareholders’ equity			Comprehensive income (loss)
	Number	Amount
Balance at January 1, 2005	42,000		42		3,188		(30	)		(2,642	)		(1	)		557		$	(1,503	)
Issuance of ordinary shares	5,248		5		2,495		—			—			—			2,500
Net loss	—		—		—		—			(1,210	)		—			(1,210	)	$	(1,210	)
Foreign currency translation adjustment	—		—		—		—			—			5			5			5
Balance at December 31, 2005	47,248		47		5,683		(30	)		(3,852	)		4			1,852		$	(1,205	)
Settlement of share subscription receivable	—		—		—		30			—			—			30
Net income	—		—		—		—			1,551			—			1,551		$	1,551
Foreign currency translation adjustment	—		—		—		—			—			19			19			19
Balance at March 31, 2006 (unaudited)	47,248	$	47	$	5,683	$	—		$	(2,301	)	$	23		$	3,452		$	1,570

The accompanying notes are an integral part of these consolidated financial statements.

F-4

EQUITY PACIFIC LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

	Three months ended March 31, 2006			Year ended December 31, 2005
	(unaudited)
Operating activities:
Net income (loss)	$	1,551		$	(1,210	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		294			988
Changes in operating assets and liabilities:
Accounts receivable		(45	)		—
Prepaid expenses and other current assets		(174	)		31
Amounts due from related parties		(30	)		—
Accounts payable		423			807
Accrued expenses and other current liabilities		23			(1,570	)
Amounts due to related parties		151			31
Deferred revenues		194			356
Business tax payable		9			99
Net cash provided by (used in) operating activities		2,396			(468	)
Investing activities:
Purchases of equipment		(418	)		(1,290	)
Purchase of intangible assets		—			(150	)
Cash used in investing activities		(418	)		(1,440	)
Financing activities:
Issuance of shares for cash		30			2,500
Proceeds from issuance of convertible loan		—			—
Cash provided by financing activities		30			2,500
Effect of exchange rate changes on cash and cash equivalents		10			5
Net increase in cash and cash equivalents		2,018			597
Cash and cash equivalents, beginning of year/period		2,255			1,658
Cash and cash equivalents, end of year/period	$	4,273		$	2,255
Supplemental cash flow information:
Income taxes paid	$	—		$	—
Interest paid	$	—		$	—
Non-cash financing activity:
Conversion of convertible loan into ordinary shares	$	—		$	—

F-5

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Equity Pacific Limited (“the Company”) was incorporated on November 20, 2003 in the British Virgin Islands (the “BVI”). The principal activity of Equity Pacific Limited, its subsidiaries, and its variable interest entity (“VIE”) (collectively referred to as the “17game Group” or the “Group”), is development and operations of online games in the People’s Republic of China (“PRC”).

Prime Leader Holdings Limited (“Prime Leader”) is a wholly-owned subsidiary of China.com Inc. (“China.com”), a company listed on the Stock Exchange of Hong Kong Limited. China.com is a majority-owned subsidiary of CDC Corporation, a company listed on NASDAQ. Prime Leader acquired an 11.11% equity interest in the Company on August 27, 2004, and additional 25.4% interest on November 29, 2004. As of December 31, 2005, the Company was 48% owned by Prime Leader.

As of December 31, 2005, details of the Company’s subsidiaries and VIE are as follows:

Subsidiary	Date of incorporation	Beneficial percentage of ownership	Principal business
Hong Kong Online Games Investment Holding Limited	October 15, 2003	100%	Intermediate holding company
Beijing 17game Network Technology Co., Ltd. (“17game”)	January 9, 2004	100%	Operations of online games
Beijing Jizhiwangyou Digital Network Co., Ltd. (“Ji Zhi Wangyou”)	November 3, 2004	100%	Development of online games
Beijing Tianyi Hudong Entertainment Software Co., Ltd. (“Tianyi Hudong”)	September 30,2003	100%	Operations of online games
Beijing Yiyou Interactive Network Technology Co., Ltd. (“Yiyou”)	July 8, 2004	51%	Development of online games
VIE
Beijing Hu Lian Jing Wei Technology Development Limited (“Hu Lian Jing Wei”)	August 31, 2001	100%	Holding of internet content provision license

In March 2006, Prime Leader purchased the remaining 52% equity interest in the Company, for a total consideration of $18,000, making it a wholly-owned subsidiary of China.com.

In December 2006, China.com sold all of its equity interest in Prime Leader and the Company to CDC Games Corporation, a wholly-owned subsidiary of CDC Corporation.

F-6

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

Regulations of the PRC restrict direct foreign ownership of business entities to own the internet content provider license (“ICP license”) in the PRC where such ICP licenses are required for operation of a PRC based internet portal. To comply with the PRC laws and regulations, the Company has set up an indirectly owned foreign business entity, Hu Lian Jing Wei, which holds the ICP license. Hu Lian Jing Wei has been established via a trust declaration document with two PRC nationals who, in substance, serve as nominees of the Company to hold the entire equity interest and declared the Company is the beneficiary owner of Hu Lian Jing Wei. As a result, the Company effectively has all the rights and benefits associated with the ICP license to operate the online game business in the PRC, and therefore fully consolidates the results of operations and the assets and liabilities of Hu Lian Jing Wei in the consolidated financial statements.

These accounts have been prepared on a going concern basis since while the Group has made losses since inception, management believes it has adequate resources to meet its needs in the next twelve months because CDC Corporation has agreed to provide adequate funds to enable the Company to meet in full its financial obligations as they fall due for the foreseeable future.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation

The consolidated financial statements for the three months ended March 31, 2006 (unaudited), for the year ended December 31, 2005 have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). Prime Leader acquired an 11.11% equity interest in the Company in August 2004, and these financial statements relate only to the periods subsequent to when Prime Leader acquired its ownership interest over the Company.

b) Principle of consolidation

The consolidated financial statements include the financial statements of the Company, all its majority-owned subsidiaries and the VIE in which the Company is deemed to be the primary beneficiary. All significant intercompany transactions and balances have been eliminated on consolidation.

F-7

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

c) Use of estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Group’s consolidated financial statements include the useful lives of and impairment on equipment and intangible assets and valuation allowance for deferred tax assets.

d) Foreign currency transactions and translations

All transactions during the year of the reporting entity in currencies other than functional currencies are translated at the exchange rates prevailing on the respective transaction dates. Monetary assets and liabilities of reporting entity existing at the balance sheet date denominated in currencies other than functional currencies are remeasured at the exchange rates existing on that date. Exchange differences are recorded by reporting entity in its statement of operations.

Foreign currency translation

The functional currency of the Company’s subsidiaries including its VIE in the PRC is the Renminbi (“RMB”). Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (the “PBOC”) prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. The resulting exchange differences are included in the statement of operations.

The Company has determined that the U.S. dollar is its functional and reporting currency. Accordingly, assets and liabilities are translated using exchange rates in effect at each year end and average exchange rates are used for the consolidated statements of operations. Translation adjustments resulting from translation of the subsidiaries’ and VIE’s financial statements are reflected as accumulated other comprehensive income included in the statement of shareholders’ equity.

Foreign currency risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of PBOC, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The cash and cash equivalents of the Group included an aggregate amount of $4,187 and $1,448 as at March 31, 2006 (unaudited) and December 31, 2005, respectively, which was denominated in RMB.

F-8

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

e) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less when purchased. Cash also includes other kinds of accounts that have the general characteristics of demand deposits in that the customer may deposit additional funds at any time and also effectively may withdraw funds at any time without prior notice or penalty.

f) Equipment

Equipment, net is carried at cost less accumulated depreciation. Depreciation and amortization calculated on a straight-line basis over the estimated useful lives of the respective assets, which are mainly 5 years. Repair and maintenance costs are charged to operating expenses as incurred.

g) Acquired intangible assets, net

Acquired intangible assets consist of license fee paid to the game developers and are amortized on a straight-line basis over their expected useful economic lives. The Group periodically evaluates the recoverability of all intangible assets and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate an impairment exists.

h) Impairment or disposal of long-lived assets

Long-lived assets are included in impairment evaluations when events and circumstances exist that indicate the carrying amount of these assets may not be recoverable. The Group reviews its long-lived assets for potential impairment based on a review of projected undiscounted cash flows associated with these assets. Measurement of impairment losses for long-lived assets that the Group expects to hold and use is based on the estimated fair value of the assets.

i) Revenue recognition

The Group recognizes revenue, net of the relevant business taxes, when all of the following conditions are met:

• Persuasive evidence of an arrangement exists,

• Delivery has occurred or services have been rendered,

• Price to the customer is fixed or determinable, and

• Collectibility is reasonably assured.

F-9

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

i) Revenue recognition - continued

The Group’s revenues are principally derived from the provision of online game services in the PRC. The Group operates its all Massively Multiplayer Online Role-Playing Games (“MMORPGs”) under two models. The first revenue model is the traditional subscription-based pay-to-play, where users purchase pre-paid cards (the “PP-Cards”) to play for a fixed number of hours. The second revenue model is free-to-play, under which players are able to access the games free of charges but may choose to purchase in-game merchandise or premium features to enhance their game experience and the purchases can only be made through the use of PP-Cards.

All PP-Cards are sold to distributors and retailers across the country, from whom the Group collects payment on a prepaid basis. The distributors then resell the cards to end users and other retail points. The Group offered sales discounts primarily at 15% to distributors or retailers for the three months ended March 31, 2006 (unaudited) and the year ended December 31, 2005. The sales discount represents the difference between the price at which the PP-Cards are sold and the face value of the PP-Cards.

The end users are required to activate their PP-Cards by using access codes and passwords to exchange the value of these cards to game points and deposit into their personal accounts. They consume points for online game services by trading them either for a pre-specified length of game playing time or in-game merchandise or premium features sold at the online game stores. All prepaid fees received from distributors are initially recognized as deferred revenue and revenue is recognized when the registered points are consumed for the Group’s online game services, i.e., when game playing time ends or in-game merchandise or premium features are delivered, or when the end customers are no longer entitled to access the online game services after the expiration of the PP-Cards.

The Group is subject to business tax at a rate of 5% on sales of PP-Cards and revenue is presented net of business tax incurred.

j) Cost of revenues

Cost of services rendered consists of online game royalty fee, game license fees, amortisation and depreciation, leased-line and capacity fees, manufacturing costs for prepaid game cards and other overhead expenses directly attributable to the provision of online game services. Royalty fee is calculated based on agreed profit sharing percentage with game developers over PP-Cards sold and activated.

F-10

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

k) Advertising costs

The Group expenses advertising costs as incurred. Total advertising expenses were $416 and $1,182 for the three months ended March 31, 2006 (unaudited) and for the year ended December 31, 2005, respectively, and have been included as part of selling and marketing expenses.

l) Taxation

British Virgin Islands

Under the current tax laws of the British Virgin Islands, the Company is not subject to tax on its income or capital gains.

China

The Company’s subsidiaries and VIE in the PRC are subject to Enterprise Income Tax (“EIT”) on the taxable income as reported in their respective statutory financial statements adjusted in accordance with the Income Tax Law of the People’s Republic of China concerning Foreign Investment and Foreign Enterprise and various local income tax laws (collectively the “PRC Income Tax Laws”).

Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carryforwards, and credits by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

m) Fair value of financial instruments

The carrying amounts of the Group’s financial instruments, which consist of cash and cash equivalents, accounts receivable, accounts payable and amounts due to related parties, approximate their fair values due to the short term nature of these instruments.

n) Deferred revenues

Deferred revenue represents prepaid fees received from customers that cover online game services to be rendered in the future. Deferred revenue is stated at the amount of prepaid fees received less the amount previously recognized as revenue upon the rendering of online game services or expiration of either the point units or expiration of the PP-Cards.

F-11

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

o) Retirement benefit costs

Payments to defined contribution retirement benefit plans, including managed retirement benefit schemes and the mandatory provident fund scheme, are charged to the consolidated statement of operations as incurred.

p) Comprehensive income (loss)

Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Comprehensive income (loss) for the periods presented has been disclosed within the consolidated statements of shareholders’ equity and comprehensive income (loss).

q) Concentration of credit risk

Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents. The Group places its cash and cash equivalents with financial institutions with high-credit ratings and quality.

The Group sells its PP-Cards on a cash basis and does not have accounts receivable from customers.

r) Recently issued accounting pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140”. SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006, with earlier application allowed. The Group does not expect the adoption of SFAS No. 155 to have a material impact on its consolidated results of operations and financial condition.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets-An Amendment of FASB Statement No. 140”. Among other requirements, FAS 156 requires a company to recognize a servicing asset or servicing liability when it undertakes an obligation to service a financial asset by entering into a servicing contract under certain situations. Under SFAS No. 156 an election can also be made for subsequent fair value measurement of servicing assets and servicing liabilities by class, thus simplifying the accounting and provide for income statement recognition of potential offsetting changes in the fair value of servicing assets, servicing liabilities and related derivative instruments. The Statement will be effective for financial statements issued for fiscal years beginning after December 31, 2006. The Group does not expect the adoption of SFAS No. 156 will have a material impact on its financial position or results of operations.

F-12

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

q) Recently issued accounting pronouncements - continued

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”, and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. The Group is currently evaluating whether the adoption of FIN 48 will have a material effect on its consolidated financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement does not require any new fair value measurements. However, for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007. The Group is currently evaluating the impact of SFAS No. 157 on its consolidated financial statements.

F-13

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of:

	March 31, 2006		December 31, 2005
	(unaudited)
Prepayments for Information Data Center fee	$	134	$	83
Prepayments for advertisements and promotion		25		49
Prepaid royalty fees		82		67
Others		126		42
	$	367	$	241

4. RELATED PARTY BALANCE AND TRANSACTIONS

Included in the amounts due from related parties at March 31, 2006 (unaudited) and December 31, 2005, $27 represented a prepaid expense provided by the Company to an entity where one of the Company’s shareholders also owns an equity interest. A balance of $30 at March 31, 2006 (unaudited) and December 31, 2005 was also included in the amounts due to related parties, representing a purchase of computer equipment from this entity.

F-14

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

4. RELATED PARTY BALANCE AND TRANSACTIONS - continued

Included in the amounts due from related parties at March 31, 2006 (unaudited), is a balance of $30 representing a payment made by the Company on behalf of Prime Leader. Included in the amounts due to related parties at March 31, 2006 (unaudited) and December 31, 2005 was a balance of $31 representing expenses paid on behalf of the Company by Prime Leader.

Included in the amounts due to related parties at March 31, 2006 (unaudited), a balance of $150 represented operating expenses paid on behalf of the Company by a fellow subsidiary of China.com Inc.

These amounts are non-interest bearing, unsecured and repayable on demand.

5. EQUIPMENT, NET

Equipment, net consists of the following:

	March 31, 2006		December 31, 2005
	(unaudited)
Computer equipment and software	$	2,166	$	1,755
Furniture, fixtures and office equipment		29		29
Motor vehicles		26		26
Leasehold improvements		—		36
		2,221		1,846
Less: Accumulated depreciation		346		282
Equipment, net	$	1,875	$	1,564

Depreciation expense for the three months ended March 31, 2006 (unaudited) and for the year ended December 31, 2005 were $98 and $102, respectively.

F-15

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

6. ACQUIRED INTANGIBLE ASSETS, NET

Acquired intangible assets, net, consist of license fees paid to the game developers:

	March 31, 2006 (unaudited)						December 31, 2005
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
License fees	$	3,171	$	1,679	$	1,492	$	3,150	$	1,469	$	1,681

Amortization expense for the three months ended March 31, 2006 (unaudited) and for the year ended December 31, 2005 were $199 and $804, respectively.

The annual estimated amortization expense for the acquired intangible assets for each of the next five years is as follows.

	Amortization
2006	$	796
2007		796
2008		89
2009		—
2010		—
2011		—
	$	1,681

In addition to the license fee paid to the game developers, the Group also pays royalty fee to the game developers calculated based on a predetermined percentage over revenue recognized and is recorded as cost of revenues in the statements of operations. For the three months ended March 31, 2006 (unaudited) and for the year ended December 31, 2005, royalty fees amounted to $1,248 and $1,687, respectively.

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	March 31, 2006		December 31, 2005
	(unaudited)
License fees payable	$	1,033	$	1,026
Adverting expenses payable		274		311
Employee payroll payable		247		261
Advances receivable from distributors		—		3
Others		85		15
	$	1,639	$	1,616

F-16

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

8. ORDINARY SHARES

In August 2005, the Company issued 5,248 ordinary shares to Prime Leader for a total cash consideration of $2,500, increasing Prime Leader’s equity interest in the Company to 48%.

9. INCOME TAXES (Draft)

The Company is a tax-exempted company incorporated in the British Virgin Islands. The subsidiaries incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) that is governed by the Income Tax Law of the PRC Concerning Foreign Investment and Foreign Enterprises and various local income tax laws (collectively the “PRC Income Tax Laws”). Pursuant to the PRC Income Tax Laws, foreign investment enterprises are subject to income tax at a statutory rate of 33% (30% of state income tax plus 3% local income tax) on the PRC taxable income. However, preferential tax treatment of the Company’s PRC subsidiaries as “high technology” companies has been agreed with the relevant tax authorities, and accordingly, they are entitled to a tax rate of 15% except Hu Lian Jing Wei. In addition, they are entitled to a three-year exemption from income tax in the incorporation year, followed by a 50% reduction in tax rates for the succeeding three years, in accordance with the PRC Income Tax Laws. As such, the Company’s PRC subsidiaries, except Hu Lian Jing Wei, are subject to 0% PRC tax for the three years ended December 31, 2006 and 7.5% PRC tax for the three years ended December 31, 2009.

The reconciliation between the statutory EIT rate and the Group’s effective tax rate is as follows:

	Three months ended March 31, 2006		Year ended December 31, 2005
	(unaudited)
	%		%
Statutory EIT rate	33.0		33.0
Effect of permanent difference:
- Non-deductible entertainment expenses	0.1		(1.7	)
- Disallowed wage expenses	1.9		(0.4	)
- Disallowed decoration expenses	—		—
- Disallowed intangible assets mortization expenses	—		(5.8	)
- Others	0.5		(1.3	)
Effect of tax concession and tax holiday	(35.8	)	(21.9	)
Effect of net operating loss not previously recognized			—
Change in valuation allowance	0.3		(1.9	)
	—		—

F-17

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

9. INCOME TAXES (Draft) - continued

The principal components of the deferred tax assets are as follows:

	March 31, 2006			December 31, 2005
	(unaudited)
Deferred tax assets:
Temporary difference related to depreciation	$	4		$	3
Net operating loss carry forwards		37			48
Accrued expenses		13			—
Deferred tax assets		54			51
Valuation allowance		(54	)		(51	)
Net deferred tax assets	$	—		$	—

There were no deferred tax liabilities as of March 31, 2006 (unaudited) and December 31, 2005. As management does not believe that it is more likely than not that all of the deferred tax assets will be realized, a full valuation allowance has been established as of March 31, 2006 (unaudited) and December 31, 2005 because it was more likely than not that the Group will not be able to utilize the tax loss carry forwards generated by its subsidiaries and consolidated VIE.

The subsidiaries, registered in the PRC, have total net operating loss carry forwards of $357 and $779 as of March 31, 2006 (unaudited) and December 31, 2005, respectively. These operating loss carry forwards expire on various dates through 2010.

The gross tax holiday benefit amounts to $551 and $258 for the three months ended March 31, 2006 (unaudited) and for the year ended December 31, 2005, respectively.

10. EMPLOYEE BENEFITS PLANS

Full time employees of the companies in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain medical care, unemployment insurance, employee housing fund and other welfare benefit are provided to employees. Chinese labor regulations require the Group to accrue these benefits based on certain percentages of the employees’ salaries. The total provision for such employee benefits were $42, $59 and $1 for the three months ended March 31, 2006 (unaudited), for the year ended December 31, 2005 and for the period from August 1, 2004 to December 31, 2004, respectively.

F-18

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

11. DISTRIBUTION OF PROFITS

PRC legal restrictions permit payments of dividends by the Group only out of its retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Prior to payment of dividends, pursuant to the laws applicable to the PRC’s enterprises, the Group must make appropriations from after-tax profit to non-distributable reserve funds as determined by the Board of Directors of the Group. These reserve funds include a (i) statutory surplus reserve, (ii) statutory public welfare fund (both (i) and (ii) are for PRC domestic enterprises only) and (iii) enterprise reserve fund, (iv) enterprise expansion fund (v) staff bonus and welfare fund (all (iii), (iv) and (v) are for PRC foreign investment enterprises only), and (vi) general reserve fund. Subject to certain cumulative limits, the statutory surplus fund and statutory public welfare fund require annual appropriations of 10% and 5% of after-tax profit (as determined under PRC GAAP at each year-end), respectively. The general reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC generally accepted accounting principles at each year-end); the other fund appropriations are at the Group’s discretion. The Group did not make any appropriations to the reserve fund for the three months ended March 31, 2006 (unaudited) and for the year ended December 31, 2005 as the Group’s board of directors did not approve for any distribution of earnings for those periods.

12. COMMITMENT

The Group leases certain office premises under non-cancelable leases, which expire in 2009. Rent expenses under operating leases for the three months ended March 31, 2006 (unaudited) and for the year ended December 31, 2005 were $35 and $121, respectively.

Future minimum lease payments under non-cancelable operating lease agreements are as follows:

Years ending December 31,
2006	$	253
2007		380
2008		63
	$	696

F-19

EQUITY PACIFIC LIMITED

NOTES TO THE CONSOLIDATED STATEMENTS - continued

FOR THE THREE MONTHS ENDED MARCH 31, 2006 (UNAUDITED)

AND FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands of US dollars, except share and per share data)

13. SUBSEQUENT EVENTS

On July 1, 2006, the Company entered into a three-year exclusive distribution license agreement of online game “StoneAge2” with Digi Park Co., Limited (“Digi”) for a total cash consideration of $2,000. In addition to the license fee, the Company also needs to pay Digi continuing royalty based on 17.5% of revenue generated by it from this game.

On August 3, 2006, the Company entered into a three-year exclusive distribution license agreement of online game “Special Force” with Dragonfly GF Co., Limited (“Dragonfly”), for a total cash consideration of $2,500. In addition to the license fee, the Company also needs to pay Dragonfly continuing royalty based on 21%-24% of revenue generated by it from this game.

F-20