10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2008
or
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______

Commission file number 333-134883

CHINA TEL GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0489800
(State or other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

8105 Irvine Center Drive, Suite 820, Irvine, California  92618

(Address of Principal Executive Offices)

949-585-9268

(Registrant telephone number, including area code)

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001 per share

(Title of class)

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [_] Yes[X] No

Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.

[X] Yes                            [_] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)

[_] Yes                            [_] No

Indicate by checkmark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K or any amendment to this Form 10-K. [_]

Indicate by checkmark if registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [_]                                                                          Accelerated filer [_]

Non-accelerated filer [X]                                                                           Smaller reporting company [_]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes [_] No [X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as June 30, 2008 (the Registrant's most recently completed second fiscal quarter) was approximately $144,276,000.

As of May 8, 2009, 98,387,774 shares of our Series A common stock are issued and outstanding and 66,909,088 shares of Series B common stock are issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933 ("Securities Act").  The listed documents should be clearly described for identification purposes.

Not Applicable.

Certain statements in this annual report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements.  These factors include, but are not limited to, our ability to implement our business plan, our ability to raise sufficient capital as needed, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors.  Most of these factors are difficult to predict accurately and are generally beyond our control.  You should consider the areas of risk described in connection with any forward-looking statements that may be made herein.  Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this annual report in its entirety, including the risks described in "Risk Factors."  Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.  These forward-looking statements speak only as of the date of this annual report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

PART I

ITEM 1.  BUSINESS

Overview

Our present operations, all of which are conducted through our wholly-owned subsidiary  Trussnet USA, Inc., a Nevada corporation ("Trussnet"), consist of providing engineering and deployment services related to the build-out of a wireless broadband network in several cities in the Peoples Republic of China (“PRC”) for CECT-Chinacomm Communications Co, Ltd. , a PRC company (together with its subsidiaries and affiliates, “Chinacomm”).  Through Trussnet, we hold a 49% equity interest in ChinaComm, Limited, a Cayman Island corporation (“ChinaComm Cayman”).  The remaining 51% equity interest in ChinaComm Cayman is held by affiliates of Chinacomm.

Chinacomm holds licenses and permits from the PRC to build and operate a 3.5 GHz wireless broadband telecommunications network (the "Chinacomm Network") in 29 cities in the PRC.  These licenses currently run through February 2013.  Chinacomm has commenced the build-out of the Chinacomm Network in Beijing, Shanghai, Guangzhou, Shenzhen, Qindao, and Nanjing and portions of the network are operational in Beijing, Shanghai and Guangzhou.

Pursuant to an Exclusive Technical and Management Consulting Services Agreement dated May 23, 2008, Yunji Communications Technology (China) Co., Ltd. (“Yunji”), a PRC wholly-owned foreign enterprise of a subsidiary of ChinaComm Cayman, will operate and service the Chinacomm Network in exchange for a portion of the revenue generated by Chinacomm from the Chinacomm Network.  Trussnet Gulfstream (Dalian) Co. Ltd. (“Trussnet Dalian”), a PRC wholly owned foreign enterprise of Trussnet, has entered into agreements with Yunji pursuant to which it will lease to Yunji equipment required in the deployment of the Chinacomm Network (“Equipment”) and provide technical and management services to Yunji for the procurement, installation and optimization of the Equipment.  These agreements will become effective only when we provide an aggregate of $191 million to acquire the Equipment and capitalize Yunji and Trussnet Dalian.  Unless and until we provide this capital, Chinacomm will continue to operating the network and retain any revenue it generates from the network.

1

Substantially all of our business is conducted in the PRC and relates to the buildout of the Chinacomm Network.  We are dependent upon Chinacomm's ability to maintain the necessary licenses for the operation of the Chinacomm Network.  As the Chinacomm Network becomes operable, we will be dependent upon Yunji's ability to attract and retain subscribers on behalf of Chinacomm.

We contract with Trussnet USA, Inc. ("Trussnet Delaware"), a Delaware corporation under separate control from our subsidiary of the same name, for the engineering and deployment services we provide to Chinacomm.  These services, which Trussnet Delaware generally performs through subcontracts with vendors holding requisite local licenses, include radio frequency engineering, site acquisition, preparation and approval of architectural and engineering drawings, installation of equipment and network architecture and engineering.  We are dependent upon Trussnet Delaware for these services. We have not billed any amounts for our services to date, and have accounted for the costs of these services as research and development.  We do not expect to bill or collect these amounts until we are able to capitalize Yunji and Trussnet Dalian.

Since our inception we have incurred accumulated losses of $109 million.  As of December 31, 2008 we had cash of $6,578 and had current liabilities of $90.3 million. Our auditors have expressed substantial doubt about our ability to continue as a going concern.  In order to continue to operate our business, we will need to raise substantial amounts of additional capital.

Agreement with Olotoa Investments, LLC

On March 10, 2009, we entered into an agreement to sell 49% of our Series A common stock, on a fully diluted basis, to Olotoa Investments, LLC, a private investment group, for a purchase price of $300 million.  Pursuant to the terms of the agreement, Olotoa Investments has agreed to pay the purchase price between March 9, 2009 and September 9, 2010 in amounts and on dates as requested by our Board of Directors.  On May 1, 2009, we requested Olotoa Investments to pay $50 million of the purchase price.  To date, Olotoa Investments has not made the requested payment.

Merger with Trussnet USA, Inc. (Nevada) and Acquisition of Interest in Chinacomm Ltd.

On May 21, 2008, we entered into a Reorganization and Merger Agreement (the “Reorganization and Merger Agreement”) pursuant to which our wholly-owned subsidiary Chinacomm Acquisition, Inc. (the "Acquisition Subsidiary”) merged with and into Trussnet.  Pursuant to the terms of the Reorganization and Merger Agreement, the Acquisition Subsidiary and Trussnet conducted a short-form merger under the laws of the State of Nevada as a result of which Trussnet, as the surviving corporation, became our wholly-owned subsidiary.  In exchange for all of the issued and outstanding shares of common stock of Trussnet, we issued to the prior shareholders of Trussnet 66,909,088 shares of our Series A Common Stock and 66,909,088 shares of our Series B Common Stock.  In addition, pursuant to the Reorganization and Merger Agreement, certificates representing Class A Common Stock held by our stockholders prior to the merger were returned to us and cancelled.

Trussnet was formed in April 2008 and had no operations prior to entering into the Reorganization and Merger Agreement.  Its principal asset was a Framework Agreement dated April 7, 2008 with Chinacomm pursuant to which Trussnet had the contractual right to acquire a forty-nine percent (49%) interest in ChinaComm Cayman.  On March 9, 2009, we acquired 49% of the authorized shares of Chinacomm Cayman for a purchase price of $196 million from Trussnet Capital Partners (HK) Ltd.  Trussnet Capital Partners (HK) Ltd., of which Tay Yong Lee is the sole shareholder, provided bridge financing for this transaction due to our lack of funds.  We paid $5 million of the purchase price in cash and paid the balance of $191 million by delivering a promissory note secured by the ChinaComm Cayman shares acquired in the transaction.  The promissory note bears interest of 8% per annum, payable quarterly, has a due date of March 9, 2010 and is non-recourse except for the pledged collateral.  Upon our payment of this note Trussnet Capital Partners (HK) Ltd. will capitalize Yunji and Trussnet Dalian.

2

Agreement with Runcom Technologies, Inc.

On October 6, 2008, we entered into a Strategic Frame Agreement with Runcom Technologies, Inc.(“Runcom”).  The agreement sets forth the terms and conditions under which Runcom was to design, manufacture and sell product to us and was to be our preferred provider of such products.  Runcom agreed to invest a total of $100 million into the Company in exchange for approximately 28% of the Company's issued and outstanding Series A common stock on a fully diluted basis according to the terms to be mutually agreed upon under a Stock Purchase Agreement.  The investment amount was to be paid in two equal payments; the first fifty percent (50%) was to occur within ninety days of the signing of the Stock Purchase Agreement, and the remaining fifty percent (50%) within six months thereof.  Runcom failed to make the initial payment, but has expressed a continued interest in making an investment in the Company.  Discussions in that regard are ongoing.

Acquisition of Perusat S.A.

On February 22, 2009, through a subsidiary of Trussnet, we acquired a 95% interest in the common stock of Perusat S.A. for a purchase price of 1,000,000 shares of China Tel Group, Inc. Series A Common Stock and $275,000.  We agreed to pay $50,000 at closing and to pay the $225,000 balance in four quarterly installments of $50,000 and a final payment of $25,000, the first of which is due on June 30, 2009. We hve not paid the $50,000 that was due at closing.  Perusat provides local and international long distance telephone services including fixed line service (voice over IP) to approximately 6,500 customers in nine cities in Peru (Lima, Arequipa, Chiclayo, Trujillo, Piura, Santa, Cusco, Ica and Huanuco).  Based on its status as a licensed telephone operator, Perusat has recently been granted a license in the 2.5 GHz spectrum covering these cities other than Lima and its surrounding metropolitan area.  We believe this license is suitable to deploy a wireless broadband telecommunications network in the licensed area.

Capital Structure

We have authorized the issuance of up to 500,000,000 shares of Series A Common Stock, of which 98,387,774 shares are issued and outstanding as of May 8, 2009.  We expect to issue shares of Series A Common Stock to Olotoa Investments pursuant to the terms of the stock purchase agreement described above.

In addition, we have issued approximately $31.9 million of convertible notes bearing interest at 10% per annum, which were initially due December 31, 2008 and convertible into shares of our Class A Common Stock at a conversion price of $0.95 per share.  To date we have not paid any of the convertible notes.  Approximately $1.4 million of the convertible notes have been converted into shares of our Class A Common Stock; approximately $7.7 million of convertible notes are past due; and the balance have been amended and restated.  Holders of the amended and restated notes can convert at the lesser of $0.95 per share or eighty percent (80%) of the volume weighted average of the closing bid price for the shares on the Over The Counter Bulletin Board (“OTCBB”) for the ten (10) day period prior to their election to convert; can redeem their notes upon ninety (90) days' notice to the Company; and received a twenty percent (20%) increase in the principal and interest due under the original convertible note.  As of May 4, 2009, the convertible notes would have been convertible into an aggregate of up to 104,897,860 shares of our Series A Common Stock based upon our share price on such date in the case of the amended notes.

3

We have authorized the issuance of up to 200,000,000 shares of Series B Common Stock, of which 66,909,088 shares are issued and outstanding as of May 8, 2009.  Each share of our Series B Common Stock has the right to cast ten (10) votes for each action on which our stockholders have a right to vote.  These shares are non-transferable and must be redeemed by the Company on May 23, 2023 at par value of $0.001 per share.  Our Chairman of the Board and Chief Executive Officer holds the proxy of each Series B Common Stock holder.

We also have authorized the issuance of up to 25,000,000 shares of Preferred Stock with rights and preferences to be determined by the Company’s Board of Directors.  We have not issued any Preferred Stock.

Employees

As of December 31, 2008, we had no employees, either full or part time.  We contract with Trussnet Delaware and other third parties to address our business and administrative needs.

Corporate History

China Tel Group Inc. (the “Company”) was incorporated under the laws of the State of Nevada on September 19, 2005 under its former name, Mortlock Ventures, Inc., for the purpose of acquiring and developing mineral properties.  The Company acquired a mineral claim in British Columbia, Canada which subsequently expired.

In January 2008, the Company entered into a letter of intent for a share exchange with Capital Truss, Inc. ("Capital Truss"), a provider of prepaid mobile telephones and services and check cashing services.  We spent approximately $6.6 million on lease improvements relating to this venture before terminating the letter of intent.  Capital Truss and its affiliates are party to a number of claims and pending legal proceedings related to leases on which Capital Truss or its affiliates were lessee, some of which Trussnet Delaware guaranteed.  We were not party to any of the applicable leases or guarantees and have not been named as a party in any of these proceedings.

During the quarter ended March 31, 2008, the Company changed its business and commenced concentrating on the telecommunication industry.  The Company changed its name to China Tel Group Inc. on April 8, 2008 and acquired Trussnet on May 21, 2008.  When used in this annual report, the terms "the Company", “we", "our" and "us" refers to China Tel Group, Inc. and its subsidiaries.

We do not hold any patents or material trademarks.  We have not made any material expenditure on compliance with environmental laws or regulations.

Available Information

Shareholders may read and copy any material we file with the Securities and Exchange Commission at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC, 20549.  Shareholders may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information which we have filed electronically with the SEC by assessing http://www.sec.gov.  The address of our website is http://www.chinatelgroup.com.

4

ITEM 1A.      RISK FACTORS

This Form 10-K contains forward-looking statements that involve risks and uncertainties.  If any of the events or circumstances described in the following risks actually occurs, our business, financial condition, or results of operations could be adversely affected, the price of our common stock could decline, and we might be forced to cease operations.

We may not be able to pay our current obligations.  Our auditors have issued a going concern opinion with respect to our financial statements.  If we are not able to raise substantial additional capital in a timely manner we may be forced to cease operations.

We currently do not have the funds necessary to conduct any meaningful business activity.  As of December 31, 2008 we had only $6,578 of cash and $90.3 million in current liabilities.  In addition, we have incurred obligations of $191 million subsequent to December 31, 2008 relating to the acquisition of our 49% interest in Chinacomm Cayman.  We are in default on the payment of $7.7 million of our convertible notes.  We will require substantial additional capital to finance our planned business operation, and expect to incur operating losses in future periods due to the expense of deploying the Chinacomm Network.  We have not realized material revenue since our inception and cannot assure you that we will be successful in generating revenues in the future.  Our auditors have issued a going concern opinion.  This means that there is doubt that we can continue as an ongoing business for the next twelve months.

If we are not able to raise substantial additional capital in a timely manner from Olotoa Investments or other sources, we may lose our rights to participate in the operation of the Chinacomm Network and may be forced to cease operations.  Moreover, our agreement to issue Olotoa Investments 49% of our shares on a fully-diluted basis may discourage other equity investments during the term of our agreement with Olotoa Investments.  On May 1, 2009, we requested Olotoa Investments to pay $50 million of the purchase price for these shares.  To date, Olotoa Investments has not made the requested payment.

To avoid forfeiture of our interest in ChinaComm Cayman, which is pledged to secure payment of our $191 million promissory note, we must make quarterly interest payments of $3.8 million on June 9, 2009, September 9, 2009 and December 9, 2009, and make the final quarterly interest payment and repay the entire $191 million principal amount on March 9, 2010.  In addition, our payment of the principal amount of this note is necessary to provide funds to capitalize Yunji and Trussnet Dalian and maintain their rights to participate in the operation of the Chinacomm Network.

We lack an operating history and our officer and directors do not have experience in managing a public company.  We have not established internal control procedures over our financial accounting.

We have no history in our current line of business upon which you can evaluate the likelihood of our future success or failure.  None of our officers and directors has training or experience in managing and fulfilling the regulatory reporting obligations of a public company.  We will have to hire professionals to undertake these filing requirements, which will increase the overall cost of our operations.  We have not yet established internal control procedures over our financial reporting.

5

We are substantially dependent upon our relationship with Chinacomm, which subjects us to a number of significant risks.

Substantially all of our business relates to the buildout of the Chinacomm Network in the PRC.  As described below under "Risks Related to Chinacomm" and "Risks Relating to Doing Business in China", our dependence on Chinacomm subjects us to a number of significant risks, including but not limited to the following:

·      Chinacomm may fail to attract or retain a sufficient number of subscribers to its network.

·      Chinacomm may fail to obtain or maintain necessary licenses and permits.

·      Chinacomm's technology may become obsolete.

·      PRC laws may limit our ability to collect dividends from operations in the PRC.

·      Future revenues denominated in RMB may be subject to fluctuations in exchange rates.

Because we expect to derive substantially all of our revenues from contracting services and equipment leasing to Chinacomm, our business would be adversely affected by any such events at Chinacomm.

We have no employees and have contracted most of our operations to Trussnet Delaware, which subjects us to a number of significant risks.

We have no employees.  Since our acquisition of Trussnet, we have contracted with Trussnet Delaware to perform approximately $51.8 million in services, representing substantially all of our operations, including the engineering and deployment services we provide to Chinacomm.  If Trussnet Delaware is unable to provide continued services for any reason, performs services in an unsatisfactory manner, or increases the amounts it charges us, it would have a material adverse effect on our business.  Capital Truss and its affiliates and Trussnet Delaware are party to a number of claims and pending legal proceedings related to leases on which Capital Truss or its affiliates were lessee, some of which Trussnet Delaware guaranteed.  If we were held liable for these obligations or other obligations of Trussnet Delaware, it would have a material adverse effect upon our business.

A number of our significant business arrangements are with related parties that may have conflicts of interest, and the terms of those arrangements may not be beneficial to us.

We are party to a number of agreements with related parties, including Trussnet Delaware,  Trussnet Capital Partners (HK) Ltd., Capital Truss and Trussnet ADC Co. Inc.  These relationships may create actual or potential conflicts of interest, and may cause the parties to these arrangements to make decisions or take actions that do not reflect our best interests.  None of these agreements restricts these parties from entering into similar arrangements with other parties.

Our officers and directors own a substantial amount of our common stock and will be able to control the vote on matters submitted to our stockholders.

Our directors and officers currently own 19,568,508 shares of our Series A common stock, representing 19.9% of the outstanding Series A common stock, and our Chairman and Chief Executive Officer holds proxies for 100% of the Series B common stock which are entitled to 10 votes per share on any issue presented to our shareholders.  As a result our officers and directors control the vote on any issue presented to the shareholders of the Company and can effect transactions without the consent of other stockholders.  It is unlikely any shareholder or group of shareholders could replace the existing directors.  This concentration of ownership may also have the effect of delaying or preventing a change in control.

6

There is limited liquidity for our shares and our shareholders may not be able to sell their shares.

Our Class A Common Stock is listed on the OTCBB quotation system.  However, due to limited trading volume, our shareholders may not be able to sell their shares in an organized market place.  If this happens, our shareholders might not receive a price per share which they might have received had there been a public market for our shares.  We also will not be quoted on the OTCBB if we are not current in our filings with the SEC.

Our shares are “penny stocks” and are covered by Section 15(g) of the Securities Exchange Act of 1934.  Federal securities laws imposes additional sales practice requirements on broker/dealers who sell the Company’s securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation process; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements.  For sales of our securities, the broker/dealer must make a special suitability determination and receive from its customer a written agreement prior to making a sale.  The imposition of the foregoing additional sales practices could adversely affect a shareholder’s ability to dispose of his or her stock.

Sales of our capital stock will dilute the interests of our existing shareholders.

We may seek additional funds through the sale of our capital stock.  This will dilute the percentage ownership of our existing shareholders.  The magnitude of this dilution will be determined by the number of shares we will have to issue in the future to obtain the funds required.  In addition, our obligation to issue Olotoa Investments 49% of our Class A Common Stock on a fully-diluted basis will require us to issue additional shares to Olotoa Investments if we sell capital stock to another party.  This would further dilute the interests of shareholders other than Olotoa Investments.

Acquisitions, investments and other strategic transactions could result in operating difficulties, dilution and distractions from our core business.

We may enter into strategic transactions and acquisitions of other assets and businesses.  Any such transactions can be risky, may require a disproportionate amount of our management and financial resources and may create unforeseen operating difficulties or expenditures, including but not limited to:

·      Difficulties in integrating acquired technologies and operations into our business while maintaining uniform standards, controls, policies and procedures;

·      Obligations imposed by counterparties in such transactions that limit our ability to obtain additional financing or to compete in the PRC or other geographic areas, or specific lines of business, or other aspects of its operational flexibility; and

·      Inability to predict or anticipate market developments and capital commitments relating to our business or technology.

The anticipated benefit of any of our strategic transactions may never materialize.  Future investments, acquisitions or dispositions, or similar arrangements could result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition.  Any such transactions may require us to obtain additional equity or debt financing, which may not be available on favorable terms, or at all.  We have experienced certain of these risks in connection with our acquisitions and investments in the past, and the occurrence of any of these risks in the future may have a material adverse effect on our business.

The industries in which we operate are continually evolving.  Our services may become obsolete, and we may not be able to develop competitive services or products on a timely basis or at all.

The broadband wireless telecommunications industry is characterized by rapid technological change, competitive pricing, frequent new service and product introductions, evolving industry standards and changing regulatory requirements.  Our success will depend upon our ability to anticipate and adapt to these and other challenges and to offer competitive services on a timely basis.  Failure to do so would have a material adverse effect upon our business.

7

We rely upon highly skilled executives and other personnel.  If we cannot hire, retain and motivate key personnel, wet may be unable to implement our business strategy.

Our success will depend largely on the expertise and reputation of Mr. George Alvarez, our Chairman of the Board and Chief Executive Officer, and the other members of our senior management team, including Tay Yong Lee, our President, and Mario Alvarez, our Chief Operations Officer, none of whom are party to an employment agreement.  In addition, we intend to hire additional highly skilled individuals to staff our operations in the PRC.  Loss of any of our key personnel or the inability to recruit and retain qualified individuals for our operations could adversely affect our ability to implement our business strategy and operate our business.

Risks Related to Chinacomm

The Chinacomm network may fail to attract a commercially viable number of subscribers.

We have incurred significant obligations relating to the deployment of the Chinacomm Network in the PRC and expect to make significant further expenditures on equipment and construction expenses relating to the deployment of the Chinacomm Network.  If subscribership to the Chinacomm Network is insufficient to make the venture commercially viable, we are unlikely to receive revenues from our ChinaComm Cayman affiliate, which would have a material adverse effect upon our business.

Chinacomm may not be granted the requisite renewals, licenses and authorizations for the Chinacomm Network.

The PRC regulatory authorities have significant discretion in granting the licenses requisite for the operation of the Chinacomm Network and in determining the conditions for use of the frequencies covered by the licenses.  The PRC may have no obligation to renew the licenses when they expire.  As a result, those authorities may refuse to grant any licenses or renewals that Chinacomm may seek for the Chinacomm Network.  If Chinacomm does not receive any necessary licenses, authorizations or approvals, it may have to cease operations or contract operations to third parties who hold the appropriate licenses.  Additionally, even where Chinacomm currently holds a license or successfully obtains a license in the future, it may be required to seek modifications to the license or the regulations applicable to the license to implement its business strategy.  Counterparties to contracts relating to the Chinacomm Network may legally default on those contracts if we or Chinacomm do not possess the requisite licenses.  The occurrence of any of these events would have a material adverse effect on our business.

Chinacomm is subject to extensive regulation that could limit or restrict its activities.  If Chinacomm fails to comply with these regulations, it may be subject to penalties, including fines and suspensions, which may adversely affect our business.

Chinacomm’s acquisition, lease, maintenance and use of broadband spectrum licenses are extensively regulated by the PRC Ministry of Information Technologies (“MIIT”).  These regulations are subject to change over time.  In addition, a number of other laws and regulations apply to Chinacomm's business.  These laws and regulations and their application are subject to continual change as new legislation, regulations or amendments to existing regulations are adopted from time to time by governmental or regulatory authorities in the PRC.  Current regulations directly affect the breadth of services Chinacomm is able to offer and may affect the rates, terms and conditions of services.  Regulation of companies that offer competing services, such as cable and DSL providers and incumbent telecommunications carriers, also affects Chinacomm's business indirectly.

8

In addition, the MIIT or other regulatory authorities may in the future restrict Chinacomm’s ability to manage subscribers’ use of the Chinacomm Network, thereby limiting the ability to prevent or manage excessive bandwidth demands.  To maintain the quality of the Chinacomm Network and user experience, Chinacomm manages the network by limiting the bandwidth used by subscribers’ applications, in part by restricting the types of applications that may be used over the network.  Some providers and users of these applications have objected to this practice.  If the MIIT or other regulatory authorities were to adopt regulations that constrain Chinacomm’s ability to employ bandwidth management practices, excessive use of bandwidth-intensive applications would likely reduce the quality of its services for all subscribers.  A decline in the quality of Chinacomm’s services could result in litigation from dissatisfied subscribers.  Any of these developments could have a material adverse effect on our business.

The breach of a license or applicable law, even if inadvertent, can result in the revocation, suspension, cancellation or reduction in the term of a license or the imposition of fines.  In addition, the PRC regulatory authorities may grant new licenses to third parties, resulting in greater competition in territories where Chinacomm already has rights to licensed broadband spectrum.  In order to promote competition, licenses may also require that third parties be granted access to Chinacomm’s bandwidth, frequency capacity, facilities or services.  Chinacomm may not be able to obtain or retain any required license, and it may not be able to renew its licenses on favorable terms, or at all.

Chinacomm may engage in business activities outside the authorized scope of the wireless broadband licenses or permitted activities.  This could subject Chinacomm to fines and other penalties, which could have a material adverse effect on our business.

Chinacomm may engage in business activities outside the authorized scope of the wireless broadband licenses or permitted activities in the PRC.  For companies that exceeded the scope of their business licenses or permitted activities or operated without a license or needed approval in the past but are now compliant, as well as for any companies that may currently operate without the appropriate license, renewal or approval or outside the scope of their business license or permitted activities, the relevant PRC authorities have the authority to impose fines or other penalties, sometimes as much as five to ten times the amount of the illegal revenues and may require the disgorgement of profits or revocation of the business license.  Due to the inconsistent nature of regulatory enforcement in the PRC, if Chinacomm exceeded the scope of its business licenses or permitted activities or operated without the appropriate licenses or approvals in the past or does so in the future, it may be subject to such fines or penalties, including the disgorgement of profits or revocation of Chinacomm's business license.  Fines or penalties of this nature might have a material adverse effect on our business.

Chinacomm has committed to deploy a wireless broadband network using broadband technologies, even if there are alternative technologies available in the future that would be technologically superior or more cost effective.

Chinacomm intends to deploy a wireless broadband based telecommunications network in the PRC.  We cannot assure you that commercial quantities of broadband equipment that meets its requirements will become available on the schedule we expect, or at all, or that vendors will continue to develop, produce or service broadband equipment.  Other competing technologies, such as third-generation high-speed downlink packet access (3G HSDPA), a third-generation mobile telephony communications protocol which allows higher data transfer speeds and capacity, may be developed that have advantages over broadband technology, and operators of other networks based on those competing technologies may be able to deploy their networks at a lower cost and more quickly than the cost and speed with which Chinacomm deploys its network, which may allow those operators to compete more effectively.  Additionally, if other network operators, such as Sprint Nextel Corporation in the U.S., do not continue to adopt and deploy broadband technology, equipment manufacturers may be unwilling to invest the time, money and resources necessary to further develop infrastructure equipment and end user devices that meet our business needs.  Chinacomm depends upon wide scale deployment of broadband wireless telecommunications networks to drive equipment volumes up and pricing down.

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Additionally, broadband technology may not perform as we expect, once deployed on a commercial basis; accordingly, Chinacomm may not be able to deliver the quality or types of service it expects.  Chinacomm may discover unanticipated costs associated with deploying and maintaining the Chinacomm Network or delivering services it must offer in order to remain competitive.  These risks could reduce Chinacomm’s subscriber growth and have a material adverse effect on its business.

If third parties fail to develop and deliver the equipment that Chinacomm needs for its existing and future networks, we may be unable to execute its business strategy or operate its business.

Chinacomm currently depends on third parties to develop and deliver complex systems, software and hardware products and components for the Chinacomm Network in a timely manner, at a high level of quality. To successfully execute our business strategy, we must not only continue to have third parties produce the software and hardware components we require, and deliver them timely when needed, but we must also continue to further upgrade and evolve the technology for our and Chinacomm’s business to remain competitive.  Any failure by our third party vendors to meet these needs may impair our ability to execute our business strategy.

For our planned broadband wireless telecommunications deployment, we are relying on third parties to develop the network components and subscriber equipment necessary to build and operate the Chinacomm Network and other similar network throughout the world.  As broadband wireless telecommunications technology is a new and highly sophisticated technology, we cannot be certain that these third parties will be successful in their development efforts.  The development process for broadband wireless telecommunications network components and subscriber equipment has been lengthy, has been subject to some short term delays and may still encounter more significant delays.  If these third parties are unable or unwilling to develop broadband wireless telecommunications technology components and subscriber equipment on a timely basis that perform according to our expectations, we may be unable to deploy the Chinacomm Network or any similar network when we expect, or at all.  If we are unable to deploy these networks in a timely manner, we may be unable to execute our business strategy.

Many of Chinacomm’s competitors are better established and have significantly greater resources than it has, which may make it difficult to attract and retain subscribers.

The PRC market for broadband, voice and related services is highly competitive, and Chinacomm competes with several other major telecommunications companies.  Many of Chinacomm’s competitors are well established with larger and better developed telecommunications networks and support systems, longer-standing relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than does Chinacomm.  Chinacomm’s competitors may reduce the prices of their services significantly or may offer broadband connectivity packaged with other products or services.  For example, a number of broadband providers in the PRC recently offered significant price reductions on their services.  Chinacomm may not be able to reduce its prices or otherwise combine its services with other products or services to remain competitive with these offerings, which may make it more difficult to attract and retain subscribers and could have an adverse affect on our business.

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We expect existing and prospective competitors to adopt technologies or business plans similar to Chinacomm’s, or seek other means to develop services competitive with Chinacomm’s, particularly if Chinacomm’s services prove to be attractive in its target markets.  There can be no assurances that there will be sufficient customer demand for services offered over the Chinacomm Network in the same markets to allow multiple operators, if any, to succeed.

We may experience difficulties in constructing, upgrading and maintaining Chinacomm’s network, which could adversely affect the satisfaction of Chinacomm and its subscribers and reduce our revenues.

Chinacomm’s and our success depends on developing and providing services that give Chinacomm’s subscribers a high quality experience.  We and Chinacomm expect to expend significant resources in constructing, maintaining and improving the Chinacomm Network.  Additionally, as the number of subscribers using its network increases, as the usage habits of its subscribers change and as Chinacomm increases its service offerings, Chinacomm may need to upgrade its network to maintain or improve the quality of its services.  If we and Chinacomm do not successfully maintain or implement upgrades to the Chinacomm Network, the quality of Chinacomm's services may decline.

We may experience quality deficiencies, cost overruns and delays with its construction, maintenance and upgrade projects, including the portions of those projects not within our control.  The construction of the Chinacomm Network requires permits and approvals from numerous governmental bodies, including the MIIT.  Such entities often limit the expansion of transmission towers and other construction necessary for the successful deployment of the Chinacomm Network.  Failure to receive approvals in a timely fashion can delay new market deployments and upgrades in existing markets and raise the cost of completing construction projects.  In addition, Chinacomm typically will be required to obtain rights from land, building and tower owners to install the antennas and other equipment that provide its service to its subscribers.  Chinacomm may not be able to obtain, on terms acceptable to them or at all, the rights necessary to construct the Chinacomm Network and expand its services.

We and Chinacomm also may face challenges in managing and operating the Chinacomm Network.  These challenges include ensuring the availability of subscriber equipment that is compatible with the network and managing sales, advertising, customer support and billing and collection functions of the business, while providing reliable network service that meets subscribers’ expectations.  Our or Chinacomm’s failure in any of these areas could adversely affect customer satisfaction, increase its costs, decrease revenues and otherwise have a material adverse effect on our business and prospects.

If Chinacomm does not maintain rights to use licensed spectrum in one or more markets in the PRC, it may be unable to operate in these markets, which could adversely affect our ability to execute our business strategies.

To offer Chinacomm’s services using licensed broadband spectrum in the PRC and internationally, Chinacomm depends on its ability to acquire and maintain sufficient rights to use broadband spectrum through ownership or long-term leases in each of the markets in which it operates or intends to operate.  Obtaining the necessary amount of licensed broadband spectrum in these markets can be a long and difficult process that can be costly and require a disproportionate amount of Chinacomm’s resources.  Chinacomm may not be able to acquire, lease or maintain the broadband spectrum necessary to execute its business strategy.  In addition, it may be necessary to spend significant resources to acquire broadband spectrum in additional or existing markets, even if the amount of broadband spectrum actually acquired in certain markets is not adequate to deploy the Chinacomm Network on a commercial basis in all such markets.

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Using licensed broadband spectrum, whether owned or leased, poses additional risks to us and to Chinacomm, including, but not limited to, the following:

·      Inability to satisfy build-out or service deployment requirements upon which some of Chinacomm’s broadband spectrum licenses or leases are, or may be, conditioned;

·      Adverse changes to regulations governing Chinacomm’s broadband spectrum rights;

·      Inability to use a portion of the broadband spectrum Chinacomm has acquired or leased due to interference from licensed or unlicensed operators in Chinacomm’s licensed broadband or in adjacent broadbands;

·      Refusal by the MIIT, or one or more foreign licensing authorities, to recognize Chinacomm’s or our acquisition or lease of broadband spectrum licenses from others or investments in other license holders;

·      Inability to offer new services or to expand existing services to take advantage of new capabilities of the Chinacomm Network resulting from advancements in technology due to regulations governing Chinacomm’s broadband spectrum rights;

·      Inability to control leased broadband spectrum due to contractual disputes with, or the bankruptcy or other reorganization of, the license holders, or third parties;

·      Failure of the MIIT or other regulators to renew Chinacomm’s broadband spectrum licenses as they expire and its failure to obtain extensions or renewals of its broadband spectrum leases before they expire;

·      Failure to obtain extensions or renewals of broadband spectrum leases on acceptable terms, or an inability to renegotiate such leases on terms acceptable to us or Chinacomm before they expire;

·      Potentially significant increases in broadband spectrum prices, because of increased competition for the limited supply of licensed broadband spectrum both in the PRC and internationally; and

·      Invalidation of Chinacomm’s authorization to use all or a significant portion of its broadband spectrum, resulting in, among other things, impairment charges related to assets recorded for such spectrum.

MIIT has renewed Chinacomm’s licenses to provide wireless access services.  Additionally, other companies hold broadband spectrum rights that could be made available for lease or sale.  The availability of additional broadband spectrum in the marketplace could change the market value of broadband spectrum rights generally and, as a result, may adversely affect the value of Chinacomm’s broadband spectrum assets and of our business.

Interruption or failure of Chinacomm’s information technology and communications systems could impair Chinacomm's ability to pay for our services.

Chinacomm may experience service interruptions or system failures in the future.  Any service interruption that adversely affects Chinacomm's ability to operate its business could result in an immediate loss of revenues to both us and Chinacomm.  If Chinacomm experiences frequent or persistent system or network failures, its reputation and brand could be permanently harmed.  We may make significant capital expenditures in an effort to increase the reliability of the Chinacomm systems, but these capital expenditures may not achieve the results we expect.

Chinacomm’s services depend on the continuing operation of its respective various information technology and telecommunications systems, some of which are not within its control.  Any damage to or failure of these systems could result in interruptions in the services Chinacomm provides to its subscribers.  Interruptions in Chinacomm’s services could reduce its and our revenues and profits, and the Chinacomm brand could be damaged if people believe the Chinacomm Network is unreliable.  Our systems and Chinacomm’s systems are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm such systems, and similar events.  Some of our and Chinacomm’s systems are not fully redundant, and their disaster recovery planning may not be adequate.  The occurrence of a natural disaster or unanticipated problems at Chinacomm’s network centers could result in lengthy interruptions in service and adversely affect operating results.

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Chinacomm could be subject to claims that it has infringed on the proprietary rights of others, which claims would likely be costly to defend, could require Chinacomm to pay damages and could limit Chinacomm’s ability to use necessary technologies in the future.

Competitors or other persons may have independently developed or patented technologies or processes that are substantially equivalent or superior to Chinacomm’s technologies or processes or that are necessary to permit us and Chinacomm to deploy and operate the Chinacomm Network based on broadband wireless telecommunications technology, or to offer additional services, such as VoIP; or competitors may develop or patent such technologies or processes in the future.  These persons may claim that Chinacomm’s services and products infringe on these patents or other proprietary rights.  For instance, certain third parties claim that they hold patents relating to certain aspects of broadband wireless telecommunications and VoIP technology.  These third parties may seek to enforce these patent rights against the operators of network providers utilizing such technologies, such as Chinacomm.  Defending against infringement claims, even meritless ones, would be time consuming, distracting and costly.  If Chinacomm is found to be infringing the proprietary rights of a third party, it could be enjoined from using such third party’s rights, may be required to pay substantial royalties and damages, and may no longer be able to use the intellectual property subject to such rights on acceptable terms or at all.  Failure to obtain licenses to intellectual property held by third parties on reasonable terms, or at all, could delay or prevent the development or deployment of Chinacomm’s and our services and could require us to expend significant resources to develop or acquire non-infringing intellectual property.

If Chinacomm’s data security measures are breached, subscribers may perceive its network and services as not secure.

The Chinacomm Network’s security and the authentication of its subscriber credentials are designed to protect unauthorized access to data on its network.  Because techniques used to obtain unauthorized access to or to sabotage networks change frequently and may not be recognized until launched against a target, Chinacomm may be unable to anticipate or implement adequate preventive measures against unauthorized access or sabotage.  Consequently, unauthorized parties may overcome the Chinacomm Network security and obtain access to data on the Chinacomm Network, including on a device connected to the network.  In addition, unauthorized access or sabotage of the network could result in damage to the network and to the computers or other devices used by Chinacomm’s subscribers.  An actual or perceived breach of network security, regardless of Chinacomm’s responsibility, could harm public perception of the effectiveness of its security measures, adversely affect Chinacomm’s ability to attract and retain subscribers, expose Chinacomm to significant liability and adversely affect our business prospects.

Chinacomm’s business will depend upon a strong brand, and if Chinacomm does not maintain and enhance its brand, Chinacomm’s ability to attract and retain subscribers may be impaired.

We believe that Chinacomm’s brand is a critical part of its business.  Maintaining and enhancing Chinacomm’s brand may require Chinacomm to make substantial investments with no assurance that these investments will be successful.  If Chinacomm fails to promote and maintain the “Chinacomm” brand, or incurs significant expenses to promote the brand and yet is unsuccessful in maintaining a strong brand, our business and prospects may be adversely affected.  We anticipate that maintaining and enhancing Chinacomm’s brand will become increasingly important, difficult and expensive.

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Chinacomm’s limited operating history may not serve as an adequate basis to judge its future prospects and results of operations.

Chinacomm has a limited operating history upon which one can evaluate the viability and sustainability of its business.  Accordingly, you should consider Chinacomm’s and our future prospects in light of the risks and uncertainties that other PRC-based companies with limited operating history have experienced.  Some of these risks and uncertainties relate to Chinacomm’s ability to, among other things, include the following:

·      Attract, retain and motivate qualified personnel;

·      Maintain effective control of its costs and expenses;

·      Expand its market share; and

·      Raise sufficient capital to sustain and expand its business.

If Chinacomm is unsuccessful in addressing any of these risks and uncertainties, its competitiveness and its future growth, as well ours, would be adversely affected.

Risks Related to Doing Business in China

Our contractual arrangements with Chinacomm may not be as effective in providing operational control as direct  ownership of such business and may be difficult to enforce.

The government of the PRC has restricted or limited foreign ownership of certain kinds of assets and companies operating in certain industries in China.  The industry groups that are restricted are wide ranging, including certain aspects of telecommunications (such as the Internet), advertising, food production, and heavy equipment manufacturers, for example.  In addition there can be restrictions on the foreign ownership of businesses that are determined from time to time to be in “important industries” that may affect the national economic security in the PRC, or having “famous brand names” or “well established brand names.” Subject to the review requirements of the Ministry of Commerce in the PRC and other relevant agencies in the PRC for acquisitions of assets and companies in the PRC, and subject to the various percentage ownership limitations that exist from time to time, acquisitions involving foreign investors and parties in the various restricted categories of assets and industries may nonetheless sometimes be consummated using contractual arrangements with permitted Chinese parties, such as Chinacomm.  The agreements would be designed to provide us with the economic benefits of and control over the subject assets or equity interests similar to the rights of full ownership, while leaving the technical ownership in the hands of Chinese parties who would be our nominees and, therefore, may exempt the transaction from the merger and acquisition regulations, including the application process required thereunder.  However, since there has been limited implementation guidance provided with respect to the merger and acquisition regulations by the PRC, there can be no assurance that the relevant government agency would not apply them to our contractual arrangements with Chinacomm.  If such an agency determines that such an application should have been made, consequences may include levying fines, revoking business and other licenses (such as for broadband wireless telecommunications), requiring restructure of ownership or operations and requiring discontinuation of any portion of all of the acquired business.  Our business and control arrangements with Chinacomm, including without limitation, the Framework Agreement, the Management Agreement and the Technical Agreement (collectively, “Chinacomm Agreements”) provide for us to increase ownership and control when and if permitted under PRC laws and regulations.  We may have difficulty enforcing these ownership and control rights.  Therefore, the Chinacomm Agreements may not be as effective in providing us with the same economic benefits, accounting consolidation or control over a target business as would direct ownership.  For example, if Chinacomm or any other entity in Chinacomm fails to perform its obligations under the Chinacomm Agreements, we may have to incur substantial costs and expend substantial resources to enforce such agreements, and rely on legal remedies under Chinese law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure will be sufficient to off-set the cost of enforcement and may adversely affect the benefits we expect to receive from the acquisition of our interest in ChinaComm Cayman, the Merger and the Chinacomm Agreements.  In the event we are unable to enforce these Chinacomm Agreements, we may not be able to exert the effective level of control or receive the full economic benefits of full direct ownership over the target business.

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The contractual arrangements we enter into with Chinacomm may be subject to a high level of scrutiny by the PRC tax authorities.

Under PRC laws, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities.  If any of the transactions we enter into with Chinacomm are found not to be on an arm’s-length basis, or to result in an unreasonable reduction in tax under PRC laws, the PRC tax authorities have the authority to disallow any tax savings, adjust the profits and losses of us or Chinacomm, and assess late payment interest and penalties.  A finding by the PRC tax authorities that we or Chinacomm are ineligible for any such tax savings, or that we are not eligible for tax exemptions, would substantially increase our possible future taxes.

If the PRC government finds that the Chinacomm Agreements do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to significant penalties or be forced to relinquish our interests in those operations.

The PRC laws and regulations currently prohibit or restrict foreign ownership in certain “important industries,” including telecommunications, advertising, food production and heavy equipment.  There are uncertainties under PRC laws and regulations whether obtaining a majority interest through contractual arrangements will comply with regulations prohibiting or restricting foreign ownership in certain industries.  For example, the PRC may apply restrictions in other industries in the future.  In addition, there can be restrictions on the foreign ownership of businesses that are determined from time to time to be in “important industries” that may affect the national economic security or those in the PRC having “famous Chinese brand names” or “well established Chinese brand names.”

If we or any of our potential future subsidiaries or affiliated entities are found to be in violation of any existing or future PRC laws or regulations (for example, if we are deemed to be holding equity interests in certain of our affiliated entities in which direct foreign ownership is prohibited) the relevant PRC regulatory authorities might have the discretion to, among other things, do the following:

·      Revoke the business and operating licenses of Chinacomm;

·      Confiscate relevant income and impose fines and other penalties;

·      Discontinue or restrict possible future Chinacomm operations in the PRC;

·      Require us and/or Chinacomm to restructure the relevant ownership structure or operations; and

·      Impose conditions or requirements with which we or Chinacomm may not be able to comply.

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The imposition of any of these penalties could result in a material and adverse effect on our ability to conduct business.  In addition, the relevant PRC regulatory authorities may impose further penalties.  Any of these consequences could have a material and adverse effect on our business.

In many cases, existing regulations with regard to investments from foreign investors and domestic private capital lack detailed explanations and operational procedures, and are subject to fluctuating interpretations, which have changed over time.  We thus cannot be certain how the regulations will be applied to our business, either currently or in the future.  Moreover, new regulations may be adopted or the interpretation of existing regulations may change, any of which could result in similar penalties, resulting in a material and adverse effect on our ability to conduct our business.

As a result of merger and acquisition regulations relating to acquisitions of assets and equity interests of Chinese companies by foreign persons, we expect that acquisitions will take longer and be subject to economic scrutiny by the PRC government authorities such that we may not be able to complete a transaction, negotiate a transaction that is acceptable to our shareholders, or sufficiently protect shareholder’s interests in a transaction.

On August 8, 2006, six PRC regulatory agencies, namely, the Ministry of Commerce (“MOFCOM”), the State Assets Supervision and Administration Commission (“SASAC”), the State Administration for Taxation, the State Administration for Industry and Commerce (“SAIC”), the China Securities Regulatory Committee (“CSRC”), and the PRC State Administration of Foreign Exchange (“SAFE”), jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which became effective on September 8, 2006 (“M&A Rules”).  These comprehensive rules govern the approval process by which a Chinese company may participate in an acquisition of its assets or its equity interests and by which a Chinese company may obtain public trading of its securities on a securities exchange outside the PRC.

Although prior to September 8, 2006 there was a complex series of regulations administered by a combination of provincial and centralized agencies in place for acquisition approval of Chinese enterprises by foreign investors, the M&A Rules have largely centralized and expanded the approval process to MOFCOM, SAIC, SAFE or its branch offices, SASAC, and the CSRC.  The M&A Rules established, among other things, additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance when a foreign investor acquires equity or assets of a PRC domestic enterprise.  Complying with the requirements of the M&A Rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM, may delay or inhibit our ability to complete such transactions. This could affect our ability to expand our business or maintain our market share.

Depending on the structure of the transaction, these regulations will require the Chinese parties to make a series of applications and supplemental applications to the aforementioned agencies, some of which must be made within strict time limits and require approvals from one or more of the aforementioned agencies.  The application process has been supplemented to require the presentation of economic data concerning a transaction, introducing aspects of economic and substantive analysis of the target business and the acquirer, and the terms of the transaction by MOFCOM and the other governing agencies as well as an evaluation of compliance with legal requirements.  The application process for approval now includes submissions of an appraisal report, an evaluation report and the acquisition agreement, depending on the structure of the transaction.  An employee settlement plan for the target company is also to be included in the application.

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The M&A Rules also prohibit a transaction at an acquisition price obviously lower than the appraised value of the Chinese business or assets.  The regulations require that, in certain transaction structures, the consideration must be paid within strict time periods, generally not in excess of a year.  Because the Chinese authorities have been concerned with offshore transactions which converted domestic companies into foreign investment enterprises (“FIEs”) in order to take advantage of certain benefits, including reduced taxation, in the PRC, the M&A Rules require new foreign sourced capital of not less than 25% of the domestic company’s post-acquisition capital in order to obtain FIE treatment.  Accordingly, if a sufficient amount of foreign capital is not infused into the domestic company, it will not be eligible to obtain FIE treatment.  In the agreement reached by the foreign acquirer, target, creditors and other parties, there must be no harm to third parties and the public interest in the allocation of assets and liabilities being assumed or acquired.  These aspects of the regulations will limit our ability to negotiate various terms of the acquisition, including aspects of the initial consideration, contingent consideration, holdback provisions, indemnification provisions and provisions relating to the assumption and allocation of assets and liabilities.  Therefore, we may not be able to negotiate a transaction with terms that will satisfy our investors and protect our shareholders interests in an acquisition of a Chinese business or assets.

It is expected that compliance with the regulations will be more time consuming than in the past, will be more costly for the Chinese parties and will permit the government much more extensive evaluation and control over the terms of the transaction.  Therefore, acquisitions in the PRC may not be able to be completed because the terms of the transaction may not satisfy aspects of the approval process and may not be completed, even if approved, if they are not consummated within the time permitted by the approvals granted.

Chinacomm’s operations and facilities in the PRC are subject to extensive regulation, which may subject Chinacomm to high compliance costs and expose it to penalties for non-compliance.  Chinacomm may not be able to obtain required regulatory approvals for its products and services in a cost-effective manner or at all, which could prevent it from successfully developing and marketing its products and services.

Providing and marketing Chinacomm’s products and services are subject to extensive regulation and review by governmental authorities in the PRC.  The PRC laws and regulations applicable to broadband wireless telecommunications services are wide-ranging and govern, among other things, every aspect of such services.  Any failure to obtain regulatory approvals or clearances or to renew licenses for its products and services could prevent Chinacomm from successfully marketing its products and services and result in a material and adverse effect on our ability to conduct our business.

We and Chinacomm could also be subject to civil liabilities, if we fail to comply with applicable laws and regulatory requirements.

Because we and Chinacomm are subject to extensive regulation in the PRC, we are subject to the risk that regulations could change in a way that would expose us to additional costs, penalties or liabilities.  If additional regulatory requirements are implemented in the PRC, the cost of developing or selling Chinacomm’s services may increase, as may the costs to us of fulfilling our obligations under the Chinacomm Agreements.

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You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based on U.S. judgments against us, Chinacomm and each of our and their respective subsidiaries, officers, directors and shareholders, and others.

After consummation of the Chinacomm share acquisition, substantially all our assets will be located outside of the United States.  As a result, it may not be possible for investors in the United States to effect service of process within the United States or elsewhere outside the PRC on us, Chinacomm, or their respective subsidiaries, officers, directors and shareholders, and others, including with respect to matters arising under United States federal or state securities laws.  The PRC does not have treaties providing for reciprocal recognition and enforcement of judgments of courts with the United States or many other countries.  As a result, recognition and enforcement in the PRC of these judgments in relation to any matter, including United States securities laws and the laws of the Cayman Islands, may be difficult or impossible.  Furthermore, an original action may be brought in the PRC against our assets, subsidiaries, officers, directors, shareholders and advisors only if the actions are not required to be arbitrated by PRC law and the facts alleged in the complaint give rise to a cause of action under PRC law.  In connection with such an original action, a PRC court may award civil liabilities, including monetary damages.

Adverse changes in political and economic policies of the Chinese government could have a material adverse effect on the overall economic growth of the PRC, which could reduce the demand for Chinacomm Group products and services and adversely affect its competitive position.

Substantially all of our business operations and Chinacomm’s business operations are conducted in the PRC, and substantially all sales of Chinacomm’s wireless broadband services are made in the PRC.  Accordingly, both our and Chinacomm’s business, financial condition, results of operations and prospects will be affected significantly by economic, political and legal developments in the PRC.  The Chinese economy differs from the economies of most developed countries in many respects, including, but not limited to, the following:

·      The amount of government involvement;

·      The level of development;

·      The growth rate;

·      The control of foreign exchange; and

·      The allocation of resources.

While the Chinese economy has experienced significant growth in the past twenty-five (25) years, growth has been uneven, both geographically and among various sectors of the economy.  The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources.  Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us or Chinacomm.  For example, our growth and expenses may be adversely affected by government control over the distribution of wireless broadband services in the PRC.

The Chinese economy has been transitioning from a planned economy to a more market-oriented economy.  Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, the Chinese government still owns a substantial portion of the productive assets in the PRC.  The continued control of these assets and other aspects of the national economy by the Chinese government could adversely affect our or Chinacomm’s business.  The Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particularindustries or companies.  

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Any adverse change in the economic conditions or government policies in the PRC could have a material adverse effect on overall economic growth and the level of Internet connectivity spending in the PRC, which in turn could lead to a reduction in demand for Chinacomm’s products and services and adversely affect our business operations.

Doing business in the PRC involves various significant risks, including internal and international political risks, evolving national economic policies as well as financial accounting standards, expropriation and the potential for a reversal in economic conditions.

The government of the PRC has been reforming its respective economic systems.  These reforms have resulted in significant economic growth and social progress.  These policies and measures may from time to time be modified or revised.  Adverse changes in economic policies of the PRC or in the laws and regulations, if any, could have a material adverse effect on the overall economic growth of the PRC and could adversely affect our business.

Uncertainties with respect to the Chinese legal system could have a material adverse effect on our business.

The PRC legal system is a civil law system based on written statutes.  Unlike in the common law system, prior court decisions may be cited for reference, but have limited precedential value.  Since 1979, the PRC’s legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in the PRC.  We are subject to laws and regulations applicable to foreign investment in the PRC and, in particular, laws applicable to wholly foreign-owned enterprises.  However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform, and enforcement of these laws, regulations and rules involve uncertainties which may limit legal protections available to us.  For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract.  However, since the PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.  These uncertainties may impede our ability to enforce the Chinacomm Agreements and any other contracts that we may enter into in order to successfully deploy and operate the Chinacomm Network.  Furthermore, intellectual property rights and confidentiality protections in the PRC is not as effective as in the United States or other countries.  Accordingly, 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 of these laws, or the preemption of local regulations by national laws.  These uncertainties could limit the legal protections available to us and other foreign investors, including you.  In addition, any litigation in the PRC may be protracted and result in substantial costs and diversion of our resources and management attention.

Any revenues from our investment in Chinacomm will be denominated in RMB and subject to currency fluctuations.

The change in value of the RMB against the U.S. dollar, Euro and other currencies is affected by, among other things, changes in the PRC’s political and economic conditions.  The RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. International pressure on the PRC government could result in a more significant fluctuation of the RMB against the U.S. dollar.  Any significant revaluation of the RMB may have a material adverse effect on our revenues and financial condition.  For example, to the extent that we need to convert U.S. dollars we receive into RMB for operations in the PRC, appreciation of the RMB against the U.S. dollar would reduce the RMB amount we receive from the conversion.  Conversely, if we decide to convert RMB into U.S. dollars, appreciation of the U.S. dollar against the RMB would reduce the U.S. dollar amount available to us.  Fluctuation in exchange rates between RMB and the U.S. dollar would also have a significant affect upon our reported results, since our reporting currency is the U.S. dollar.

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Regulations relating to offshore investment activities by the PRC residents may limit our ability to pay dividends to us and our ability to increase our investment in ChinaComm Cayman.

In October 2005, SAFE issued a circular entitled “Circular on several issues concerning foreign exchange regulation of corporate finance and roundtrip investments by PRC residents through special purpose companies incorporated overseas,” or Circular No. 75.  Circular No. 75 states that if residents of the PRC use assets or equity interests in their PRC entities as capital contributions to establish offshore companies or inject assets or equity interests of their PRC entities into offshore companies to raise capital overseas, they must register with local SAFE branches with respect to their overseas investments in offshore companies and must also file amendments to their registrationsif their offshore companies experience material events involving capital variation, such as changes in share capital, share transfers, mergers and acquisitions, spin-off transactions, long-term equity or debt investments or uses of assets in the PRC to guarantee offshore obligations.  In May 2008, SAFE issued relevant guidance to its local branches with respect to the operational process for Circular No. 75, which standardized more specific and stringent supervision on the registration according to Circular No. 75.  The new guidance requires any PRC resident holding shares or options in a special purpose company to register with local SAFE and imposes obligations on onshore subsidiaries of the special purpose company to coordinate and use such registration.  Failure to comply with relevant requirements under Circular No. 75 could subject us to fines or sanctions that the PRC government imposes, including restrictions on our ability to pay dividends to us and our ability to increase our investment in ChinaComm Cayman.

Increasing enforcement of the PRC environmental laws and regulations may result in higher costs of compliance with these laws and regulations and costs of raw materials.

A substantial portion of the our and all of Chinacomm’s business and properties are subject to the PRC laws and regulations relating to the protection of the environment, natural resources and worker health and safety and controlling the use, management, storage, and disposal of hazardous substances, wastes, and other regulated materials.  Because Chinacomm leases and operates real property, various environmental laws also may impose liability on it for the costs of cleaning up and responding to hazardous substances that may have been released on the property it utilizes, including releases unknown to Chinacomm.  These environmental laws and regulations also could require us or Chinacomm to pay for excessive discharge fees and take remedial actions.  The costs of complying with these various environmental requirements, as they now exist or may be altered in the future, could adversely affect our business.

In addition, our raw material costs have been rising, and may continue to rise, due to suppliers being subject to increasing enforcement of these environmental laws and regulations.  This could also adversely affect our profitability by increasing its cost to perform its obligations under the Chinacomm Agreements.

ITEM 1B.      UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 2.      PROPERTIES

We share with Trussnet Delaware office space at 8105 Irvine Center Drive, Suite 820, Irvine, California 92618 that is leased by Trussnet Delaware.  We believe that such space is currently sufficient for our needs.

ITEM 3.      LEGAL PROCEEDINGS

Neither we nor any of our direct or indirect subsidiaries are party to any material legal proceedings, nor to the best of management’s knowledge are any such proceedings contemplated.

On March 19, 2009, we received a subpoena from the Securities and Exchange Commission ("SEC") related to Westmoore Securities, Inc.  Westmoore Securities, Inc. acted as the placement agent for our convertible notes, and a principal of Westmoore Securities, Inc. was a member of our Board of Directors until March 7, 2009.  We have provided documents to the SEC in response to the subpoena.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

We have not held an Annual General Meeting of Stockholders since inception.  Management plans to hold an Annual General Meeting of Stockholders during 2009.

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PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Since inception, there has been no established trading market for our common stock.  Our Series A common stock is quoted on the OTCBB under the symbol CHTL.  The reported high and low sales prices for the common stock as reported on the OTCBB are shown below for the periods indicated.  The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

	High		Low
Fiscal 2008
January 1, 2008 through March 31, 2008	$	3.25	$	0.01
April 1, 2008 through June 30, 2008	$	3.29	$	1.29
July 1, 2008 through September 30, 2008	$	3.00	$	0.69
October 1, 2008 through December 31, 2008	$	1.03	$	0.25
Fiscal 2009
January 1, 2009 through March 31, 2009	$	0.80	$	0.32

On December 31, 2008, the last sale price of our common stock as reported on the OTCBB was $0.54.

There are no outstanding options or warrants to purchase our securities.  We have issued and outstanding $34.1 million of promissory notes.  As of May 4, 2009, the convertible notes would have been convertible into an aggregate of up to 104,897,860 shares of our Series A Common Stock based upon our share price on such date in the case of the amended notes.

As of March 31, 2009, there were 804 holders of our Series A Common Stock and 44 holders of our Series B Common Stock.

Since inception, we have not paid any dividends on our common stock, and we do not anticipate that we will pay dividends in the foreseeable future.

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Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		--		--		--
Equity compensation plans not approved by security holders		--		--		8,000,000
Total:		--		--		8,000,000

Performance Graph

The graph below compares our performance from inception through December 31, 2008, against the performance of the Nasdaq Market Index and the Hemscott Wireless Communications Index.

COMPARISON OF CUMULATIVE TOTAL RETURN

AMONG CHINA TEL GROUP, INC.,

NASDAQ MARKET INDEX AND HEMSCOTT WIRESELL COMMUNICATIONS INDEX

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ITEM 6.      SELECTED FINANCIAL DATA

The following selected historical financial data are derived from our audited financial statements.  The balance sheet data as of December 31, 2008 and the statements of operations data for the year ended December 31, 2008 are derived from our audited financial statements and related notes that are included elsewhere in this report.  The information set forth below should be read in conjunction with our historical financial statements, including the note thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this report.

	Year Ended December 31
	2007			2008
Statements of Operations Data:
Revenues	$	-		$	-
Cost of goods and services and network costs (exclusive of items shown separately below)		48,865
Selling, general and administrative expense		99,490			7,818,329
Research and Development Costs	$	-		$	51,828,172
Total operating expenses	$	212,385		$	59,646,501
Operating loss		(212,385	)		(59,646,501	)
Other income (expense), net		4,022			(49,323,391	)
Net loss	$	(224,725	)	$	(108,969.892	)
Net loss per ChinaTel Group Class A Common Share(2):
Basic and Diluted					(1.23	)
Weighted average Class A Common Shares outstanding:
Basic and Diluted					88,307,498

	2007		2008
Balance Sheet Data:
Current assets	$	8,399	$	6,249,309
Total assets	$	3,144,158	$	11,249,309
Current Liabilities:	$	-	$	90,333,521
Long-term debt	$	-	$	66,909
Total stockholders’ deficit		2,464,936	$	(79,151,121	)

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ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This following information specifies certain forward-looking statements of our management.  Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact.  Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms.  The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable.  Our future operating results, however, are impossible to predict, and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

Forward-looking statements include, but are not limited to, the following:

·      Statements relating to our future business and financial performance;

·      Our competitive position;

·      Growth of the telecommunications industry in China; and

·      Other material future developments that you may take into consideration

We believe it is important to communicate our expectations to our shareholders.  However, there may be events in the future that we are not able to accurately predict or over which we have no control.  The risk factors and cautionary language discussed in this report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations we described in our forward-looking statements, including among other things:

·      Competition in the industry in which we do business;

·      Legislation or regulatory environments;

·      Requirements or changes adversely affecting the businesses in which we are engaged; and

·      General economic conditions.

You are cautioned not to place undue reliance on these forward-looking statements.  The assumptions used for purposes of the forward-looking statements represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances.  As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment.  To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements.  We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

Overview

The following discussion should be read in conjunction with the information contained in the financial statements and the notes thereto, which form an integral part of the financial statements.  The financial statements begin on page F-2 below.

Our Reorganization and Merger Agreement with Trussnet has been accounted for as a reverse acquisition whereby Trussnet is deemed the accounting acquirer and the Company merely the legal acquirer.  Accordingly, the consolidated financial statements presented are that of Trussnet as of its date of its inception (April 4, 2008).  In connection with the Reorganization and Merger Agreement, the Company adopted the accounting acquirer's year end of December 31st pursuant to SEC rules.

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Our efforts are principally focused on fulfilling our Framework Agreement with Chinacomm that we entered into on April 7, 2008.  The contracts under the Framework Agreement call for us to design, engineer, install and operate a next generation wireless internet access network to bring high-speed wireless broadband services to mainland Chinese residents, businesses and governmental agencies.  Specifically, we are expected to serve as exclusive contractor for the operation of a 3.5GHz world-wide broadband wireless telecommunications network and Mesh Wi-Fi broadband network in 29 major cities throughout the People’s Republic of China.  We have incurred in excess of $51 million in costs related to the deployment of three of the twenty nine cities in the Chinacomm Network.  These costs relate to: (i) project management; (ii) radio frequency engineering; (iii) architectural design, including equipment and software approval; (iv) supervision of equipment installation; (v) network operational staffing; (vi) site acquisition, including preliminary research and predeployment analysis; (vi) design of security and redundancy systems; (vii) information transport engineering; (viii); construction management; and (ix) network optimization.

Olotoa Investments has agreed to purchase $300 million of our Class A Common Stock. If this transaction is consummated, the proceeds will allow us to finance the Chinacomm Network design, installation and operation, in addition to provide capital to pay our existing debt and operational expenses.

Critical Accounting Policies and Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation.  Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.  The most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included herein for the period ended December 31, 2008.

Development Stage Company.  We are a development stage company, as defined in Statement of Financial Accounting Standards No. 7, “Accounting and Reporting by Development Stage Enterprises”.

Loss per share.  In accordance with SFAS No. 128, “Earnings Per Share”, basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding.  Diluted loss per common share is computed similar to basic loss per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  As of December 31, 2008, we had approximately 32,000,000 shares of common stock related to the issuance of debt instruments that could be converted into shares of the Company’s Series A common stock.  Diluted loss per share is not presented, because the issuance of these additional common shares would be anti-dilutive.

Convertible Instruments.  When we issue convertible debt with detachable instruments, we allocate the proceeds received on a relative fair value basis pursuant to EITF Issue No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios".  Then, we apply the amount allocated to the convertible instrument, and an effective conversion price is calculated and used to measure the intrinsic value, if any, of the embedded conversion option.  The intrinsic value of the embedded conversion option and the relative fair value of the detachable instruments are recorded as discounts to the convertible debt and amortized over the term of the debt.

When we issue convertible debt with non-detachable instruments, we compute the intrinsic value of the conversion option based on a comparison of the proceeds of the convertible instrument allocated to the common stock portion of the conversion option and the fair value at the commitment date of the common stock to be received by the holder upon conversion pursuant to EITF Issue No. 0027, "Application of Issue No. 98-5 to Certain Convertible Instruments".  The excess of the fair value of the common stock at the commitment date over proceeds is the intrinsic value of the embedded conversion option that we recognize at the issuance date for the convertible debt.  We record the intrinsic value of the embedded conversion option as a beneficial conversion feature to the convertible debt and amortize it over the term of the debt.

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Goodwill and Identifiable Intangible Assets.  Goodwill consists of the excess of the purchase price over the fair value of net assets acquired in purchase business combinations.  At December 31, 2008, all goodwill is related to the Reorganization and Merger Agreement with Trussnet.  In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill and intangible assets with indefinite lives are not amortized, but instead are measured for impairment at least annually in the fourth quarter, or when events indicate that impairment exists.  As required by SFAS 142, in the impairment tests for indefinite-lived intangible assets, we compare the estimated fair value of the indefinite-lived intangible assets, using a combination of discounted cash flow analysis and market value comparisons.  If the carrying value exceeds the estimate of fair value, we calculate the impairment as the excess of the carrying value over the estimate of fair value and, accordingly, record the loss.

Intangible assets that are determined to have definite lives are amortized over their useful lives and are measured for impairment only when events or circumstances indicate the carrying value may be impaired in accordance with SFAS 144 discussed below.

Impairment of Long-Lived Assets.  In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144), we estimate the future undiscounted cash flows to be derived from the asset to assess whether or not a potential impairment exists when events or circumstances indicate the carrying value of a long-lived asset may be impaired.  If the carrying value exceeds our estimate of future undiscounted cash flows, we then calculate the impairment as the excess of the carrying value of the asset over our estimate of its fair value.

The following discussion and analysis summarizes the significant factors affecting our consolidated results of operations, financial conditions and liquidity position for the period from inception (April 4, 2008) to December 31, 2008 and should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this filing.

Liquidity and Capital Resources

Since our inception we have incurred accumulated losses of $109 million.  As of December 31, 2008, we had cash of $6,578 and had liabilities of $90.4 million, of which $90.3 million are deemed to be current liabilities. We expect to continue to incur net losses for the foreseeable future. Our auditors have expressed substantial doubt about our ability to continue as a going concern.  In order to continue to operate our business, we will need to raise substantial amounts of additional capital.

From our inception (April 4, 2008) through December 31, 2008, we raised approximately $32 million related to our offering of our convertible notes.  The notes bear interest of 10% per annum and are either past due or due ninety days after our receipt of a notice of redemption.

To avoid forfeiture of our interest in ChinaComm Cayman, which is pledged to secure payment of our $191 million promissory note to Trussnet Capital Partners (HK) Ltd., we must make quarterly interest payments of $3.8 million on June 9, 2009, September 9, 2009 and December 9, 2009, and make the final quarterly interest payment and repay the entire $191 million principal amount on March 9, 2010.  The payment of the $191 million principal amount also is necessary to maintain our rights to participate in the operation of the Chinacomm Network.

On March 10, 2009, we entered into an agreement to sell 49% of our Series A common stock, on a fully diluted basis as defined in the agreement, to Olotoa Investments for a purchase price of $300 million.  Pursuant to the terms of the agreement, Olotoa Investments will pay the purchase price between March 9, 2009 and September 9, 2010 in amounts and on dates as request by our Board of Directors.  We expect the cash proceeds from this investment to be used primarily to capitalize Yunji and Trussnet Dalian, repay our $191 million promissory note to Trussnet Capital Partners (HK) Ltd. and to provide operating capital for the deployment of the Chinacomm Network.  On May 1, 2009, we requested Olotoa Investments to pay $50 million of the purchase price.  To date, Olotoa Investments has not made the requested payment.

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Sources and Uses of Cash

We have utilized approximately $22 million to fund advances for a major portion of our vendors and suppliers related to our research and development, advances on a failed investment and administrative expenses, approximately $3 million in commissions paid on our convertible notes, and $5 million for our initial investment on the design and development of the Chinacomm Network.

The following table presents a summary of our sources and uses of cash for the period from our inception (April 4, 2008) to December 31, 2008:

Net cash used in operating activities:	$	(23,641,797	)
Net cash used in investing activities		(4,944,596	)
Net cash provided by financing activities		28,592,971
Increase in cash and cash equivalents	$	6,578

Operating Activities.  The cash used in operating activities consists of the payment for services relating to the deployment of the Chinacomm Network and the payment of commissions on the convertible notes.

Investing Activities.  The cash used in investment activities consists of our initial payment of $5 million to Trussnet Capital Partners (HK) Ltd. toward the purchase of our interest in Chinacomm Cayman.

Financing Activities.  Net cash provided by financing activities consist of net cash proceeds from the issuance of convertible notes.  The notes matured on December 31, 2008, unless they were extended by signing an amended and restated convertible note.  In that case, the due date is ninety (90) days from the date the Company receives a notice of redemption from the convertible note holder.  The convertible notes have an interest rate of 10% per annum.

Results of Operations for the period from inception (April 4, 2008) through December 31, 2008.

Revenues.  We had no revenues from our inception on April 4, 2008 through December 31, 2008.

Operating Expenses.  For the period from inception (April 4, 2008) through December 31, 2008 we had operating expenses of approximately $60 million.  These expenses were attributable to general and administrative expenses of approximately $7.9 million, research and development cost of approximately $51.8 million, beneficial conversion costs related to our debt fully amortized as interest of approximately $27.1 million, interest expense accrued on our debt of approximately $3.5 million, loss on investment of approximately $6.6 million, and unrealized loss on change in fair value of a derivative of approximately $12.1 million.  These expenses are further detailed as follows:

General and Administrative Expenses.  The $7.9 million in general and administrative expenses is due to the $3.3 million in financing costs paid to various investment advisors for the amounts raised on our convertible debt offering and $4.6 million for operating costs.

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Beneficial Conversion Costs.  The $27.1 million in beneficial conversion costs is attributable to the excess of the conversion price over the quoted stock price pursuant to EITF 00-27.  These costs relate to an offering of convertible notes, originally due December 31, 2008 and subsequently amended to provide for a due date of December 31, 2009, unless sooner tendered for redemption, in the aggregate  principal amount of $34.1 million.  The Company has accepted, as of December 31, 2008, a total of approximately $32 million in subscriptions.  The convertible notes bear interest at 10%, and can be converted, together with accrued interest, into shares of common stock of the Company at $0.95 per share under the original convertible notes and at the lesser of $.95 per share or eighty percent (80%) of the volume weighted average of the closing bid price for the shares on the OTCBB for the ten (10) day period prior to the election to convert under the amended notes.  During the period ended December 31, 2008, approximately $1.4 million of the outstanding notes were converted for 1,490,335 shares of the Company’s Series A common stock.

As of December 31, 2008, the Company recorded a beneficial conversion liability in the amount of approximately $27 million related to the excess of the conversion price of notes over the Company’s quoted stock price, resulting in a beneficial conversion cost of approximately $27 million fully amortized and included with interest expense.

Interest expense.  The $3.5 million in interest expense is related to the accrued interest portion of the 10% convertible notes from their respective dates of issuance.

Net Loss.  For the period from our inception (April 4, 2008) through December 31, 2008, our net loss from continuing operations was approximately $109 million.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2008:

	Payment Due by Period
Contractual Obligations	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years
Long Term Debt Obligations		246,210,537		51,315,537		194,895,000		-		-
Capital Lease Obligations		-		-		-		-		-
Operating Lease Obligations		-		-		-		-		-
Purchase Obligations		-		-		-		-		-
Other Long Term Liabilities Reflected on the Registrant's Balance Sheet Under GAAP		41,354,625		41,354,625		-		-		-
Total		287,565,162		92,670,162		194,895,000

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Quantitative and Qualitative Disclosures About Market Risk

As of December 31, 2008, we did not hold any market risk sensitive instruments.

If we are successful at generating revenue relating to the Chinacomm Network those revenues will be denominated in RMB and we will then have a material exposure to changes in dollar RMB exchange rates.   

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our financial statements and the notes thereto are contained on pages F-2 through F-22, which appear at the end of this Form 10-K annual report.

ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A(T).   CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures

Section 404 of the Sarbanes-Oxley Act of 2002 requires that management document and test the Company's internal control over financial reporting and include in this Annual Report on Form 10-K a report on management's assessment of the effectiveness of our internal control over financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over the our financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States Generally Accepted Accounting Principles.  A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 authorization of management and directors of the company and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the company's consolidated financial statements.

In connection with the preparation of this report, to evaluate the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2008, our management did not complete the assessment of the effectiveness of our internal control over financial reporting, implementing the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in "Internal Control-Integrated Framework".  Management has concluded as a result that its disclosure controls and procedures may not be effective at the reasonable assurance level as of December 31, 2008.  Specifically, its control environment possibly may not sufficiently promote effective internal control over financial reporting through the management structure to prevent a material misstatement.

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We are required to complete implementing the internal controls based on the criteria established in Internal Control -- Integrated Framework issued by the COSO.  Our management is fully committed to implement internal controls based on these criteria in 2009 and believes that it is taking the steps that will properly address any issue.

While we are taking immediate steps and dedicating substantial resources to implement the internal controls based on the criteria established in Internal Control - Integrated Framework issued by the COSO, they will not be considered fully implemented until the new and improved internal controls operate for a period of time, are tested and are found to be operating effectively.

Our registered public accountant has not conducted an audit of our controls and procedures regarding internal control over financial reporting.  Consequently, the registered public accounting firm expresses no opinion with regards to the effectiveness or implementation of our controls and procedures with regards to internal control over financial reporting.

This report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary SEC rules that permit the Company to provide only management’s report in this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during our fiscal quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B      OTHER INFORMATION

Not applicable.

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PART III

ITEM 10.      DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

The name, age and position of our directors is set forth below:

Name	Age	Position(s)
George Alvarez	45	Chief Executive Officer
Mario Alvarez	48	Chief Operating Officer
Tay Yong Lee (Colin Tay)	44	President
Kenneth L. Waggoner	59	Vice President, General Counsel and Secretary
Robert P. Weygand, Jr.	57

Since inception on September 19, 2005, our Board of Directors has conducted its business entirely by written consent and has not met in person.  Each of our Directors serves until his successor is elected and qualified.  The sole committee of our Board of Directors is the Audit Committee.

Audit Committee

The Board of Directors has designated an Audit Committee comprised of George Alvarez, our Chief Executive Officer and Chairman of the Audit Committee, and Carlos Trujillo, our Chief Financial Officer. The primary function of the Audit Committee is to oversee and monitor our accounting and reporting processes and the audits of our financial statements.  Neither George Alvarez nor Carlos Trujillo can be considered an “audit committee financial expert” as defined in Item 401 of Regulation S-K.  The Company does not presently have among its officers and directors a person meeting these qualifications, and given our financial conditions, does not anticipate in seeking an audit committee financial expert in the near future.  However, the Audit Committee has engaged the services of an independent accountant as a consultant to provide advice to the Audit Committee.

Our Audit Committee held one meeting in 2008.

32

Executive Officers of the Registrant

Each of our officers is elected by the Board of Directors to a term of one (1) year and serves until his successor is duly elected and qualified, or until he is removed from office.  The name, address, age and position of our executive officers is set forth below:

Name and Address	Age	Position(s)
George Alvarez 8105 Irvine Center Drive, Suite 820 Irvine, CA 92618	45	Chief Executive Officer
Tay Yong Lee (Colin Tay) Kuang Fu South Road Taiwan 106 Taiwan 6940	44	President
Mario Alvarez 8105 Irvine Center Drive, Suite 820 Irvine, CA 92618	48	Chief Operating Officer
Kenneth L. Waggoner 8105 Irvine Center Drive, Suite 820 Irvine, CA 92618	59	Vice President, General Counsel and Secretary
Carlos A. Trujillo 8105 Irvine Center Drive, Suite 820 Irvine, CA 92618	51	Chief Financial Officer
Isidoro Gutierrez 8105 Irvine Center Drive Irvine, CA 92618	55	Chief Administrative Officer

Background of Officers and Directors

George Alvarez was appointed a director in March 2008 and Chief Executive Officer in June 2008.  He was Chief Executive Officer of Trussnet Delaware, a an architecture, engineering and construction management firm, from 2004 until December 2007 and was Co-Founder of VelociTel, Inc., VelociTel, LLC and their predecessor companies in the wireless network service industry (“VelociTel”), and served as VelociTel's President and Chief Operating Officer from 1987 to 2002.  Mr. Alvarez is a licensed contractor in the state of Arizona.  He graduated with honors from Airco Technical Institute in Fullerton, California.

Tay Yong Lee was appointed a director and President in June 2008.  Since 1992 Mr. Tay has been the Chief Executive Officer of Trussnet ADC Co. Inc., Taiwan, which provides engineering and construction services.  He also is the sole owner and director Trussnet Capital Partners (HK) Ltd.  From 1986 to 1992, Mr. Tay was with YKK Architectural Products Pte. Co. Ltd., of Singapore, and YKK Taiwan Co., Ltd., first as a Quantity Surveyor and then as Manager of the Architectural Products Division. Prior to joining YKK, Mr. Tay was a Quantity Surveyor with Hyundai Engineering & Construction, part of the worldwide Hyundai organization.  Mr. Tay received his Tertiary Diploma in Building from Singapore Polytechnic in 1984, professional accreditations from the Singapore Institute of Building in 1998 and a professional designation from the Chartered Institute of Building  (United Kingdom) in 2000.

Mario Alvarez was appointed a director and Chief Operating Officer in June 2008.  Since 2002 he has provided consulting services to Trussnet Delaware and Trussnet USA Development Co. Inc., which constructs wireless telecommunications facilities.  Mr. Alvarez was co-founder of VelociTel, and served as its Chairman and Chief Executive Officer from 1987 to 2002.  He is a member of the American Institute of Architects, the National Council of Architectural Registration Boards and the Construction Specifications Institute. Mr. Alvarez is a licensed architect in 49 states. He received his B.A. in Architecture from the University of Washington and his M.A. in Architecture from the University of Idaho.

Kenneth L. Waggoner was appointed a Director and Vice President and General Counsel in January 2009, and Secretary in March 2009.  From 2005 to 2007 Mr. Waggoner was the Chief Executive Officer of Foton Motors, Inc., a distributor of Chinese heavy equipment in the United States.  From 2005 to 2008 he also acted as a legal advisor to Trussnet Delaware and its affiliated companies and to EuroPacific Parts International, Inc., a distributor of aftermarket automobile parts in the United States.  Mr. Waggoner was Of Counsel with the law firm Morgan, Lewis & Bockius, LLP from 2004 to 2005.  From 2002 to 2004, he was Vice President and General Counsel of the Global Downstream operations of ChevronTexaco Corporation.  From 1986 to 2002 Mr. Waggoner was a partner with the law firm of Brobeck, Phleger & Harrison.  Mr. Waggoner received his J.D. degree with honors in 1973 from Loyola University School of Law in Los Angeles, California.  He received his B.A. degree with honors in 1970 from California State University at Long Beach.

Robert P. Weygand, Jr. was appointed a director in April 2009.  Since 2008, Mr. Weygand has been President of B&W International Consulting.  From 2004 to 2008, he served as Chief Executive Officer of Sanicor International, a consultant firm and distributor for Japan and other Asian manufacturers in the sanitary ware and plumbing industry.  Mr. Weygand was Vice President of Strategic Planning and Marketing for VelociTel from 1999 to 2002.

33

Carlos A. Trujillo was appointed Chief Financial Officer in June 2008.  From 2006 to 2008 he was Chief Financial Officer of California Cove Communities, Inc., a home building and real estate development company, in which position he was responsible for financial and accounting functions including financial statement preparation, compliance with regulations, establishing accounting policies and procedures, and interacting with auditors and tax accounting firms.  From 1998 to 2006 Mr. Trujillo was the sole proprietor of a CPA firm.   Mr. Trujillo received his Bachelors Degree in Accounting from California State University, Fullerton in 1982 and is a certified public accountant licensed by the State of California.

Isidoro Gutierrez was appointed Chief Administrative Officer in June 2008. From 2002 to 2008 he was Chief Administrative Officer of Trussnet Delaware.  From 1987 to 2002 Mr. Gutierrez was Chief Administrative Officer of VelociTel.  He studied Business Administration at Loyola Maramount University in Los Angeles, California.

George Alvarez and Mario Alvarez are brothers.  Isidoro Gutierrez is an uncle of George and Mario Alvarez.

None of our directors is an officer or director of a company registered under the Securities and Exchange Act of 1934.

Code of Ethics

Due to a lack of resources, we have not adopted a written code of ethics applying to our executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

George Alvarez has not yet filed a report on Form 4 with respect to his proxy to vote all 66,909,088 shares of our Series B Common Stock.

Messrs.Gutierrez, Tay, Trujillo, Waggoner and Weygand have not yet filed initial reports on Form 3.

34

ITEM 11.      EXECUTIVE COMPENSATION

Compensation of Executive Officers

We have not paid any compensation to our executive officers since inception.

Compensation of Directors

To date we have not compensated directors for their services in their capacity as directors.  We reimburse our directors for all travel and lodging expenses associated with corporate matters if and when incurred.

Employment Agreements with Executive Officers and Directors

We have no employment agreements with any officers or directors.  We have no compensatory plans or arrangements with respect to any person named in Cash Consideration set out above which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person’s employment us or our subsidiaries, or any change in control, or a change in the person’s responsibilities following a change in control.

Stock Option Plan

Our Board of Directors has adopted a stock option plan for the benefit of our directors, officers or future employees.  The option plan grants the directors of the company authority to award stock options to purchase up to 8,000,000 shares of our Class A Common Stock.  We have not obtained stockholder approval for the stock option plan or issued any options thereunder.

Compensation Committee Interlocks and Insider Participation

Since we have no employees and have not paid any compensation, we have not established a compensation committee.  All issues regarding executive compensation are addressed by our Board of Directors.  All members of our Board of Directors were our officers during 2008 except Mr. Waggoner, who joined the Company as an officer in January 2009, and Mr. Weygand.  All members of our Board of Directors had one or more relationships requiring disclosure under Item 404 of Regulation S-K.

None of our executive officers served as a director of another entity, one of whose executive officers served on our Board of Directors except as follows:

·      Our Chief Executive Officer George Alvarez is the President of Capital Truss.  George Alvarez and our Chief Administrative Officer Isidoro Gutierrez are directors of Capital Truss.  In January 2008, we entered into a letter of intent for a share exchange with Capital Truss.  We spent approximately $6.6 million on lease improvements relating to this venture before terminating the letter of intent.

35

Compensation Committee Report

Since we have no employees and have not paid any compensation, we have not prepared a compensation discussion and analysis.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth, as at May 8, 2009, the total number of shares owned beneficially by each of our directors, officers, and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares.  The shareholder listed below has direct ownership of his/her shares and possesses sole voting and dispositive power with respect to the shares.

Name and Address of Beneficial Owner (1)	Class A Common Stock				Class B Common Stock
	Amount of Beneficial Ownership		Percent of Class		Amount of Beneficial Ownership		Percent of Class
George Alvarez (2)		47,700		*		66,909,088		100%
Mario Alvarez (3)		18,536,363		18.8%		18,536,363		27.7%
Matthew R. Jennings(4) 8141 E. Kaiser Blvd. Suite 312 Anaheim Hills, California 92808		15,136,463		15.4%		13,686,363		20.5%
Cuachira, LLC (5) Campos Eliseos #231 Piso  16 Col. Polanco, Mexico 11560 DF		5,000,000		5.1%		5,000,000		7.5%
Tay Yong Lee		0				0
Kenneth L. Waggoner		92,206		*		0
Robert P. Weygand, Jr.		892,239		*		0
Carlos A. Trujillo		0				0
Isidoro Gutierrez		0				0
Directors and Officers as a Group (7 persons)		19,568,508		19.9%		66,909,088		100%

________________

*           Less than one percent.

(1)Unless otherwise noted, the address of each holder is 8105 Irvine Center Drive, Suite 820, Irvine, California 92618.  Unless otherwise noted, the security ownership disclosed in this table is of record and beneficial.

(2)Mr. George Alvarez holds proxies to vote all 66,909,088 issued and outstanding shares of Series B Common Stock.

(3)Consists of shares held by the Alvarez and Alvarez Irrevocable Living Trust, of which Mr. Mario Alvarez is trustee.  Mr. Alvarez disclaims beneficial ownership of such shares except to the extent of his interest therein.

(4)Consists of (a) 7,250,000 shares of Series A Common Stock and 6,750,000 shares of Series B Common Stock held by Westmoore Investment L.P., of which Mr. Jennings is general partner; (b) 2,750,000 shares of Series A Common Stock and 2,250,000 shares of Series B Common Stock held by Westmoore Capital Group Series A, LLC, of which Mr. Jennings is Manager; (c) 2,284,563 shares of Series A Common Stock and 2,036,363 shares of Series B Common Stock held by Westmoore Management, LLC, of which Mr. Jennings is Chief Executive Officer; (d) 1,928,000 shares of Series A Common Stock and 1,900,000 shares of Series B Common Stock held by Westmoore Capital Group Series B, LLC, of which Mr. Jennings is Manager; (e) 673,900 shares of Series A Common Stock and 500,000 shares of Series B Common Stock held by Westmoore Capital Group Series II, LLC, of which Mr. Jennings is Manager; and (f) 250,000 shares of Series A Common Stock and 250,000 shares of Series B Common Stock held by YYZ Holdings, of which Mr. Jennings is a 40% stockholder.

(5)Based upon a Schedule 13D filed with the Securities and Exchange Commission on January 29, 2009.

36

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

Except as indicated below, since April 4, 2008 there have been no transactions, nor are there any currently proposed transactions, to which we were or are to be a participant in which the amount involved exceeds $120,000, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest.

Our operating subsidiary Trussnet originally was organized in 2008 by Trussnet Delaware.  Since our acquisition of Trussnet, Trussnet Delaware has performed approximately $51.8 million in contract services, representing substantially all of our operations, including the engineering and deployment services we provide relating to the Chinacomm Network. We also share office space with Trussnet Delaware.  Our Chief Executive Officer George Alvarez, our Chief Operating Officer Mario Alvarez and our Chief Administrative Officer Isidoro Gutierrez all were officers and stockholders of Trussnet Delaware but resigned their offices at Trussnet Delaware and transferred their equity interest in Trussnet Delaware to third parties prior to joining our Company.  The current Chief Executive Officer of Trussnet Delaware is the brother of Carlos Trujillo, our Chief Financial Officer.  Trussnet Delaware has paid consulting fees to Mario Alvarez and Kenneth L. Waggoner subsequent to our acquisition of Trussnet.

Pursuant to an Agreement for Professional Services, dated April 10, 2008, between Trussnet and Trussnet Delaware, we have agreed to pay Trussnet Delaware for its services at its standard hourly rates or based upon fixed fees for specific services.  The agreement has a term of two years but either party may terminate the agreement upon sixty days written notice.  Due to a lack of funding, we have not paid Trussnet Delaware for a significant portion of the services it has provided to us.  As of December 31, 2008, we owed Trussnet Delaware approximately $31.8 million.  Trussnet Delaware has advanced funds for our operations in anticipation of our receiving additional funding.  Except for the extension of credit for services performed, we believe that Trussnet Delaware provided all such services at prices and on terms and conditions that are the same as those that would result from arm’s-length negotiations between unrelated parties. As we have no employees, we believe that there is only a de minimis value to our shared use of Trussnet Delaware office space.

Trussnet Delaware has subcontracted much of the work developing applications software for the Chinacomm Network to Trussnet ADC Co. Inc.  Our President Tay Yong Lee is the Chief Executive Officer of Trussnet ADC Co. Inc.

We purchased our 49% interest in Chinacomm Cayman from Trussnet Capital Partners (HK) Ltd., a Hong Kong company of which Tay Yong Lee is a director and principal stockholder.  We believe that purchase was on terms and conditions that are the same as those that would result from arm’s-length negotiations between unrelated parties.

37

In January 2008, we entered into a letter of intent for a share exchange with Capital Truss.  We spent approximately $6.6 million on lease improvements relating to this venture before terminating the letter of intent.  Our Chief Executive Officer George Alvarez is the President of Capital Truss.  George Alvarez and our Chief Administrative Officer Isidoro Gutierrez are the only current directors of Capital Truss, Inc.  Our President Tay Yong Lee and our Chief Operating Officer Mario Alvarez previously served as directors of Capital Truss and our Chief Financial Officer Carlos A. Trujillo previously served as is its Secretary and Treasurer.

We paid Robert P. Weygand, Jr. 931,579 shares of our Class A Common Stock which we valued at $885,000 for a portion of the consulting services Mr. Weygand provided in 2008.  He performed an additional $440,100 in consulting services during 2008 and $644,200 in consulting services during the first quarter of 2009 for which we have not yet paid him.  Mr. Weygand joined our Board of Directors in April 2009.

We have paid Westmoore Securities, Inc. $1,954,641 since January 1, 2008 in fees relating to the sale of our convertible notes due December 31, 2009.  Matthew R. Jennings, an affiliate of Westmoore Securities, Inc., was a member of our Board of Directors until March 7, 2009. We have agreed to accept 8,328,615 shares of our Series A Common Stock from Westmoore Management LLC and certain of its affiliates in exchange for the cancellation of a $2.9 million promissory note previously issued to us by Westmoore Management LLC. Mr. Jennings is the Chief Executive Officer of Westmoore Management LLC. 

Review, Approval or Ratification of Transactions With Related Parties

We have not yet adopted policies and procedures for review, approval or ratification of transactions with related parties.  All of the transactions disclosed under this Item were approved by our Chief Executive Officer or our President.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Mendoza Berger & Company, LLP served as our independent registered public accounting firm for fiscal 2008.  We paid Mendoza Berger & Company, LLP a total of $62,448 in 2008 for the audit and other services provided by that firm.

Audit Fees:  This category includes the audit of our annual financial statements, review of financial statements included in our Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors.  This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.  The aggregate fees billed by the independent registered accountants for the period ended December 31, 2008 for professional services for the audit of our financial statements as at December 31, 2008 and for the periods then ended and services that are normally provided by the accountants in connection with statutory and regulatory filings or engagements were $60,448.

Audit-Related Fees:  This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under "Audit Fees." The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.  Mendoza Berger & Company, LLP did not perform any audit-related services for us during 2008.

Tax Fees:  This category consists of professional services rendered by our independent auditors for tax compliance and tax advice.  The services for the fees disclosed under this category include tax return preparation and technical tax advice.  We paid Mendoza Berger & Company, LLP $2,000 during 2008 for services for tax compliance, tax advice, and tax planning.

All Other Fees:  This category consists of fees for other miscellaneous items.  We did not pay Mendoza Berger & Company, LLP any other fees during 2008.

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent auditors.  Under the procedure, the Audit Committee approves the engagement letter with respect to audit, tax and review services.  Other fees are subject to pre-approval by the Audit Committee.  Any such approval by the Audit Committee is disclosed to the entire Board.

38

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

EXHIBIT NO.	DESCRIPTION
2.1	Reorganization and Merger Agreement, dated May 21, 2008, among the Company, Chinacomm Acquisition, Inc., Trussnet USA, Inc. and the stockholders of Trussnet.
3.1	Certificate of Incorporation. [Previously filed on Schedule 14C on June 19, 2008]
3.2	By-laws. [previously filed on Form SB-2 on June 9, 2006]
10.1	Independent Contractor Agreement, effective as of January 1, 2008, between Trussnet U.S.A., Inc. and Timothy C. Hoopes. [Previously filed on Form S-8 on March 6, 2009]
10.2	Stock Option Plan
10.3	Independent Contractor Agreement, effective April 4, 2008, between the Company and Robert P. Weygand. [Previously filed on Form S-8 on November 17, 2008]
10.4	Engagement Letter and Retainer Agreement, each dated April 5, 2008, between the Company and the Law Offices of Mark C. Fields. [Previously filed on Form S-8 on February 19, 2009 and December 10, 2008]
10.5	Framework Agreement, dated April 7, 2008, between the Company and Chinacomm.
10.6	Agreement for Professional Services, dated April 10,2008, between Trussnet USA, Inc. (Nevada) and Trussnet USA, Inc. (Delaware)
10.7	Exclusive Technical Services Agreement, dated May 23, 2008, between Trussnet Gulfstream (Dalian) Co., Ltd. and Yunji Communications Technology (China) Co.
10.8	Exclusive Technical and Management Consulting Services Agreement, dated May 23, 2008, between Yunji Communications Technology (China) Co. and CECT-Chinacomm Communications Co., Ltd.
10.9	Equipment Lease Agreement, dated May 23, 2008, between Trussnet Gulfstream (Dalian) Co., Ltd. and Yunji Communications Technology (China) Co.
10.10	Equipment Sublease Agreement, dated May 23, 2008, between Yunji Communications Technology (China) Co. and Chinacomm
10.11	Strategic Frame Agreement, dated October 6, 2008, between the Company and Runcom Technologies Ltd. [Previously filed on Form 8-K on November 6, 2008]
10.12	Agreement dated October 14, 2008, between the Company and Shai Bar-Lavi. [Previously filed on Form S-8 on March 20, 2009]
10.13	Convertible Note Purchase Agreement.
10.14	Amended and Restated Convertible Note Purchase Agreement, dated November 17, 2008.
10.15	Consulting and Non-Circumvention Agreement, dated January 2, 2009, between the Company and Sandy Haxby. [Previously filed on Form S-8 on January 27, 2009
10.16	Stock Purchase Agreement, dated February 22, 2009, between Mario Octavio Navarro Alvarez and Rafael Isaias Samanez Zacarias, as sellers, and Gulfstream Capital Partners Ltd., as buyer, regarding capital stock of Perusat S.A.
10.17	Stock Purchase Agreement, dated as of February 25, 2009, between the Company and Olotoa Investments, LLC. [Previously filed on Form 8-K on March 16, 2009]
10.18	Retainer Agreement, dated March 3, 2009, between the Company and Horowitz Cron & Jasper. [Previously filed on Form S-8 on March 4, 2009]
10.19	Asset Purchase Agreement, dated as of March 9, 2009, between the Company and Trussnet Capital Partners (HK) Ltd. [Previously filed on Form 8-K on March 10, 2009]
21	Subsidiaries of the Registrant.
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

39

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1932, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  May 15, 2009 CHINA TEL GROUP, INC.   By: /s/ George Alvarez   George Alvarez Chief Executive Officer

40

Table of Contents

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheet	F-3
Consolidated Statement of Operations	F-4
Consolidated Statement of Stockholders’ Equity (deficit)	F-5
Consolidated Statement of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

China Tel Group, Inc.

We have audited the accompanying consolidated balance sheet of China Tel Group, Inc. and its subsidiaries, as of December 31, 2008, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for the year then ended.  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 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the financial position of China Tel Group, Inc. and its subsidiaries, as of December 31, 2008, and the results of its operations and its cash flows for period from April 4, 2008 (date of inception) through December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations.  These factors raise substantial doubt as to the Company's ability to continue as a going concern.  Management's plan in regard to these matters is also described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MENDOZA BERGER & COMPANY, LLP

MENDOZA BERGER & COMPANY, LLP

Irvine, California

May 15, 2009

F-2

CHINA TEL GROUP, INC.
(a development stage company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2009
ASSETS
Current assets:
Cash	$	6,578
Note receivable		3,039,123
Deferred financing costs, net of accumulated amortization of $386,188		3,203,608
Total current assets		6,249,309
Other assets:
Investments, at cost		5,000,000
Total assets	$	11,249,309
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	42,632,534
Convertible debentures, net of unamortized discount of $12,568,303		21,535,101
Derivative liability		26,165,886
Total current liabilities		90,333,521
Long term debt
Mandatory redeemable Series B common stock		66,909
Commitments and contingencies
Stockholders' deficit:
Preferred stock, no par value, 25,000,000 authorized, no shares issued and outstanding		-
Common stock:
Series A common stock; $0.001 par value, 500,000,000 shares authorized, 89,458,947 shares issued and outstanding		89,459
Additional paid in capital		30,079,383
Deficit accumulated during development stage		(109,319,963	)
Total stockholders' deficit		(79,151,121	)
Total liabilities and stockholders' deficit	$	11,249,309
The accompanying notes are an integral part of these financial statements

F-3

CHINA TEL GROUP, INC.
(a development stage company)
STATEMENT OF LOSS
FOR THE PERIOD FROM APRIL 4, 2008 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008
OPERATING EXPENSES:
Selling, general and administrative expenses	$	7,818,329
Research and development costs		51,828,172
Total operating expenses		59,646,501
Net loss from operations		(59,646,501	)
OTHER INCOME (EXPENSES):
Loss on investments, related party		(6,636,410	)
Unrealized loss on change in fair value of debt derivative		(12,082,500	)
Interest expense		(30,604,481	)
Net loss before income taxes		(108,969,892	)
Income taxes		-
NET LOSS	$	(108,969,892	)
Net loss per share, basic and fully diluted	$	(1.23	)
Weighted average number of shares outstanding, basic and fully diluted		88,307,498
The accompanying notes are an integral part of these financial statements

F-4

CHINA TEL GROUP, INC.
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM APRIL 4, 2008 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008
								Deficit
								Accumulated
	Common stock				Additional			During
	Series A				Paid in			Development
	Shares		Amount		Capital			Stage			Total
Balance, April 4, 2008 (date of inception)		-	$	-	$	-		$	-		$	-
Effect of merger with China Tel Group, Inc. (formerly Mortlock Ventures, Inc.) and assumption of liabilities as of April 4, 2008		86,117,088		86,117		(153,026	)		(350,071	)		(416,980	)
Beneficial conversion feature relating to issuance of convertible debentures		-		-		27,060,987			-			27,060,987
Issuance of Series A common stock in exchange for convertible debentures		1,490,336		1,490		1,396,590			-			1,398,080
Issuance of Series A common stock in settlement of debt		1,851,523		1,852		1,774,832			-			1,776,684
Net loss		-		-		-			(108,969,892	)		(108,969,892	)
Balance, December 31, 2008		89,458,947	$	89,459	$	30,079,383		$	(109,319,963	)	$	(79,151,121	)
The accompanying notes are an integral part of these financial statements

The preferred stock has no shares issued and outstanding

F-5

CHINA TEL GROUP, INC.
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM APRIL 4, 2008 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(108,969,892	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of financing costs		386,188
Accretion of convertible debt		1,515,083
Loss on change in fair value of debt derivative		12,082,500
Beneficial conversion feature in conjunction with the issuance of convertible debentures		27,060,987
(Increase) decrease in:
Prepaid expenses		38
Increase (decrease) in:
Accounts payable and accrued liabilities		44,283,299
Net cash used in operating activities		(23,641,797	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds received in connection with reverse merger		55,404
Investment in Chinacomm		(5,000,000	)
Net cash used in investing activities		(4,944,596	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of convertible debentures		28,592,971
Net cash provided by financing activities		28,592,971
Net increase in cash and cash equivalents		6,578
Cash and cash equivalents, beginning of the period		-
Cash and cash equivalents, end of the period	$	6,578
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	-
Cash paid during the period for taxes	$	-
NON CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued in settlement of debt	$	1,776,684
The accompanying notes are an integral part of these financial statements

F-6

CHINA TEL GROUP, INC.

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2008

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:

Basis and business presentation

China Tel Group, Inc. (formerly Mortlock Ventures, Inc.)  (the “Company”) was incorporated under the laws of the State of Nevada on September 19, 2005 for the purpose of acquiring and developing mineral properties.  On April 8, 2008, the Company changed its name to China Tel Group, Inc. and began focusing on the telecommunications industry.

The Company is in the development stage, as defined by Statement of Financial Accounting Standards No. 7 ("SFAS No. 7") and its efforts have been principally devoted to developing a wireless broadband network in several cities in the Peoples Republic of China.  To date, the Company has not generated sales revenues, has incurred expenses and has sustained losses.  Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise.  For the period from inception through December 31, 2008, the Company has accumulated losses of $108,969,892.

The consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries Trussnet USA, Inc. and Gulfstream Capital Ltd.  All significant intercompany balances and transactions have been eliminated in consolidation.

Reverse Merger and Corporate Restructure

On May 21, 2008, the Company consummated a reverse merger by entering into a reorganization and merger agreement (the “Merger”) with the stockholders of Trussnet USA, Inc., pursuant to which the stockholders of Trussnet USA, Inc. exchanged all of the issued and outstanding capital stock of Trussnet USA, Inc. for 66,909,088 shares of Series A common stock of the Company representing 77.7% of the Company’s outstanding Series A common stock and 66,909,088 Series B common stock, after the return to treasury and retirement of 57,600,000 shares of common stock (categorized as Series A common stock) of the Company held by certain stockholders of the Company concurrently with the Merger.

Series B common stock is non transferable, not participating with voting rights in all matters in which shareholders have a right to vote at a 10 votes per each share of Series B common stock.  The Series B common stock is redeemable on May 23, 2023 at par value of $0.001 per share.

As a result of the Merger, there was a change in control of the Company.  In accordance with SFAS No. 141, the Company was the acquiring entity.  In substance, the Merger is a recapitalization of the Company’s capital structure rather than a business combination.

For accounting purposes, the Company accounted for the transaction as a reverse acquisition with the Company as the surviving entity.  The total purchase price and carrying value of net assets acquired was $-0-.  The Company did not recognize goodwill or any intangible assets in connection with the transaction.

F-7

The results of operations of Mortlock Ventures, Inc. to the Agreement are included in the Company's consolidated statement of losses.

All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.

In conjunction with the Merger, a principal shareholder contributed Gulfstream Capital Ltd, a dormant Republic of Seychelles Company formed on January 8, 2007.

The total consideration paid was $-0- and the significant components of the transaction are as follows:

Mortlock Ventures, Inc. Summary Statement of Financial Position At May 21, 2008
Current Assets:
Cash	$	55,404
Other assets:
Prepaid expenses		38
Advances receivable		2,616,105
Current Liabilities:
Accounts payable		(125,919	)
Convertible debentures		(2,395,699	)
Subscriptions received		(500,000	)
Net liabilities assumed	$	(350,071	)

Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue in accordance with Securities Exchange Commission (the “SEC”) Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” ("SAB 101").  SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured.  Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts.  Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

On December 17, 2003, the SEC staff released Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition.  The staff updated and revised the existing revenue recognition in Topic 13, Revenue Recognition, to make its interpretive guidance consistent with current accounting guidance, principally EITF Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." Also, SAB 104 incorporates portions of the Revenue Recognition in Financial Statements - Frequently Asked Questions and Answers document that the SEC staff considered relevant and rescinds the remainder.  The company's revenue recognition policies are consistent with this guidance; therefore, this guidance will not have an immediate impact on the company's consolidated financial statements.

F-8

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

Fair Values

In the second quarter of fiscal year 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS No. 157) as amended by FASB Statement of Position (FSP) FAS 157-1 and FSP FAS 157-2. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure.  FSP FAS 157-2 delays, until the first quarter of fiscal year 2009, the effective date for SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).  The adoption of SFAS No. 157 did not have a material impact on the Company’s financial position or operations.  Refer to Footnote 13 for further discussion regarding fair valuation.

Long-Lived Assets

The Company has adopted Statement of Financial Accounting Standards No. 144 (“SFAS 144”).  The Statement requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period.  The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows.  Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  SFAS No. 144 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

Income Taxes

The Company has adopted Financial Accounting Standard No. 109 (SFAS 109) which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.

Comprehensive Income

The Company does not have any items of comprehensive income in any of the periods presented.

F-9

Net Loss per Share

The Company has adopted Statement of Financial Accounting Standard No. 128, "Earnings Per Share," specifying the computation, presentation and disclosure requirements of earnings per share information.  Basic earnings per share have been calculated based upon the weighted average number of common shares outstanding.  Stock options and warrants have been excluded as common stock equivalents in the diluted earnings per share because they are either anti-dilutive, or their effect is not material.

Stock based compensation

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123R (revised 2004), “Share-Based Payment” which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” Statement 123R supersedes APB opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, "Statement of Cash Flows.” Generally, the approach in Statement 123R is similar to the approach described in Statement 123.  However, Statement 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  Pro-forma disclosure is no longer an alternative.  This statement does not change the accounting guidance for share based payment transactions with parties other than employees provided in Statement of Financial Accounting Standards No. 123(R).  This statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.” On April 14, 2005, the SEC amended the effective date of the provisions of this statement.  The effect of this amendment by the SEC is that the Company had to comply with Statement 123R and use the Fair Value based method of accounting no later than the first quarter of 2006.  The Company implemented SFAS No. 123(R) on April 4, 2008 using the modified prospective method.

As of December 31, 2008, there were no outstanding employee stock options.

Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables.  The Company places its cash and temporary cash investments with high credit quality institutions.  At times, such investments may be in excess of the FDIC insurance limit.

Research and Development

The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs. Under SFAS 2, all research and development costs must be charged to expense as incurred.  Accordingly, internal research and development costs are expensed as incurred.  Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved.  Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.  The Company incurred research and development expenses of $51,828,172 from April 4, 2008 (date of inception) through December 31, 2008.

F-10

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments," requires disclosure of the fair value of certain financial instruments.  The carrying value of cash and cash equivalents, accounts payable and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.  The carrying amount for the Series A convertible preferred stock approximate fair value.

Investments

As part of the Company’s business strategy to take a minority interest in its customer base, the Company entered into a Framework Agreement whereby the Company, through its subsidiary, Gulfstream Capital Ltd to acquire 49% interest in ChinaComm Cayman for  a total purchase price of $196,000,000.  At December 31, 2008, pursuant to the agreement, Company has paid $5,000,000t towards the purchase.  The investment of $5,000,000 represented part payment towards the total purchase price of $196,000,000 and is carried at cost under the cost method of accounting for investment.

The Company did not evaluate for impairment and the fair value of the cost-method investment is not estimated since there were no identified events or changes in circumstances that may have a significant adverse effect on the fair value and the Company determined, in accordance with SFAS No. 107 that it is not practicable to estimate the fair value of the investment.

Liquidity

As shown in the accompanying financial statements, the Company incurred net loss from operations of $108,969,892 from its inception on April 4, 2008 through December 31, 2008.

Recent accounting pronouncements

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS No. 141(R)"), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS No. 141R is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited.  The Company does not expect the adoption of SFAS No. 141R in 2009 will have a material effect on its consolidated financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS No. 160”), which will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity within the consolidated balance sheets.  SFAS No. 160 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited.  The Company does not expect the adoption of SFAS No. 160 in 2009 to have a material effect on its consolidated financial position, results of operations or cash flows.

In December 2007, the FASB ratified the consensus in Emerging Issues Task Force (EITF) Issue No. 07-1, “Accounting for Collaborative Arrangements” (EITF 07-1).  EITF 07-1 defines collaborative arrangements and requires collaborators to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) the other collaborators based on other applicable authoritative accounting literature, and in the absence of other applicable authoritative literature, on a reasonable, rational and consistent accounting policy is to be elected.  EITF 07-1 also provides for disclosures regarding the nature and purpose of the arrangement, the entity’s rights and obligations, the accounting policy for the arrangement and the income statement classification and amounts arising from the agreement.

F-11

EITF 07-1 will be effective for fiscal years beginning after December 15, 2008, which will be the Company’s fiscal year 2009, and will be applied as a change in accounting principle retrospectively for all collaborative arrangements existing as of the effective date.

The Company does not expect the adoption of EITF 07-1in 2009 to have a material effect on its consolidated financial position, results of operations or cash flows.

In June 2008, the FASB ratified the consensus on Emerging Issues Task Force (EITF) Issue 07-5, “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock.” This issue addresses whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which is the first part of the scope exception in paragraph 11(a) of SFAS No. 133, for purposes of determining whether the instrument should be classified as an equity instrument or accounted for as a derivative instrument.  The provisions of EITF Issue No. 07-5 are effective for financial statements issued for fiscal years beginning after December 15, 2008 and will be applied retrospectively through a cumulative effect adjustment to retained earnings for outstanding instruments as of that date.  The Company does not expect the adoption of EITF 07-05 to have a material effect on its consolidated financial position, results of operations or cash flows.

In March 2008, the FASB” issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133” (“SFAS No. 161”).  SFAS No. 161 is intended to improve financial standards for 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.  Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.  It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged.  The Company does not expect the adoption of SFAS No. 161 to have a material effect on its consolidated financial position, results of operations or cash flows.

In April 2008, the FASB issued FSP No. FAS 142-3,“Determination of the Useful Life of Intangible Assets”.  This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”.  The Company is required to adopt FSP 142-3 on January 1, 2009, earlier adoption is prohibited.  The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption.  The Company does not expect the adoption of FSP No. FAS 142-3 to have a material effect on its consolidated financial position, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162").  SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy).  SFAS No. 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."  The Company does not expect the adoption of SFAS No. 162 to have a material effect on its consolidated financial position, results of operations or cash flows.

F-12

In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) " ("FSP APB 14-1").  FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate.  FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.  The Company is currently evaluating the potential impact, if any, of the adoption of FSP APB 14-1 on its consolidated financial position, results of operations or cash flows.

In May 2008, the FASB issued FASB Statement No. 163, “Accounting for Financial Guarantee Insurance Contracts”, which clarifies how FASB Statement No. 60, “Accounting and Reporting by Insurance Enterprises”, applies to financial guarantee insurance contracts issued by insurance enterprises.  The standard is effective for financial statements issued for fiscal years beginning after December 15, 2008, including interim periods in that year.  The Company does not expect the adoption of SFAS 163 to have a material effect on its consolidated financial statements.

In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” Under the FSP, unvested share-based payment awards that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS.  The FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years.  The Company does not expect the adoption of FSP EITF No. 03-6-1 to have a material effect on its consolidated financial position, results of operations or cash flows.

In October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active.” This position clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.  It also reaffirms the notion of fair value as an exit price as of the measurement date.  This position was effective upon issuance, including prior periods for which financial statements have not been issued.  The adoption had no impact on the Company’s consolidated financial statements.

In December 2008, the FASB issued FSP 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, which is effective for fiscal years ending after December 15, 2009.  FSP 132(R)-1 requires disclosures about fair value measurements of plan assets that would be similar to the disclosures about fair value measurements required by SFAS 157.  The Company has no benefit plan as of December 31, 2008; therefore this pronouncement has no effect on the consolidated financial statements.

In December 2008, the FASB issued FSP SFAS 140-4 and FIN 46(R)-8, Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities.  The FSP requires extensive additional disclosure by public entities with continuing involvement in transfers of financial assets to special-purpose entities and with variable interest entities (VIEs), including sponsors that have a variable interest in a VIE.  This FSP became effective for the first reporting period ending after December 15, 2008 and did not have any material impact on the Company's consolidated financial statements.

F-13

In January 2009, the FASB issued Financial Statement of Position (“FSP”) Issue No. EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP EITF No. 99-20-1”).  FSP EITF No. 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be Held by a Transferor in Securitized Financial Assets” to achieve more consistent determination of whether an other-than-temporary impairment has occurred.  The Company adopted FSP EITF No. 99-20-1 and it did not have a material impact on the consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.

NOTE 2 - GOING CONCERN MATTERS

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $108,969,892 from April 4, 2008 (date of inception) through December 31, 2008.  Additionally, the Company has negative working capital of $84,084,212 as of December 31, 2008.  These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.  The Company’s continued existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.  The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

The Company is actively pursuing additional equity financing through discussions with investment bankers and private investors.  There can be no assurance that the Company will be successful in its effort to secure additional equity financing.

NOTE 3 – NOTE RECEIVABLE

In conjunction with the sale of convertible debentures, the Company’s broker/dealer issued a demand note for $3,039,123 representing non forwarded proceeds received from note subscribers.  The Company has been provided common stock of the Company held by the broker/dealer as collateral.

NOTE 4 – DEFERRED FINANCING COSTS

Deferred financing costs are amortized ratably over a 13.5 month period in conjunction with the related convertible debenture.  The Company charged $386,188 to operations for the period from April 4, 2008 (date of inception) through December 31, 2008.

NOTE 5 – INVESTMENTS

The Company entered into a Framework Agreement whereby the Company, through its subsidiary, Gulfstream Capital Ltd to acquire 49% interest in ChinaComm Cayman for a total purchase price of $196,000,000.  At December 31, 2008, pursuant to the agreement, Company has paid $5,000,000 towards the purchase.  The investment of $5,000,000 represented part payment towards the total purchase price of $196,000,000 and is carried at cost under the cost method of accounting for investment.

F-14

The Company did not evaluate for impairment and the fair value of the cost-method investment is not estimated since there were no identified events or changes in circumstances that may have a significant adverse effect on the fair value and the Company determined, in accordance with SFAS No. 107 that it is not practicable to estimate the fair value of the investment.

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of the following:

Accounts payable	$	40,621,862
Accrued interest		2,010,672
Total	$	42,632,534

NOTE 7 – CONVERTIBLE DEBENTURES

Convertible debentures are comprised of the following:

	Gross Principal Amount			Less: Unamortized Discount			Net
10% convertible note payable, unsecured and due December 31, 2008; accrued and unpaid interest due at maturity; Note holder has the option to convert note principal together with accrued and unpaid interest to the Company’s common stock at a rate of $0.95 per share.  The Company is currently in default	$	13,123,832			-		$	13,123,832
10% convertible debenture, due December 31, 2009 with interest payable at maturity.  The note is convertible into the Company’s common stock at the lower of a) $0.95 or b) 80% of weighted average bid price for the common stock on a principal market for ten days before, but not including, conversion date.	$	20,979,572			12,568,303		$	8,411,269
Total		34,103,404			12,568,303			21,535,101
Less current maturities		(34,103,404	)		(12,58,303	)		(21,535,101	)
Long term portion	$	-		$	-		$	-

The Company entered into a Convertible Note Purchase Agreement with accredited investors during the year ended December 31, 2008 for the issuance of an aggregate of $35,501,482 of convertible notes (“Convertible Notes”).  The Convertible Notes accrue interest at 10% per annum, payable at maturity and were due on December 31, 2008.  The note holder has the option to convert any unpaid note principal to the Company’s common stock at a rate of $0.95 per share of common stock.  The effective interest rate at the date of inception was 420.61% per annum.

In accordance with Emerging Issues Task Force Issue 98-5, Accounting for Convertible Securities with a Beneficial Conversion Features or Contingently Adjustable Conversion Ratios (“EITF 98-5”), the Company recognized an imbedded beneficial conversion feature present in the Convertible Notes.  The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital.  The Company recognized and measured an aggregate of $27,060,987 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid-in capital and a discount against the Convertible Note.  The debt discount attributed to the beneficial conversion feature is amortized ratably to operations as interest expense over the term of the promissory note.

F-15

For the period from April 4, 2008 (date of inception) through December 31, 2008, the Company amortized $27,060,987 to current period operations as interest expense.

On November 17, 2008, the Company entered into an Amended and Restated Note Purchase agreement with certain note holders for the modification of certain terms and conditions contained in the previously issued Convertible Note Purchase Agreement.  The Company issued an aggregate of $20,979,572 in amended convertible notes in exchange for $17,389,776 of previously issued notes, a 20% inducement premium and accrued interest.  The convertible notes accrue interest at 10% per annum, payable at maturity and are due on December 31, 2009.  The note holder has an option to convert any unpaid note principal to the Company’s common stock at the lower of a) $0.95 or b) 80% of the weighted average bid price of the previous ten days, excluding date of conversion.  The effective interest rate at the date of inception was 304.22%.

The Company's identified embedded derivatives related to the Amended and Restated Note Purchase Agreement entered into on November 17, 2008.  These embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the Amended and Restated Note Purchase Agreement up to the proceeds amount and to fair value as of each subsequent balance sheet date.  At the inception of the Securities Purchase Agreement, the Company determined a fair value $14,083,386 of the embedded derivative.  The fair value of the embedded derivative was determined using the Black Scholes Option Pricing Model based on the following assumptions:  dividend yield: -0-%, volatility 144.76%, risk free rate: 1.08%, expected term: 409 days.

NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS

The Company's derivative financial instruments consisted of embedded derivatives related to the 10% amended and restated convertible notes issued November 17, 2008.  The embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments required that the Company record the derivatives at their fair values as of the inception date of the notes (estimated at $14,083,386) and at fair value as of each subsequent balance sheet date.  Any change in fair value was recorded as non-operating, non-cash income or expense at each reporting date.  If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company recorded a non-operating, non-cash charge.  If the fair value of the derivatives is lower at the subsequent balance sheet date, the Company recorded non-operating, non-cash income.  Conversion-related derivatives were valued using the Black Scholes Option Pricing Model with the following assumptions: dividend yield of 0%; annual volatility of 154.91%; and risk free interest rate of 0.37%.  The derivatives were classified as short-term liabilities.

NOTE 9 – MANDATORY REDEEMABLE SERIES B COMMON STOCK

The Company is authorized to issue 66,909,000, $0.001 par value Series B common stock.  The general attributes are:

Voting rights

Each share of Series B common stock is entitled to ten (10) votes in all matters for any action that the Series A common stockholders are entitled to vote.

Non participatory

The Series B common stock does not participate in any declared dividends for any class of stock.

F-16

Liquidation preference

The Series B common stockholders have the same liquidation rights as the Series A common stockholders.

Transferability

The Series B common stock is non transferable.

Mandatory redemption

The Series B common stock will be redeemed in 2023 at par value ($0.001) per share

NOTE 10 – STOCKHOLDERS EQUITY

The Company is authorized to issue 25,000,000 shares of preferred stock, no par value. No shares of preferred stock were issued and outstanding as of December 31, 2008.

The Company is authorized to issue 500,000,000 shares of Series A common stock.  As of December 31, 2008, there were 89,458,947 shares issued and outstanding.

During the year ended December 31, 2008, the Company issued 1,490,336 shares of common stock in exchange for convertible debentures.

During the year ended December 31, 2008, the Company issued 1,851,523 shares of common stock in settlement of outstanding accounts payable.

NOTE 11- RELATED PARTY TRANSACTIONS

The Company has the following material related party transactions:

Our operating subsidiary Trussnet originally was organized in 2008 by Trussnet Delaware.  Since our acquisition of Trussnet, Trussnet Delaware has performed approximately $51.8 million in contract services, representing substantially all of our operations, including the engineering and deployment services we provide relating to the Chinacomm Network. We also share office space with Trussnet Delaware.  Our Chief Executive Officer George Alvarez, our Chief Operating Officer Mario Alvarez and our Chief Administrative Officer Isidoro Gutierrez all were officers and stockholders of Trussnet Delaware but resigned their offices at Trussnet Delaware and transferred their equity interest in Trussnet Delaware to third parties prior to joining our Company.  The current Chief Executive Officer of Trussnet Delaware is the brother of Carlos Trujillo, our Chief Financial Officer.  Trussnet Delaware has paid consulting fees to Mario Alvarez and Kenneth L. Waggoner subsequent to our acquisition of Trussnet.

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Pursuant to an Agreement for Professional Services, dated April 10, 2008, between Trussnet and Trussnet Delaware, we have agreed to pay Trussnet Delaware for its services at its standard hourly rates or based upon fixed fees for specific services.  The agreement has a term of two years but either party may terminate the agreement upon sixty days written notice.  Due to a lack of funding, we have not paid Trussnet Delaware for a significant portion of the services it has provided to us.  As of December 31, 2008, we owed Trussnet Delaware approximately $31.8 million.  Trussnet Delaware has advanced funds for our operations in anticipation of our receiving additional funding.  Except for the extension of credit for services performed, we believe that Trussnet Delaware provided all such services at prices and on terms and conditions that are the same as those that would result from arm’s-length negotiations between unrelated parties. As we have no employees, we believe that there is only a de minimis value to our shared use of Trussnet Delaware office space.

Trussnet Delaware has subcontracted much of the work developing applications software for the Chinacomm Network to Trussnet ADC Co. Inc.  Our President Tay Yong Lee is the Chief Executive Officer of Trussnet ADC Co. Inc.

We purchased our 49% interest in Chinacomm Cayman from Trussnet Capital Partners (HK) Ltd., a Hong Kong company of which Tay Yong Lee is a director and principal stockholder.  We believe that purchase was on terms and conditions that are the same as those that would result from arm’s-length negotiations between unrelated parties.

In January 2008, we entered into a letter of intent for a share exchange with Capital Truss.  We spent approximately $6.6 million on lease improvements relating to this venture before terminating the letter of intent.  Our Chief Executive Officer George Alvarez is the President of Capital Truss.  George Alvarez and our Chief Administrative Officer Isidoro Gutierrez are the only current directors of Capital Truss, Inc.  Our President Tay Yong Lee and our Chief Operating Officer Mario Alvarez previously served as directors of Capital Truss and our Chief Financial Officer Carlos A. Trujillo previously served as is its Secretary and Treasurer.

We paid Robert P. Weygand, Jr. 931,579 shares of our Class A Common Stock which we valued at $885,000 for a portion of the consulting services Mr. Weygand provided in 2008.  He performed an additional $440,100 in consulting services during 2008 and $644,200 in consulting services during the first quarter of 2009 for which we have not yet paid him.  Mr. Weygand joined our Board of Directors in April 2009.

We have paid Westmoore Securities, Inc. $1,954,641 since January 1, 2008 in fees relating to the sale of our convertible notes due December 31, 2009.  Matthew R. Jennings, an affiliate of Westmoore Securities, Inc., was a member of our Board of Directors until March 7, 2009. We have agreed to accept 8,328,615 shares of our Series A Common Stock from Westmoore Management LLC and certain of its affiliates in exchange for the cancellation of a $2.9 million promissory note previously issued to us by Westmoore Management LLC. Mr. Jennings is the Chief Executive Officer of Westmoore Management LLC. 

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NOTE 12 - COMMITMENTS AND CONTINGENCIES

Employment and Consulting Agreements

The Company has consulting agreements with outside contractors to provide certain, financial, executive and financial advisory services.  The Agreements are generally for a term of less than 12 months from inception and renewable automatically from year to year unless either the Company or Consultant terminates such engagement by written notice.

Litigation

The Company may be subject to legal proceedings and claims which arise in the ordinary course of its business.  Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.  The Company had no pending legal proceedings or claims as of May 15, 2009.

On February 28, 2008, the Company entered into a one year contract for investor relations services requiring the payment of $7,500 per month expiring on January 31, 2009.  This commitment can be terminated by either party with 90 days' written notice.  This contract was terminated during the period ended December 31, 2008.

On March 28, 2008, the Company entered into an agreement for financial advisory and placement agent services for a proposed offering to be determined of up to $100,000,000.  Pursuant to the agreement, the Company paid $30,000 as a retainer and advance during the period ended December 31, 2008.  In connection with a future proposed offering, the advisory firm would be entitled to 250,000 shares of the Company’s common stock, a cash fee of 1% of the gross proceeds received by the Company, a commission of 6% of the gross proceeds and warrants, exercisable at $2.50 per share, equal to 1% of the shares sold.

Pursuant to the Framework Agreement on April 7, 2008 with Chinacomm for the engineering and design services related to the build out and operation of a wireless broadband system in the PRC, the Company has an outstanding commitment in the amount of $191,000,000.

NOTE 13 – FAIR VALUE MEASUREMENT

The Company adopted the provisions of SFAS No. 157, “Fair Value Measurements” on April 4, 2008.  SFAS No. 157 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.  SFAS No. 157 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  SFAS No. 157 establishes three levels of inputs that may be used to measure fair value:

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Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.  In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of SFAS No. 157, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (Including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2008:

The following table sets forth the Company’s short and long-term investments as of December 31, 2008 which are measured at fair value on a recurring basis by level within the fair value hierarchy.  As required by SFAS No. 157, these are classified based on the lowest level of input that is significant to the fair value measurement:

	Quoted Prices in Active Markets for Identical Instruments Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3			Assets at fair Value
Assets:
Cash	$	6,578		-		-			6,578
Liabilities:
Debt Derivative					$	(26,165,886	)		(26,165,886	)

At December 31, 2008, the carrying amounts of the convertible notes payable approximate fair value because the entire note had been classified to current maturity.

NOTE 14 – NET LOSS PER SHARE

The Company accounts for net (loss) per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (“EPS”), which requires presentation of basic and diluted EPS on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.

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Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during each period.  It excludes the dilutive effects of potentially issuable common shares such as those related to our convertible notes.  Diluted net (loss) income per share is calculated by including potentially dilutive share issuances in the denominator.  However, diluted net (loss) income per share for the period from April 4, 2008 (date of inception) through December 31, 2008does not reflect the effects of 84,453,769 shares potentially issuable upon conversion of our convertible notes as of December 31, 2008.  These potentially issuable shares would have an anti-dilutive effect on our net (loss) income per share.

NOTE 15 – INCOME TAXES

During the year ended December 31, 2008, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, “ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES,” (FIN 48), which supplements SFAS No. 109, “ACCOUTING FOR INCOME TAXES,” by defining the confidence level that a tax position must meet in order to be recognized in the financial statements.  The Interpretation requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained based solely on its technical merits as of the reporting date.  The more-likely-than-not threshold represents a positive assertion by management that a company is entitled to the economic benefits of a tax position.  If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits no benefits of the tax position are to be recognized.  Moreover, the more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of a benefit.  With the adoption of FIN 48, companies are required to adjust their financial statements to reflect only those tax positions that are more-likely-than-not to be sustained.  Any necessary adjustment would be recorded directly to retained earnings and reported as a change in accounting principle.

The income tax (provision) benefit consists of the following:

	2008
Current income tax provision:
Federal	$	-
State		-
		-
Deferred income tax provision:
Federal		25,840,000
State		6,173,000
		32,013,000
Less:  Valuation Allowance		(32,013,000	)

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The following table documents the effective tax rates:

Effective Federal rate	34.0	%
Effective State rate	6.0	%
	40.0	%

The components of the deferred tax asset, net of the deferred tax liability, are as follows at December 31:

	2008
Deferred tax asset (liability):
Net  Operating Loss carry forward	$	46,683,000
Loss on change in fair value of debt  derivatives		(5,176,000	)
Beneficial conversion feature		(11,593,000	)
State taxes		2,099,000
Total		32,013,000
Less: Valuation allowance		(32, 013,000	)
	$	-

Upon adoption of FIN 48 as of April 4, 2008, the Company had no gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.  At December 31, 2008 the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances were $0.  These amounts consider the guidance in FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”. The Company has not accrued any additional interest or penalties as a result of the adoption of FIN 48.

SFAS No. 109 requires a valuation allowance to be recorded when, under the standard; it is more likely than not that the deferred tax assets will be realized.  The future use of deferred tax assets is dependent on the future taxable profits which arise from taxable temporary timing differences.  The Company believes all its deferred tax assets are fully realizable based on management’s projections that future taxable profits will utilize deferred tax assets arising from past net operating losses.

Per Internal Revenue Code Section 382, which state law conforms to, in the event of a change of ownership, the availability of the Company’s net operating loss carryforwards may be subject to an annual limitation against taxable income in future periods, which could substantially limit the eventual utilization of these net operating loss carryforwards.

NOTE 16 – SUBSEQUENT EVENTS

Effective as of February 29, 2009, the Company entered into an agreement, whereby Olotoa Investments, LLC (Olotoa) will purchase a forty-nine percent (49%) share of our Series A Common Stock on a fully diluted basis for $300 Million (“Purchase Price”).  Olotoa shall commence payments on March 9, 2009 through September 9, 2010 in such amounts as designated by our board of directors.  After receipt of each payment toward the purchase price, the Company will deliver to Olotoa, stock certificates evidencing legal and beneficial ownership of the pro rated portion of the purchased securities so as to deliver the entire 49% after receipt of the full payment of the purchase price.

On March 9, 2009 the Company entered into an Asset Purchase Agreement with Trussnet Capital Partners (HK) Ltd.(Seller), (registered under the laws of Hong Kong) whereby the Company acquired 2,450,000,000 common stock shares, a 49% Equity Interest in Chinacomm Limited, a Caymen Island corporation.  The shares of Chinacomm Limited were acquired for $191 million financed with a promissory note due to the Seller.  The note matures on March 9, 2010 and bears interest at eight percent (8%) per annum, payable quarterly, beginning May 31, 2009.  The note is secured by a pledge agreement, whereby the 2,450,000,000 shares of Chinacomm Limited acquired are pledged to Trussnet Capital Partners (HK) Ltd granting a first priority lien on and security interest in all our rights, title and interest in and to the Equity Interest.

A Stock Purchase Agreement dated February 22, 2009 whereby Gulfstream Capital Partners Ltd, (Gulfstream), a subsidiary of Trussnet USA, Inc. Nevada, agreed to acquire 12,531,260 shares of common stock of Perusat S.A. (Perusat) organized and existing under the laws of the Republic of Peru.  The acquisition of these shares will provide the Company with an equity interest of ninety-five percent (95%) of Perusat.  Gulfstream will deliver one million (1,000,000) shares of China Tel Group, Inc. Series A Common Stock and $275,000.  Perusat is in the business of providing all type of telecommunication services, including local and long distance telephone service, land line telephony, mobile phones, IP telephony, internet, cable television and rental of networks and equipment.

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EX-2.1

EXHIBIT 2.1

REORGANZATION AND MERGER AGREEMENT

THIS REORGANIZATION AND MERGER  AGREEMENT, dated as of the 21stday of May 2008 (this “Agreement”) is entered into by and among, CHINA TEL GROUP,INC., a Nevada corporation (“CTG”), CHINACOMM ACQUISITION, INC, a California corporation (“CAI”), TRUSSNET USA, INC., a Nevada corporation (“TUI”), and all the shareholders of TUI (collectively, the “TUI Shareholders”).  CTG, CAI, TUI and the TUI Shareholders are referred to singularly as a “Party” and collectively as the “Parties.”

WITNESSETH:

WHEREAS, the TUI Shareholders own all of the issued and outstanding shares of TUI (the “TUI Shares”);

WHEREAS, TUI is a party to a certain Framework Agreement by and between TUI and CECT-Chinacomm Communications Co, Ltd. (“Chinacomm”) dated April 7, 2008 (the “Framework Agreement”), which contemplates, among other things, a series of transactions between the parties thereof including, without limitation, jointly establishing a wholly-owned foreign invested enterprise in China, with forty-nine percent (49%) of its equity interests indirectly owned by TUI and fifty-one percent (51%) of its equity interests indirectly owned by Chinacomm (such transactions, the “WOFIE Transactions”).  The Framework Agreement is attached hereto as Exhibit B;

WHEREAS, CTG is in the business of exploration for gold and related minerals in British Columbia, Canada and wishes to expand its business;

WHEREAS, CAI is a wholly-owned subsidiary of CTG;

WHEREAS, the respective Boards of Directors of CTG, CAI, TUI and the TUI Shareholders have deemed it advisable and in the best interests of CTG, CAI, TUI and the TUI Shareholders that TUI be acquired by CTG, pursuant to the terms and conditions set forth in this Agreement;

WHEERAS, CTG, CAI, TUI and the TUI Shareholders propose to enter into this Agreement which provides, among other things, the TUI Shareholders will deliver the TUI Shares to CTG in exchange for the issuance by CTG of an aggregate number of shares of CTG’s common stock set forth in Section 2.01 of this Agreement, on the terms and conditions set forth herein (the “Share Exchange”), and that CAI be merged into TUI with TUI being the surviving corporation and becoming a wholly-owned subsidiary of CTG, and such additional items as more fully described in this Agreement; and

WHEREAS, the parties desire the transaction to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.

NOW, THEREFORE, in consideration, of the promises and of the mutual representations, warranties and agreements set forth herein, the Parties hereto agree as follows:

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ARTICLE I

DEFINITIONS

Section 1.01.Definitions. The following terms shall have the following respective meanings:

“Affiliate”	with respect to any Party, a Person that directly or indirectly controls, is controlled by, or is under common control of such Party.  For the purpose of this definition, “control” means (i) ownership of more than fifty percent (50%) of the voting shares of a Person or (ii) the right or ability to direct the management or policies of a Person through ownership of voting shares or other securities, pursuant to a written agreement or otherwise;
“Business Day”	a day (other than a Saturday) on which banks in Nevada are open for business throughout their normal business hours;
“Closing”	the closing of the transactions contemplated by this Agreement;
“Completion”	completion of acquisition of the TUI Shares in accordance with the terms and conditions of this Agreement;
“Encumbrance”	any mortgage, charge, pledge, lien, (otherwise than arising by statute or operation of law), equities, hypothecation or other encumbrance, priority or security interest, preemptive right deferred purchase, title retention, leasing, sale-and-repurchase or sale-and-leaseback arrangement whatsoever over or in any property, assets or rights of whatsoever nature and includes any agreement for any of the same and reference to “Encumbrances” shall be construed accordingly;
“Exchange Act”	the US Securities Exchange Act of 1934;
“Person”	any individual, firm, company, government, state or agency of a state or any joint venture, association or partnership (whether or not having separate legal personality);
“Securities Act”	the US Securities Act of 1933;
“SEC”	the US Securities and Exchange Commission;
“US”	United States of America;
“United States Dollars” or “US$”	United States dollars;

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Section 1.02.Rules of Construction.

(a)           Unless the context otherwise requires, as used in this Agreement:  (i) “including” means “including, without limitation”; (ii) words in the singular include the plural; (iii) words in the plural include the singular; (iv) words applicable to one gender shall be construed to apply to each gender; (v) the terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this entire Agreement, including the Schedules hereto; (vi) the terms “Article,” “Section” and “Schedule” shall refer to the specified Article, Section or Schedule of or to this Agreement and references to paragraphs shall refer to the relevant paragraph of a specified Schedule and (vii) the term “day” shall refer to calendar days.

(b)           Titles and headings to Articles and Sections are inserted for convenience of reference only, and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

ARTICLE II

THE SHARE EXCHANGE AND MERGER

Section 2.01.Share Exchange and Merger.

(a)           Subject to and upon the terms and conditions of this Agreement, on the Closng Date (as defined hereafter), CTG, through its wholly-owned subsidiary CAI, shall acquire all of the TUI Shares from the TUI Shareholders with all of the TUI Shares exchanged being free from all Encumbrances together with all rights now or hereafter attaching thereto.

(b)           In exchange for the delivery of the TUI Shares on the Closing Date, CTG shall deliver to the TUI Shareholders:

(i)           66,909,088 restricted shares of CTG’s Series Acommon stock (the “CTG Series A Common Stock”), which CTG Series A Common Stock shall, at the Closing Date or immediately thereafter (after giving effect to the cancellation of 57,600,000 shares of restricted common stock contemplated by Section 8.06, shall represent 82.48% of CTG’s total issued and outstanding shares of Series A Common Stock; and

(ii)           66,909,088 shares of CTG’s Series B common stock (the “CTG Series B Common Stock”) with certain rights and privileges, including, but not limited to, the right to cast at all shareholders’ meetings or any shareholder action taken without a meeting, a total of ten (10) votes for every one (1) share of CTG Series B Common Stock held, which CTG Series B Common Stock shall be non-transferable and shall be redeemable by CTG, at CTG’s sole discretion, fifteen (15) years from the Closing Date at par value of $0.0001 per share (the aforementioned CTG Series A Common Stock and CTG Series B Common Stock are referred to herein collectively as the “Exchange Shares”); provided, however, that 2,000,000 shares of CTG Series A Common Stock and 2,000,000 shares of CTG Series B Common Stock to be delivered pursuant to subclause (i) of this Subsection 2.01(b) shall be held by Horwitz Cron & Jasper pursuant to a Shareholder’s Agreement between Bevan Cooney and TUI to be entered into by them on or prior to the Closing.

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(c)           Upon execution of this Agreement, all of the Board Members of CTG, except George Alvarez, shall resign and CTG shall appoint four (4) nominees from the TUI Shareholders to CTG’s Board of Directors to serve, namely, Matthew Jennings, Mario Alvarez, Michael Sugarmanand Colin Tay.

(d)           The Share Exchange shall take place upon the terms and conditions provided for in this Agreement and in accordance with applicable law. If the Closing does not occur as set forth in Section 2.02 of this Agreement due to one Party’s failure to perform, then the other Party may terminate the Agreement.

(e)           Following the Share Exchange, CAI will affect a short-form merger with TUI under the Nevada Revised Statutes whereby CAI shall be merged into TUI with TUI being the surviving corporation.

Section 2.02.Closing Location.  The Closing of the Share Exchange and the other transactions contemplated by this Agreement will occur no later than May 31, 2008, or as soon thereafter as possible (the “Closing Date”), at a place and time mutually agreed by the Parties in writing.

Section 2.03.TUI’s Closing Documents.  At the Closing, the TUI Shareholders and TUI will tender to CTG and CAI:

(a)           Certified copy of resolutions of the Board of Directors of TUI in a form satisfactory to CTG, acting reasonably, authorizing:

(i)           the execution and delivery of this Agreement by TUI;

(ii)	the transfer and registration of the TUI Shares in the name of CTG and the issuance of one (1) new share certificate representing the TUI Shares in the name of CTG; and
(iii)	consent to the merger of CAI and TUI with TUI as the surviving corporation.

(b)           Original share certificates issued in the name of TUI representing all of the TUI Shares, duly endorsed for transfer by TUI and marked “cancelled for transfer” or as otherwise directed by CTG or its counsel, in accordance with the laws of the State of Nevada;

(c)           One (1) new share certificate issued by TUI in the name of CTG representing the TUI Shares;

(d)           A certified copy of the register of shareholders of TUI showing CTG as the registered owner of the TUI Shares; and

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(e)           A certificate executed by a duly appointed officer of TUI and by the TUI Shareholders certifying that the conditions in Section 9.01(b) have been satisfied.

Section 2.04.CTG’s Closing Documents.  At the Closing, CTG will tender to TUI and the TUI Shareholders:

(a)           A certified copy(ies) of resolutions of the Board of Directors of CTG in a form satisfactory to TUI and the TUI Shareholders, acting reasonably, authorizing:

(i)           the execution and delivery of this Agreement by CTG; and

(ii)           the issuance or transfer of the Exchange Shares to the TUI Shareholders;

(b)           Share certificates, registered in the name of the TUI Shareholders or such other names as the TUI Shareholders may unanimously direct, representing the Exchange Shares; and

(c)           A certificate executed by a duly appointed officer of CTG certifying that the conditions in Section 10.01(b) have been satisfied.

Section 2.05.CAI’s Closing Documents.  At the Closing, CAI will tender to TUI and the TUI Shareholders:

(a)           A certified copy(ies) of resolutions of the Board of Directors of CAI in a form satisfactory to TUI and the TUI Shareholders, acting reasonably, authorizing:

(i)           the execution and delivery of this Agreement by CAI; and

(ii)           consent to the merger of CAI and TUI with TUI as the surviving corporation;

(b)           A certificate executed by a duly appointed officer of CAI certifying that the conditions in Section 10.01(b) have been satisfied.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.01.Each Party represents and warrants to the other Party that each of the warranties it makes is accurate in all respects and not misleading as at the date of this Agreement.

Section 3.02.Each Party undertakes to disclose in writing to the other Party anything which is or may constitute a breach of or be inconsistent with any of the warranties immediately upon the same coming to its notice at the time of and after Completion.

Section 3.03.Each Party agrees that each of the warranties it makes shall be construed as a separate and independent warranty and (except where expressly provided to the contrary) shall not be limited or restricted by reference to or inference from the terms of any other warranty or any other term of this Agreement.

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Section 3.04.Each Party acknowledges that the restrictions contained in Section 12.01 (Public Notices) and Section 12.10 (Confidentiality) shall continue to apply after the Completion under this Agreement without limit in time.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF CTG

Section 4.01.Organization, Standing and Authority; Foreign Qualification. CTG is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as proposed to be conducted and is duly qualified or licensed as a foreign corporation in good standing in each jurisdiction in which the character of its properties or the nature of its business activities require such qualification.

Section 4.02.Corporate Authorization. The execution, delivery and performance by CTG of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of CTG, and this Agreement constitutes a valid and binding agreement of CTG. The Exchange Shares to be issued in accordance with this Agreement shall be duly authorized and, upon such issuance, will be validly issued, fully paid and non-assessable.

Section 4.03.Capitalization.  CTG’s authorized capital stock currently consists solely of 500,000,000 shares of common stock, of which 76,808,000 shares are issued and outstanding as of the date hereof. All of such issued and outstanding shares of CTG’s common stock are duly authorized, validly issued, fully paid and non-assessable. Except as described on Schedule 4.03, there are no outstanding options, warrants, agreements or rights to subscribe for or to purchase, or commitments to issue, shares of CTG’s common stock or any other security of CTG or any plan for any of the foregoing. Except as set forth on Schedule 4.03, CTG is not obligated to register the resale of any of its common stock on behalf of any shareholder of CTG under the Securities Act.

Section 4.04.Subsidiaries. CAI is the sole subsidiary, direct or indirect , of CTG.

Section 4.05.SEC Filings.

(a)           CTG has delivered to TUI and the TUI Shareholders (i) CTG’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 2007, containing CTG’s consolidated balance sheet at June 30, 2007 and consolidated statements of income, changes in stockholders' deficiency and cash flows of CTG for the period from September 19, 2005 (date of inception) to the fiscal year ended June 30, 2007, along with a copy of the audit report of Madsen & Associates, CPA’s Inc., Murray, Utah, independent auditors; and (ii) quarterly reports on Form 10-QSB for the quarters ended September 30 and December 31, 2007 (collectively, “CTG’s Reports”). To the best of CTG’s knowledge and belief, all of CTG’s Reports as of their respective dates (i) comply in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder, (ii) do not contain any untrue statement of a material fact, and (iii) do not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and

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(b)           All documents which CTG is responsible for filing with the SEC or any regulatory agency in connection with this Agreement will comply as to form in all material respects with the requirements of applicable law, and all of the information relating to CTG in any document filed with the SEC or any other regulatory agency in connection with this Agreement or the transactions otherwise contemplated hereby shall be true and correct in all material respects.

Section 4.06.Financial Statements. All consolidated financial statements included in CTG’s Reports, including the related notes, fairly present, in conformity with generally accepted accounting principles (“GAAP”) applied on a consistent basis (except as indicated therein), the consolidated financial position of CTG as of the dates thereof and the consolidated results of operations and changes in shareholders' equity and cash flows of CTG for the periods then ended, subject, in the case of the interim financial statements, to normal and recurring year-end audit adjustments and except that the interim financial statements do not contain all of the notes required by GAAP.

Section 4.07.Articles of Incorporation and Bylaws. (a) CTG has heretofore delivered to TUI and the TUI Shareholders true, correct and complete copies of its Articles of Incorporation, certified by the Secretary of State of the State of Nevada and Bylaws or comparable instruments, certified by the corporate secretary thereof.

Section 4.08.No Conflict.  The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

(a)           violate any provision of the Articles of Incorporation, Bylaws or other charter or organizational document of CTG;

(b)           violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which CTG is a party or by or to which either of its assets or properties, may be bound or subject;

(c)           violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon CTG or upon the securities, assets or business of CTG;

(d)           violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to CTG or to the securities, properties or business of CTG; or

(e)           result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by CTG.

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Section 4.09.Litigation. There is no litigation, suit, proceeding, action or claim at law or in equity, pending or to CTG’s best knowledge threatened against or affecting CTG or involving any of CTG’s property or assets, before any court, agency, authority or arbitration tribunal, including, without limitation, any product liability, workers' compensation or wrongful dismissal claims, or claims, actions, suits or proceedings relating to toxic materials, hazardous substances, pollution or the environment. CTG is not subject to or in default with respect to any notice, order, writ, injunction or decree of any court, agency, authority or arbitration tribunal.

Section 4.10.Compliance with Laws. To the best knowledge of CTG, it has complied with all laws, municipal bylaws, regulations, rules, orders, judgments, decrees and other requirements and policies imposed by any governmental authority applicable to it, its properties or the operation of its business, except where the failure to comply will not have a material adverse effect on the business, properties, financial condition or earnings of CTG.

Section 4.11.True and Correct Copies. All documents furnished or caused to be furnished to TUI and the TUI Shareholders by CTG are true and correct copies, and there are no amendments or modifications thereto except as set forth in such documents.

Section 4.12.Compliance with Securities Act.  Neither CTG nor to the knowledge of CTG anyone authorized to act on its behalf has taken, or will take, any action that would subject the issuance or sale of the Exchange Shares hereunder to the registration requirements of Section 5 of the Securities Act; provided however, the availability of an exemption from the registration requirements of Section 5 is based upon the accuracy and completeness of the representations and warranties of TUI and the TUI Shareholders on which CTG will rely. In connection with the offer and sale of the Exchange Shares, CTG has not conducted any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, the Internet or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

Section 4.13.Contracts.

(a)           There have been delivered or made available to TUI and the TUI Shareholders, or prior to the Closing there will have been delivered or made available to TUI and the TUI Shareholders, true, correct and complete copies of each of the contracts set forth in Schedule 4.13. Each such contract is valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with its terms, and neither CTG nor any of its affiliates, as the case may be, is in default in any respect under any of them.

(b)           Except for the contracts set forth on Schedule 4.13 and excluding any obligation referenced in this Agreement, CTG is not a party to any:

(i)           contracts with any current or former officer, director, employee, consultant, agent or other representative having more than three (3) months to run from the date hereof or providing for an obligation to pay and/or accrue compensation of $100,000 or more per annum, or providing for the payment of fees or other consideration in excess of $100,000 in the aggregate to any officer or director of CTG, or to any other entity in which CTG has an interest;

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(ii)           contracts for the purchase or sale of equipment or services that contain an escalation, renegotiation or re-determination clause or that can be cancelled without liability, premium or penalty only on ninety (90) days’ or more notice;

(iii)           contracts for the sale of any of its assets or properties or for the grant to any person of any preferential rights to purchase any of its or their assets or properties;

(iv)           contracts (including, without limitation, leases of real property) calling for an aggregate purchase price or payments in any one (1) year of more than $100,000 in any one case (or in the aggregate, in the case of any related series of contracts);

(v)           contracts relating to the acquisition by CTG of any operating business of, or the disposition of any operating business by, any other person;

(vi)           executory contracts relating to the disposition or acquisition of any investment or of any interest in any person;

(vii)           joint venture contracts or agreements;

(viii)         contracts under which CTG agrees to indemnify any party, other than in the ordinary course of business or in amounts not in excess of $100,000 or to share tax liability of any party;

(ix)           contracts containing covenants of CTG not to compete in any line of business or with any person in any geographical area or covenants of any other person not to compete with CTG in any line of business or in any geographical area;

(x)           contracts for or relating to computers, computer equipment, computer software or computer services; or

(xi)           contracts relating to the borrowing of money by CTG or the direct or indirect guarantee by CTG of any obligation for, or an agreement by CTG to service, the repayment of borrowed money, or any other contingent obligations in respect of indebtedness of any other Person, including, without limitation:

(A)           any contract with respect to lines of credit;

(B)           any contract to advance or supply funds to any other person other than in the ordinary course of business;

(C)           any contract to pay for property, products or services of any other person even if such property, products or services are not conveyed, delivered or rendered;

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(D)           any keep-well, make-whole or maintenance of working capital or earnings or similar contract; or

(E)           any guarantee with respect to any lease or other similar periodic payments to be made by any other person; and

(xii)           any other material contract whether or not made in the ordinary course of business.

Section 4.14.Operations of CTG.  Except as disclosed on Schedule 4.15 or as contemplated by this Agreement, since the latest filing date of CTG’s Reports, CTG has not:

(a)           amended its Articles of Incorporation or Bylaws or merged with or into or consolidated with any other person or entity, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or the character of its business;

(b)           issued, reserved for issuance, sold or redeemed, repurchased or otherwise acquired, or issued options or rights to subscribe to, or entered into any contract or commitment to issue, sell or redeem, repurchase or otherwise acquire, any shares of its capital stock or any bonds, notes, debentures or other evidence or indebtedness;

(c)           declared or paid any dividends or declared or made any other distributions of any kind to its shareholders;

(d)           made any change in its accounting methods or practices or made any change in depreciation or amortization policies, except as required by law or generally accepted accounting principles;

(e)           made any loan or advance to any of  its shareholders or to any of its directors, officers or employees, consultants, agents or other representatives, or made any other loan or advance, otherwise than in the ordinary course of business;

(f)           sold, abandoned or made any other disposition of any of its assets or properties;

(g)           granted or suffered any lien on any of its assets or properties;

(h)           entered into or amended any contracts to which it is a party, or by or to which it or its assets or properties are bound or subject which if existing on the date hereof would be required to be disclosed in Schedule 4.13;

(i)           made any acquisition of all or a substantial part of the assets, properties, securities or business of any other person or entity;

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(j)           paid, directly or indirectly, any of its material liabilities before the same became due in accordance with its terms or otherwise than in the ordinary course of business;

(k)           terminated or failed to renew, or received any written threat (that was no subsequently withdrawn) to terminate or fail to renew, any contract that is or was material to the assets, liabilities, business, property, operations, prospects, results of operations or condition (financial or otherwise) of CTG; or

(l)           entered into any other contract or other transaction that materially increases the liabilities of CTG.

Section 4.15.Absence of Certain Changes.  Since the latest filing date of CTG’s Reports, there has been no event, change or development which could have a material adverse effect on CTG.

Section 4.16.Material Information.  This Agreement, the Schedules attached hereto and all other information provided, in writing, by CTG or representatives thereof to TUI and the TUI Shareholders, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make any statement contained herein or therein not misleading.  There are no facts or conditions which have not been disclosed to TUI and the TUI Shareholders in writing which, individually or in the aggregate, could have a material adverse effect on CTG or a material adverse effect on the ability of CTG to perform any of its obligations pursuant to this Agreement.

Section 4.17.Brokerage.  No broker or finder has acted, directly or indirectly, for CTG nor did CTG incur any finder’s fee or other commission, in connection with the transactions contemplated by this Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF CAI

Section 5.01.Organization, Standing and Authority; Foreign Qualification. CAI is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as proposed to be conducted and is duly qualified or licensed as a foreign corporation in good standing in each jurisdiction in which the character of its properties or the nature of its business activities require such qualification.

Section 5.02.Corporate Authorization. The execution, delivery and performance by CAI of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of CAI, and this Agreement constitutes a valid and binding agreement of CAI.

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Section 5.03.Capitalization.  CAI’s authorized capital stock consists solely of 10,000,000 shares of common stock, of which 10,000 shares of common stock are issued and outstanding as of the date hereof; all of such issued and outstanding shares of CAI’s common stock are duly authorized, validly issued, fully paid and non-assessable. Except as described on Schedule 5.03, there are no outstanding options, warrants, agreements or rights to subscribe for or to purchase, or commitments to issue, shares of CAI’s common stock or any other security of CAI or any plan for any of the foregoing. Except as set forth on Schedule 5.03, CAI is not obligated to register the resale of any of its common stock on behalf of any shareholder of CAI under the Securities Act.

Section 5.04.Subsidiaries. CAI has no subsidiary, direct or indirect.

Section 5.05.Omitted.

Section 5.06.Omitted.

Section 5.07.Articles of Incorporation and Bylaws. (a) CAI has heretofore delivered to TUI and the TUI Shareholders true, correct and complete copies of its Articles of Incorporation, certified by the Secretary of State of the State of Nevada and Bylaws or comparable instruments, certified by the corporate secretary thereof.

Section 5.08.No Conflict.  The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

(a)           violate any provision of the Articles of Incorporation, Bylaws or other charter or organizational document of CAI;

(b)           violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which CAI is a party or by or to which either of its assets or properties, may be bound or subject;

(c)           violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon CAI or upon the securities, assets or business of CAI;

(d)           violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to CAI or to the securities, properties or business of CAI; or

(e)           result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by CAI.

Section 5.09.Litigation. There is no litigation, suit, proceeding, action or claim at law or in equity, pending or to CAI’s best knowledge threatened against or affecting CAI or involving any of CAI’s property or assets, before any court, agency, authority or arbitration tribunal, including, without limitation, any product liability, workers' compensation or wrongful dismissal claims, or claims, actions, suits or proceedings relating to toxic materials, hazardous substances, pollution or the environment. CAI is not subject to or in default with respect to any notice, order, writ, injunction or decree of any court, agency, authority or arbitration tribunal.

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Section 5.10.Compliance with Laws. To the best knowledge of CAI, it has complied with all laws, municipal bylaws, regulations, rules, orders, judgments, decrees and other requirements and policies imposed by any governmental authority applicable to it, its properties or the operation of its business, except where the failure to comply will not have a material adverse effect on the business, properties, financial condition or earnings of CAI.

Section 5.11.True and Correct Copies. All documents furnished or caused to be furnished to TUI and the TUI Shareholders by CAI are true and correct copies, and there are no amendments or modifications thereto except as set forth in such documents.

Section 5.12.Omitted.

Section 5.13.Contracts.

(a)           There have been delivered or made available to TUI and the TUI Shareholders, at or prior to the Closing, true, correct and complete copies of each of the contracts set forth in Schedule 5.13. Each such contract is valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with its terms, and neither CAI nor any of its affiliates, as the case may be, is in default in any respect under any of them.

(b)           Except for the contracts set forth on Schedule 5.13 and excluding any obligation referenced in this Agreement, CAI is not a party to any:

(i)           contracts with any current or former officer, director, employee, consultant, agent or other representative having more than three (3) months to run from the date hereof or providing for an obligation to pay and/or accrue compensation of $100,000 or more per annum, or providing for the payment of fees or other consideration in excess of $100,000 in the aggregate to any officer or director of CAI, or to any other entity in which CTG has an interest;

(ii)           contracts for the purchase or sale of equipment or services that contain an escalation, renegotiation or re-determination clause or that can be cancelled without liability, premium or penalty only on ninety (90) days’ or more notice;

(iii)           contracts for the sale of any of its assets or properties or for the grant to any person of any preferential rights to purchase any of its or their assets or properties;

(iv)           contracts (including, without limitation, leases of real property) calling for an aggregate purchase price or payments in any one (1) year of more than $100,000 in any one case (or in the aggregate, in the case of any related series of contracts);

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(v)           contracts relating to the acquisition by CAI of any operating business of, or the disposition of any operating business by, any other person;

(vi)           executory contracts relating to the disposition or acquisition of any investment or of any interest in any person;

(vii)           joint venture contracts or agreements;

(viii)          contracts under which CAI agrees to indemnify any party, other than in the ordinary course of business or in amounts not in excess of $100,000 or to share tax liability of any party;

(ix)           contracts containing covenants of CAI not to compete in any line of business or with any person in any geographical area or covenants of any other person not to compete with CAI in any line of business or in any geographical area;

(x)           contracts for or relating to computers, computer equipment, computer software or computer services; or

(xi)           contracts relating to the borrowing of money by CAI or the direct or indirect guarantee by CAI of any obligation for, or an agreement by CAI to service, the repayment of borrowed money, or any other contingent obligations in respect of indebtedness of any other Person, including, without limitation:

(A)           any contract with respect to lines of credit;

(B)           any contract to advance or supply funds to any other person other than in the ordinary course of business;

(C)           any contract to pay for property, products or services of any other person even if such property, products or services are not conveyed, delivered or rendered;

(D)           any keep-well, make-whole or maintenance of working capital or earnings or similar contract; or

(E)           any guarantee with respect to any lease or other similar periodic payments to be made by any other person; and

(xii)           any other material contract whether or not made in the ordinary course of business.

Section 5.14.Operations of CAI.  Except as disclosed on Schedule 5.14 or as contemplated by this Agreement, since the date of CAI’s inception, CAI has not:

(a)           amended its Articles of Incorporation or Bylaws or merged with or into or consolidated with any other person or entity, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or the character of its business;

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(b)           issued, reserved for issuance, sold or redeemed, repurchased or otherwise acquired, or issued options or rights to subscribe to, or entered into any contract or commitment to issue, sell or redeem, repurchase or otherwise acquire, any shares of its capital stock or any bonds, notes, debentures or other evidence or indebtedness;

(c)           declared or paid any dividends or declared or made any other distributions of any kind to its shareholders;

(d)           made any change in its accounting methods or practices or made any change in depreciation or amortization policies, except as required by law or generally accepted accounting principles;

(e)           made any loan or advance to any of  its shareholders or to any of its directors, officers or employees, consultants, agents or other representatives, or made any other loan or advance, otherwise than in the ordinary course of business;

(f)           sold, abandoned or made any other disposition of any of its assets or properties;

(g)           granted or suffered any lien on any of its assets or properties;

(h)           entered into or amended any contracts to which it is a party, or by or to which it or its assets or properties are bound or subject which if existing on the date hereof would be required to be disclosed in Schedule 5.13;

(i)           made any acquisition of all or a substantial part of the assets, properties, securities or business of any other person or entity;

(j)           paid, directly or indirectly, any of its material liabilities before the same became due in accordance with its terms or otherwise than in the ordinary course of business;

(k)           terminated or failed to renew, or received any written threat (that was no subsequently withdrawn) to terminate or fail to renew, any contract that is or was material to the assets, liabilities, business, property, operations, prospects, results of operations or condition (financial or otherwise) of CAI; or

(l)           entered into any other contract or other transaction that materially increases the liabilities of CAI.

Section 5.15.Absence of Certain Changes.  Since the date of CAI’s inception, there has been no event, change or development which could have a material adverse effect on CAI.

Section 5.16.Material Information.  This Agreement, the Schedules attached hereto and all other information provided, in writing, by CAI or representatives thereof to TUI and the TUI Shareholders, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make any statement contained herein or therein not misleading.  There are no facts or conditions which have not been disclosed to TUI and the TUI Shareholders in writing which, individually or in the aggregate, could have a material adverse effect on CAI or a material adverse effect on the ability of CAI to perform any of its obligations pursuant to this Agreement.

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Section 5.17.Brokerage.  No broker or finder has acted, directly or indirectly, for CAI nor did CAI incur any finder’s fee or other commission, in connection with the transactions contemplated by this Agreement.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF TUI AND THE TUI SHAREHOLDERS

TUI and the TUI Shareholders represent to CTG as follows:

Section 6.01.Organization, Standing and Authority; Foreign Qualification. TUI is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as presently conducted and as proposed to be conducted and is duly qualified or licensed as a foreign corporation in good standing in each jurisdiction in which the character of its properties or the nature of its business activities require such qualification.

Section 6.02.Authorization. The execution, delivery and performance by TUI and the TUI Shareholders of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate or other action, as the case may be, on the part of TUI and the TUI Shareholders. TUI and the TUI Shareholders have duly executed and delivered this Agreement and this Agreement constitutes a valid and binding agreement of TUI and the TUI Shareholders. The TUI Shares to be transferred to CTG in accordance with this Agreement have been duly authorized and validly issued, fully paid and non-assessable. Upon transfer of the TUI Shares, no Encumbrance shall exist thereon.

Section 6.03.Capitalization.

(a)           TUI’s capital stock consists of 100,000,000 authorized shares of common stock, of which 66,909,088 shares are issued and outstanding as of the date hereof; all of such issued and outstanding shares of TUI stock are duly authorized, validly issued, fully paid and non-assessable.  There are no outstanding options, warrants, agreements or rights to subscribe for or to purchase, or commitments to issue, shares of TUI’s common stock or any other security of TUI or any plan for any of the foregoing.

(b)           None of the TUI Shares are subject to any option, right of first refusal or any other restriction on transfer, whether by contract, agreement, applicable law, regulation or statute, as the case may be.

Section 6.04.Subsidiaries. TUI has no direct or indirect subsidiaries.

Section 6.05.Sale of Exchange Shares. Upon completion of the purchase and sale of the Exchange Shares, TUI and the TUI Shareholders, or their assigns, shall be the beneficial and record holder or holders of the Exchange Shares. TUI and the TUI Shareholders, or their assigns, are acquiring the Exchange Shares as principal for their own account to be held for investment purposes only, not for the benefit of any other person and not with a view to the resale, distribution or other disposition of all or any of the Exchange Shares, and are delivering concurrently with this Agreement, a certificate in the form attached to this Agreement as Exhibit A.

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Section 6.06.Restriction on Exchange Shares. TUI and the TUI Shareholders consent to CTG making a notation on its records or giving instructions to any transfer agent of the restricted shares portion of the Exchange Shares in order to implement the restriction on transfer set forth and described herein. TUI and the TUI Shareholders have been independently advised as to, and are aware of, the restrictions with respect to trading in the Exchange Shares pursuant to the applicable securities laws and further agrees that it is solely responsible for compliance with all such restrictions as set forth in Exhibit A.

Section 6.07.Investment Risk. TUI and the TUI Shareholders understand that an investment in CTG includes a high degree of risk, have such knowledge and experience in financial and business matters, investments, securities and private placements as to be capable of evaluating the merits and risks of their investment in the Exchange Shares, are in a financial position to hold the Exchange Shares for an indefinite period of time, and are able to bear the economic risk of, and withstand a complete loss of such investment in the Exchange Shares.

Section 6.08.Cooperation. If required by applicable securities laws or order of a securities regulatory authority, stock exchange or other regulatory authority, TUI and the TUI Shareholders will execute, deliver, file and otherwise assist CTG in filing such reports, undertakings and other documents as may be required with respect to the issuance of the Exchange Shares.

Section 6.09.Tax Advice. TUI and the TUI Shareholders are responsible for obtaining such legal, including tax, advice as it considers necessary or appropriate in connection with the execution, delivery and performance by it of this Agreement and the transactions contemplated herein.

Section 6.10.      Investment Representations.

(a)           All of the acknowledgements, representations, warranties and covenants set out in Exhibit A hereto are true and correct as of the date hereof and as of the Closing Date.

(b)           TUI and the TUI Shareholders confirm that, to the extent applicable to them, they are aware of, have complied and will comply with their obligations in connection with the Criminal Justice Act 1993, the Proceeds of Crime Act 2002 and Part VIII of the Financial Services and Markets Act 2000.

Section 6.11.No Conflict.  The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

(a)           violate any provision of the Articles or Certificate of Incorporation, Bylaws or other charter or organizational document of TUI;

(b)           violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which TUI or the TUI Shareholders are a party or by or to which either of their assets or properties, including the TUI Shares, may be bound or subject;

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(c)           violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon TUI and/or the TUI Shareholders or upon the securities, assets or business of TUI and/or the TUI Shareholders;

(d)           violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to TUI and/or the TUI Shareholders or to the securities, properties or business of TUI and/or the TUI Shareholders; or

(e)           result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by TUI and/or the TUI Shareholders.

Section 6.12.Articles of Incorporation and Bylaws.

(a)           TUI has heretofore delivered to CTG true, correct and complete copies of its Articles of Incorporation, certified by the Secretary of State of the State of Nevada, and Bylaws or comparable instruments (certified by the corporate secretary thereof).

(b)           The minute books of TUI accurately reflect all actions taken at all meetings and consents in lieu of meetings of its respective shareholders, and all actions taken at all meetings and consents in lieu of meetings of its board of directors and all committees from the date of incorporation to the date hereof.

Section 6.13.Compliance with Laws.  To the best of TUI’s and the TUI Shareholder’s knowledge, neither TUI nor the TUI Shareholders are in violation of any applicable order, judgment, injunction, award or decree nor are they in violation of any federal, state, local or foreign law, ordinance or regulation or any other requirement of any governmental or regulatory body, court or arbitrator, other than those violations which, in the aggregate, would not have a material adverse effect on TUI or the TUI Shareholders and have not received written notice that any violation is being alleged.

Section 6.14.Material Information.  This Agreement, the Schedules attached hereto and all other information provided, in writing, by TUI and the TUI Shareholders or representatives thereof, to CTG, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make any statement contained herein or therein not misleading.  There are no facts or conditions which have not been disclosed to CTG in writing which, individually or in the aggregate, could have a material adverse effect on TUI or the TUI Shareholders or a material adverse effect on the ability of TUI or the TUI Shareholders to perform any of their obligations pursuant to this Agreement.

Section 6.15.Actions and Proceedings.  There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving TUI or the TUI Shareholders.  There are no actions, suits or claims or legal, regulatory, administrative or arbitration proceedings pending or, to the knowledge of TUI or the TUI Shareholders, threatened against or involving TUI or the TUI Shareholders, their respective assets or the TUI Shares.

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Section 6.16.Contracts.

(a)           There have been delivered or made available to CTG true, correct and complete copies of each of the contracts set forth in Schedule 6.16 or in any other Schedule.  Each such contract is valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with its terms, and neither TUI, the TUI Shareholders nor any of their other affiliates, as the case may be, is in default in any respect under any of them; and

(b)           Except for the list of contracts and agreements contained in Schedule 6.16 and excluding any obligation referenced in this Agreement, TUI is not a party to any:

(i)           contracts with any current or former officer, director, employee, consultant, agent or other representative having more than three (3) months to run from the date hereof or providing for an obligation to pay and/or accrue compensation of $200,000 or more per annum, or providing for the payment of fees or other consideration in excess of $200,000 in the aggregate to any officer or director of TUI, or to any other entity in which TUI has an interest;

(ii)           contracts for the purchase or sale of equipment or services that contain an escalation, renegotiation or re-determination clause or that can be cancelled without liability, premium or penalty only on ninety (90) days’ or more notice;

(iii)           contracts for the sale of any of its assets or properties or for the grant to any person of any preferential rights to purchase any of its assets or properties;

(iv)           contracts (including with limitation, leases of real property) calling for an aggregate purchase price or payments in any one year of more than $200,000 in any one case (or in the aggregate, in the case of any related series of contracts);

(v)           contracts relating to the acquisition by TUI of any operating business of, or the disposition of any operating business by, any other person;

(vi)           executory contracts relating to the disposition or acquisition of any investment or of any interest in any person;

(vii)           joint venture contracts or agreements;

(viii)          contracts under which TUI agrees to indemnify any party, other than in the ordinary course of business or in amounts in excess of $200,000, or to share tax liability of any party;

(ix)           contracts containing covenants of TUI not to compete in any line of business or with any person in any geographical area or covenants of any other person not to compete with TUI in any line of business or in any geographical area;

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(x)           contracts relating to the making of any loan by TUI;

(xi)           contracts relating to the borrowing of money by TUI or the direct or indirect guarantee by TUI of any obligation for, or an agreement by TUI to service, the repayment of borrowed money, or any other contingent obligations in respect of indebtedness of any other Person, including, without limitation:

(A)           any contract with respect to lines of credit;

(B)           any contract to advance or supply funds to any other person other than in the ordinary course of business;

(C)           any contract to pay for property, products or services of any other person even if such property, products or services are not conveyed, delivered or rendered;

(D)           any keep-well, make-whole or maintenance of working capital or earnings or similar contract; or

(E)           any guarantee with respect to any lease or other similar periodic payments to be made by any other person; and

(xii)          contracts for or relating to computers, computer equipment, computer software or computer services; or

(xiii)         any other material contract whether or not made in the ordinary course of business.

Section 6.17.TUI’s Financial Statements.  TUI has no, and will not have prior to the Closing Date, operations, and accordingly, is unable to provide financial statements to CTG.  As of the date of this Agreement, and as of the Closing Date, the sole asset of TUI is, and will be, the Framework Agreement.

Section 6.18.Operations of TUI.  Except as contemplated by this Agreement, since the date of TUI’s incorporation , neither TUI nor the TUI Shareholders have:

(a)           amended TUI’s Certificate or Articles of Incorporation or Bylaws or merged with or into or consolidated with any other person or entity, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of TUI’s outstanding capital stock or the character of TUI’s business;

(b)           issued, reserved for issuance, sold or redeemed, repurchased or otherwise acquired, or issued options or rights to subscribe to, or entered into any contract or commitment to issue, sell or redeem, repurchase or otherwise acquire, any shares of TUI’s capital stock or any bonds, notes, debentures or other evidence or indebtedness;

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(c)           declared or paid any dividends or declared or made any other distributions of any kind to TUI’s shareholders;

(d)           made any loan or advance to any of TUI’s directors, officers or employees, consultants, agents or other representatives, or made any other loan or advance, otherwise than in the ordinary course of business;

(e)           sold, abandoned or made any other disposition of any of TUI’s assets or properties;

(f)           granted or suffered any lien on any of TUI’s assets or properties;

(g)           entered into or amended any contracts to which TUI is a party, or by or to which TUI or TUI’s assets or properties are bound or subject which if existing on the date hereof would be required to be disclosed in Schedule 6.16;

(h)           made any acquisition of, or entered into any agreement to acquire, all or a substantial part of the assets, properties, securities or business of any other person or entity on behalf of TUI;

(i)           paid, directly or indirectly, any of TUI’s material liabilities before the same became due in accordance with its terms or otherwise than in the ordinary course of business;

(j)           terminated or failed to renew, or received any written threat (that was no subsequently withdrawn) to terminate or fail to renew, any contract that is or was material to the assets, liabilities, business, property, operations, prospects, results of operations or condition (financial or otherwise) of TUI; or

(k)           entered into any other contract or other transaction that materially increases the liabilities of TUI.

Section 6.19.Absence of Certain Changes.  Since the date of incorporation, there has been no event, change or development which could have a material adverse effect on TUI.

Section 6.20.Brokerage.  No broker or finder has acted, directly or indirectly, for TUI or the TUI Shareholders nor has TUI or the TUI Shareholders incurred any obligation to pay any brokerage, finder’s fee or other commission in connection with the transactions contemplated by this Agreement.

ARTICLE VII

TUI’S COVENANTS AND AGREEMENTS

Section 7.01.Conduct of Businesses in the Ordinary Course.  From the date of this Agreement to the Closing Date, TUI shall conduct its business substantially in the manner in which it is currently conducted and to not undertake any of the actions specified in Sections 6.18, nor enter into any contract described in Section 6.16, without the prior written consent of CTG.

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Section 7.02.Preservation of Permits and Services.  From the date of this Agreement to the Closing Date, TUI shall use its best efforts to preserve any permits and licenses in full force and effect and to keep available the services, and preserve the goodwill, of its present officers, employees, agents, and consultants.

Section 7.03.Litigation.   From the date of this Agreement to the Closing Date, TUI and/or the TUI Shareholders shall notify CTG promptly of any actions or proceedings of the type described in Section 6.15 that from the date hereof are threatened or commenced against TUI and/or the TUI Shareholders or against any officer, director, employee, properties or assets of TUI with respect to TUI’s affairs, or against any of the TUI Shares and of any requests for information or documentary materials by any governmental or regulatory body in connection with the transactions contemplated hereby.

Section 7.04.Conduct of TUI Pending the Closing Date.  From the date of this Agreement to the Closing Date: (a) TUI and the TUI Shareholders shall use their best efforts to conduct their affairs in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties contained in Article VI shall continue to be true and correct on and as of the Closing Date as if made on and as of the Closing Date; and (b) TUI and/or the TUI Shareholders shall promptly notify CTG of any event, condition or circumstance occurring from the date of this Agreement to the Closing Date that would constitute a violation or breach of this Agreement by TUI and/or the TUI Shareholders.

Section 7.05.Corporate Examinations and Investigations.  Prior to the Closing Date, CTG shall be entitled, through its employees and representatives, to make such reasonable investigation of the assets, liabilities, properties, business and operations of TUI, and such examination of the books, records, tax returns, results of operations and financial condition of TUI. Any such investigation and examination shall be conducted at reasonable times and under reasonable circumstances and TUI and its employees and representatives, including without limitation, their counsel and independent public accountants, shall cooperate fully with such representatives in connection with such reasonable review and examination.

Section 7.06.Acquisition Proposals.  From the date of this Agreement to the Closing Date, neither TUI, the TUI Shareholders nor any of their officers, directors, affiliates, employees, representatives or agents, shall, directly or indirectly, solicit, initiate or participate in any way in discussions or negotiations with, or provide any information or assistance to, or enter into any contract with any person, entity or group (other than CTG) concerning any acquisition of a substantial equity interest in, or in a merger, consolidation, liquidation, dissolution, disposition of assets of TUI or any disposition of any of the TUI Shares (an “Acquisition Proposal”) (other than pursuant to the transactions contemplated by this Agreement), or assist or participate in, facilitate or encourage any effort or attempt by any other person or entity to do or seek to do any of the foregoing. TUI and/or the TUI Shareholders shall promptly communicate to CTG the terms of any Acquisition Proposal, which they may receive.

ARTICLE VIII

COVENANTS AND AGREEMENTS OF CTG AND CAI

Section 8.01.Conduct of Businesses in the Ordinary Course.  From the date of this Agreement to the Closing Date, CTG and CAI shall conduct their respective businesses substantially in the manner in which they are currently conducted and shall not enter into any contract described in Sections 4.13 and 5.13, or undertake any of the actions specified in Sections 4.14 and 5.14, without the prior written consent of TUI or the TUI Shareholders.

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Section 8.02.Preservation of Permits and Services.  From the date of this Agreement to the Closing Date, CTG and CAI shall use their best efforts to preserve any permits and licenses in full force and effect and to keep available the services of its respective present officers, employees, consultants and agents and to preserve their goodwill.

Section 8.03.Litigation.  From the date of this Agreement to the Closing Date, CTG and CAI shall notify TUI and the TUI Shareholders of any actions or proceedings of the type described in Sections 4.09 and 5.09 that are threatened or commenced against CTG or CAI or against any officer, director, employee, properties or assets of CTG or CAI with respect to its affairs and of any requests for information or documentary materials by any governmental or regulatory body in connection with the transactions contemplated hereby.

Section 8.04.Conduct of CTG Pending the Closing.  From the date hereof through the Closing Date:

(a)           CTG and CAI shall use their best efforts to conduct their affairs in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties contained in Article IV and V shall continue to be true and correct on and as of the Closing Date as if made on and as of the Closing Date; and

(b)           CTG and CAI shall promptly notify TUI and the TUI Shareholders of any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of this Agreement by CTG or CAI.

Section 8.05.Corporate Examinations and Investigations.  Prior to the Closing Date, TUI and the TUI Shareholders shall be entitled, through their employees and representatives, to make any investigation of the assets, liabilities, properties, business and operations of CTG and CAI; and such examination of the books, records, tax returns, results of operations and financial condition of CTG and its subsidiaries.  Any such investigation and examination shall be conducted at reasonable times and under reasonable circumstances and CTG and CAI and the employees and representatives of CTG and CAI, including without limitation, their counsel and independent public accountants, shall cooperate fully with such representatives in connection with such reasonable review and examination.

Section 8.06.Cancellation of CTG Common Stock.  CTG shall cause the Persons listed on Schedule 8.06 to return to CTG for cancellation, stock certificates representing an aggregate of 57,600,000 restricted shares of the currently issued and outstanding shares of CTG common stock, and CTG shall cause such shares to thereafter be cancelled.

Section 8.07.Amendment to Articles of Incorporation.  CTG shall cause its Articles of Incorporation to be amended (i) to provide for the authorization of Series A Common Stock and Series B Common Stock, including, but not necessarily limited to, with certain rights and preferences as set forth in Section 2.01(b), and (ii) to authorize the issuance (in addition to the Exchange Shares) of an aggregate of 25,000,000 shares of preferred stock, to be issued from to time by the Board of Directors of CTG and containing such rights, privileges and designations (including conversion rights, redemption rights, voting rights and dividends, or the absence thereof) as the Board of Directors may, from time to time determine (the “Preferred Stock”).

ARTICLE IX

CONDITIONS PRECEDENT TO THE OBLIGATION OF CTG TO CLOSE

The obligations of CTG to be performed by it at the Closing pursuant to this Agreement are subject to the fulfillment on or before the Closing Date, of each of the following conditions, any one or more of which may be waived by it, to the extent permitted by law:

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Section 9.01.Representations and Covenants.

(a)           The representations and warranties of TUI and the TUI Shareholders contained in this Agreement shall be true and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, except that any of such representations and warranties that are given as of a particular date and relate solely to a particular date or period shall be true as of such date or period; and

(b) TUI and the TUI Shareholders shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by them on or before the Closing Date. TUI and the TUI Shareholders shall have delivered to CTG a certificate, dated the Closing Date, and signed by TUI and the TUI Shareholders to the foregoing effect.

Section 9.02.Governmental Permits and Approvals.

(a)           All approvals, authorizations, consents, permits and licenses from governmental and regulatory bodies required for the transactions contemplated by this Agreement and to permit the business currently carried on by TUI to continue to be carried on by TUI substantially in the same manner immediately following the Closing Date shall have been obtained and shall be in full force and effect, and CTG shall have been furnished with appropriate evidence, reasonably satisfactory to them, of the granting of such approvals, authorizations, consents, permits and licenses; and

(b)           There shall not have been any action taken by any court, governmental or regulatory body then prohibiting or making illegal on the Closing Date the transactions contemplated by this Agreement;

Section 9.03.Third Party Consents.  All consents, permits and approvals from parties to contracts with TUI and/or the TUI Shareholders that may be required in connection with the performance by TUI and/or the TUI Shareholders of their obligations under this Agreement or the continuance of such contracts with TUI and/or the TUI Shareholders in full force and effect after the Closing Date, shall have been obtained.

Section 9.04.Litigation.  No action, suit or proceeding shall have been instituted and be continuing or be threatened by any person to restrain, modify or prevent the carrying out of the transactions contemplated hereby, or to seek damages in connection with such transactions, or that has or could have a material adverse effect on TUI, the TUI Shareholders or on the TUI Shares.

Section 9.05.Closing Documents.  TUI and the TUI Shareholders shall have executed and delivered the documents described in Section 2.03 above.

ARTICLE X

CONDITIONS PRECEDENT TO THE OBLIGATION OF TUI TO CLOSE

The obligations of TUI and/or the TUI Shareholders to be performed by them at the Closing pursuant to this Agreement are subject to the fulfillment, on or before the Closing Date, of each the following conditions, any one or more of which may be waived by it, to the extent permitted by law:

Section 10.01.Representations and Covenants.

(a)           The representations and warranties of CTG and CAI contained in this Agreement shall be true and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, except that any of such representations and warranties that are given as of a particular date and relate solely to a particular date or period shall be true as of such date or period; and

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(b)           CTG and CAI shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by it on or before the Closing Date. CTG and CAI shall have delivered to TUI and the TUI Shareholders a certificate dated the Closing Date, and signed by an authorized signatory of CTG CAI to the foregoing effect.

Section 10.02.Governmental Permits and Approvals.

(a)           All approvals, authorizations, consents, permits and licenses from governmental and regulatory bodies required for the transactions contemplated by this Agreement and to permit the business currently carried on by TUI to continue to be carried on by TUI substantially in the same manner immediately following the Closing Date shall have been obtained and shall be in full force and effect, and TUI and the TUI Shareholders shall have been furnished with appropriate evidence, reasonably satisfactory to them, of the granting of such approvals, authorizations, consents, permits and licenses; and

(b)           There shall not have been any action taken by any court, governmental or regulatory body then prohibiting or making illegal on the Closing Date the transactions contemplated by this Agreement.

Section 10.03.Third Party Consents.  All consents, permits and approvals from parties to contracts with TUI and the TUI Shareholders that may be required in connection with the performance by CTG and CAI of their obligations under this Agreement or the continuance of such contracts with CTG and CAI in full force and effect after the Closing Date, shall have been obtained.

Section 10.04.Litigation.  No action, suit or proceeding shall have been instituted and be continuing or be threatened by any person to restrain, modify or prevent the carrying out of the transactions contemplated hereby, or to seek damages in connection with such transactions, or that has or could have a material adverse effect on CTG or CAI.

Section 10.05.Closing Documents.  CTG and CAI shall have executed and delivered the documents described in Section 2.04 and 2.05 above.

ARTICLE XI

TERMINATION

Section 11.01.Termination.

(a)           Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the Share Exchange and the other transactions contemplated by this Agreement shall be abandoned at any time prior to the Closing:

(i)           by mutual written consent of Trussnet and CTG;

(ii)           by either Trussnet or CTG in the event that a temporary restraining order, preliminary or permanent injunction or other judicial order preventing the consummation of the Share Exchange or any of the other transactions contemplated hereby shall have become final and non-appealable; provided, that, the party seeking to terminate this Agreement pursuant to this clause (ii) shall have used all commercially reasonable efforts to have such order, injunction or other order vacated;

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(iii)           by either the TUI Shareholders or CTG, if the Closing does not occur on or prior to May 31, 2008 (the “Termination Date”); provided, however, that the right to terminate this Agreement under this clause (iii) shall not be available to any Party whose material breach of this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before the Termination Date;

(iv)           by CTG if CTG is not then in material breach of this Agreement and if there shall have been any breach by the TUI Shareholders (which has not been waived) of one or more of its representations or warranties, covenants or agreements set forth in this Agreement, which breach or breaches (A) would give rise to the failure of a condition set forth in Section 9.01, and (B) shall not have been cured within thirty (30) days following receipt by the TUI Shareholders of written notice of such breach, or such longer period in the event that such breach cannot reasonably be expected to be cured within such 30-day period and the TUI Shareholders is diligently pursuing such cure, but in no event later than the Termination Date;

(v)           by the TUI Shareholders if the TUI Shareholders are not then in material breach of this Agreement and if there shall have been any breach by CTG (which has not been waived) of one or more of its representations or warranties, covenants or agreements set forth in this Agreement, which breach or breaches (A) would give rise to the failure of a condition set forth in Section 8.06 or 8.07, as applicable, and (B) shall not have been cured within thirty (30) days following receipt by CTG of written notice of such breach; or

(vi)           by either the TUI Shareholders or CTG if the Closing shall not have occurred on or before the Termination Date and both the TUI Shareholders and CTG are in material breach of this Agreement.

(b)           In the event of termination by the TUI Shareholders or CTG pursuant to this Section 11.01, written notice thereof shall forthwith be given to the other Party and the transactions contemplated by this Agreement shall be terminated, without further action by any Party. If the transactions contemplated by this Agreement are terminated as provided herein, the TUI Shareholders shall immediately cause each of nominees appointed to the Board of Directors of CTG and/or appointed as officers of CTG to resign from all such positions.

Section 11.02.Effect of Termination.  If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in Section11.01, this Agreement shall become null and void and of no further force and effect, except for the provisions of (i) Section 11.01 and this Section 11.02; (ii) Section 12.15 relating to certain expenses; and (iii) Section 12.01 relating to publicity. Nothing in this Section 11.02 shall be deemed to release any Party from any liability for any breach by such Party of the terms, conditions, covenants and other provisions of this Agreement or to impair the right of any Party to compel specific performance by any other Party of its obligations under this Agreement.

ARTICLE XII

MISCELLANEOUS

Section 12.01.Public Notices.  The Parties agree that all notices to third parties and all other publicity concerning the transactions contemplated by this Agreement shall be jointly planned and coordinated and no Party shall act unilaterally in this regard without the prior approval of the others, such approval not to be unreasonably withheld.

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Section 12.02.Time.  Time shall be of the essence hereof.

Section 12.03.Notices.  Any notice or other writing required or permitted to be given hereunder or for the purposes hereof shall be sufficiently given if delivered or faxed to the Party to whom it is given or, if mailed, by prepaid registered mail addressed to such Party at:

if to TUI, at:

George Alvarez

Capital Truss, Inc.

8105 Irvine Center Drive, Suite 800

Irvine, CA 92618

Facsimile: 949-585-0072

if to the TUI Shareholders, at:

Matthew Jennings

Westmoore Management, LLC

8141 E. Kaiser, Suite 312

Anaheim Hills, CA       92808

Facsimile: 714-998-4426

With a copy to:

Lawrence M. Cron, Esq.

Horwitz Cron & Jasper

Four Venture, Suite 390

Irvine, CA 92618

Facsimile: 949-453-8774                                                                

if to CTG and/or CAI, at:

___________________________

___________________________

___________________________

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With a copy to:

W. Scott Lawler, Esq.

Lawler & Associates, PLC

11622 El Camino Real, Suite 100

San Diego, California 92130

Facsimile: 951-676-4988

Or at such other address as the Party to whom such writing is to be given shall have last notified to the Party giving the same in the manner provided in this article. Any notice mailed shall be deemed to have been given and received on the fifth Business Day next following the date of its mailing unless at the time of mailing or within five (5) Business Days thereafter there occurs a postal interruption which could have the effect of delaying the mail in the ordinary and usual course, in which case any notice shall only be effectively given if actually delivered or sent by telecopy. Any notice delivered or faxed to the Party to whom it is addressed shall be deemed to have been given and received on the Business Day next following the day it was delivered or faxed.

Section 12.04.Governing Law; Venue; Submission to Jurisdiction.  This Agreement shall be governed by and construed and enforced in accordance with, the internal laws of the State of California without regard to the conflict of laws principles thereof as the same apply to agreements executed solely by residents of the State of California and wholly to be performed within the State of California.  Each of the Parties submits to the jurisdiction of any state or federal court sitting in the State of California in any action or proceeding arising out of or relating to this Agreement, agrees that all claims in respect of the action or proceeding may be heard and determined in any such court, and agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court.  Each of the Parties waives any defense or inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto.

Section 12.05.Settlement of Disputes.  Any dispute arising out of or in connection with this Agreement, including, without limitation, any question regarding its existence, validity, interpretation, breach, or termination (a "Dispute"), which cannot be amicably settled between the Parties, shall be finally and exclusively resolved by arbitration in the State of California.

Section 12.06.Severability.  If a court of competent jurisdiction determines that any one or more of the provisions contained in this Agreement is invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision or provisions shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless in either case as a result of such determination this Agreement would fail in its essential purpose.

Section 12.07.Entire Agreement.  This Agreement constitutes the entire agreement between the Parties and supersedes all prior agreements and understandings, oral or written, by and between any of the Parties with respect to the subject matter hereof.

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Section 12.08.Further Assurances.  The Parties shall with reasonable diligence, do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement, and each Party shall provide such further documents or instruments required by the other Party as may be reasonably necessary or desirable to give effect to the purpose of this Agreement and carry out its provisions whether before or after the Closing Date.

Section 12.09.Inurement.  This Agreement and each of the terms and provisions hereof shall inure to the benefit of and be binding upon the Parties and their respective heirs, executors, administrators, personal representatives, successors and assigns.

Section 12.10.Confidentiality.

           (a)           All aspects and terms of the transaction contemplated by this Agreement and all information and data in whatever form (including written, oral or electronic) related thereto received by a Party from the other Party (collectively, “Confidential Information”) shall be held in strict confidence by the Parties, and not disclosed to any third parties except as otherwise set forth in this Section 12.10.  The Parties agree to treat all information furnished by or on behalf of any Party hereto in accordance with the provisions of this Section 12.10 and to take, or abstain from taking, the other actions set forth herein.  The Parties agree that the Confidential Information shall be used solely for the purpose of evaluating the transactions contemplated hereby and will be kept confidential by such Party, its officers, directors, employees, representatives, agents and advisors, provided that either Party may, without such approval, disclose Confidential Information: (i) to the receiving Party’s officers, directors, employees, representatives, agents and advisors, including outside professional advisors, who need to know the Confidential Information for the purpose of evaluating the Acquisition and agree in writing to be bound by the terms of confidentiality set forth in this Section 12.10, (ii) to any bank or financial institution from whom such Party is seeking or obtaining finance, upon obtaining a similar undertaking of confidentiality (but excluding this proviso) from such bank or institution, (iii) to which the disclosing Party has consented to in writing, (iv) as required by applicable law or the requirements of any recognized stock exchange in compliance with its rules and regulations, (v) to any government agency or tax authority lawfully requiring such information, or (vi) to any court of competent jurisdiction acting in pursuance of its powers.

(b)           If this Agreement is terminated in accordance with Article XI hereof, a Party that has received Confidential Information from the other Party shall return such Confidential Information to the other Party upon its written request and will not retain any copies, extracts or other reproductions thereof.  If any Party or any of its representatives are requested in any proceeding to disclose any of the Information, such Party will provide the disclosing Party with prompt prior written notice of such request so that the disclosing Party may seek a protective order or other appropriate remedy or waive compliance with the terms of this Agreement.

(c)           The Parties agree that, without the prior written consent of the other Party, which may be withheld in such Party’s sole discretion, none of the Parties shall disclose any provision of this Agreement, or its existence, to any third party except as otherwise set forth in this Section 12.10.

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Section 12.11.Public Disclosure.  Before the Closing and except as otherwise agreed by the Parties, no Party will make any public release of information regarding the transactions contemplated hereby, except as may be required by such Party pursuant to any applicable law, rules, regulations or statutes.

Section 12.12.Assignment, Successors and Assigns.  Neither Party may assign (directly, or indirectly by way of merger, amalgamation, stock sale or any similar procedure) any of its rights or obligations hereunder.

Section 12.13.Waiver.  Except as provided in this Article, no action taken or inaction pursuant to this Agreement will be deemed to constitute a waiver of compliance with any warranties, conditions or covenants contained in this Agreement and will not operate or be construed as a waiver of any subsequent breach, whether of a similar or dissimilar nature.  No waiver of any right under this Agreement shall be binding unless executed in writing by the Party to be bound thereby.

Section 12.14.Counterparts.  This Agreement may be executed in as many counterparts as may be necessary or by facsimile and each such counterpart agreement or facsimile so executed shall be deemed to be an original and such counterparts and facsimile copies together shall constitute one and the same instrument and shall be valid and enforceable.

Section 12.15.Fees and Costs.  Each Party shall pay their own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby.

IN WITNESS WHEREOF the Parties hereto have set their hand and seal as of the day and year first above written.

CHINA TEL GROUP, INC.	TRUSSNET USA, INC.,
a Nevada corporation	a Nevada corporation
By:_______________________________	By:_______________________________
Name:	Name:
Title:	Title:
CHINACOMM ACQUISITION, INC
a California corporation
By:_______________________________
Name:
Title:

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TRUSSNET USA, INC. Shareholders
By:_______________________________	By:_______________________________
Name:	Name:
By:_______________________________	By:_______________________________
Name:	Name:
By:_______________________________	By:_______________________________
Name:	Name:
By:_______________________________	By:_______________________________
Name:	Name:
By:_______________________________	By:_______________________________
Name:	Name:
By:_______________________________	By:_______________________________
Name:	Name:
By:_______________________________	By:_______________________________
Name:	Name:
By:_______________________________	By:_______________________________
Name:	Name:

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EXHIBIT A

CERTIFICATE OF U.S. PERSON

This Certificate of U.S. Person is being executed and delivered by all of the SHAREHOLDERS (the “Shareholders” or “Subscriber”) of TRUSSNET USA, INC., a Nevada corporation (“Trussnet”), in connection of the closing of the transactions contemplated by and set forth in that certain Reorganization and Merger Agreement dated May 21, 2008 (the “Agreement”), by and among CHINA TEL GROUP, INC., a Nevada corporation (“CTG” or the “Issuer”), CHINACOMM ACQUISITION, INC., a California corporation, TRUSSNET USA, INC., a Nevada corporation (“Trussnet”), and all of the SHAREHOLDERS of TRUSSNET.

A “United States Subscriber” is any person in the United States or any “U.S. person” as defined in Regulation S under the United States Securities Act of 1933.  This will include (a) any natural person resident in the United States; (b) any partnership or corporation organized or incorporated under the laws of the United States; (c) any trust of which any trustee is a U.S. person; (d) any partnership or corporation organized outside the United States by a U.S. person principally for the purpose of investing in Shares not registered under the U.S. Securities Act of 1933, unless it is organized or incorporated, and owned, by accredited investors who are not natural persons, estates or trusts; (e) any estate of which any executor or administrator is a U.S. person.

The undersigned Subscriber covenants, represents and warrants to the Issuer that:

(a)           it understands that the Securities have not been and will not be registered under the U.S. Securities Act and that the sale contemplated hereby is being made in reliance on the exemption from such registration requirement provided by Rule 506 of Regulation D;

(b)           it understands that the enforcement of civil liabilities under the United States federal securities laws may be affected adversely by the fact that the Corporation is organized under the laws of the Cayman Islands, and that most of or all of the assets of the Corporation are or will be located outside of the United States;

(b)           it understands and agrees that there may be material tax consequences to the Subscriber of an acquisition, disposition or exercise of any of the Securities.  The Issuer gives no opinion and makes no representation with respect to the tax consequences to the Subscriber under United States, state, local or foreign tax law of the undersigned’s acquisition or disposition of such Shares. In particular, no determination has been made whether the Issuer will be a “passive foreign investment company” (“PFIC”) within the meaning of Section 1291 of the United States Internal Revenue Code;

(c)           it understands and acknowledges that upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the U.S. Securities Act of 1933 or applicable state securities laws and regulations, the certificates representing the Securities will bear a legend in substantially the following form:

“The Securities represented hereby have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”).  The holder hereof, by purchasing such Securities, agrees for the benefit of the Issuer that such Securities may be offered, sold, pledged or otherwise transferred only (a) to the Issuer, (b) outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act if applicable, (c) inside the United Sates (1) pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder, if available, and in accordance with applicable state securities laws, or (2) in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities, and the holder has prior to such sale furnished to the Issuer an opinion of counsel or other evidence of exemption in form and substance reasonably satisfactory to the Corporation.”

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(d)           it consents to the Issuer making a notation on its records or giving instruction to the registrar and transfer agent of the Issuer in order to implement the restrictions on transfer set forth and described herein;

(e)           it is a resident of the State of ___________________________________;

(f)           either alone or with its purchaser representative1, it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Securities and it is able to bear the economic risk of loss of its entire investment;

(g)           the Issuer has provided to it the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which the Issuer possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information provided to it;

(h)           it is acquiring the Securities for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Securities in violation of the United States Securities laws; and

(i)           if it decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such Shares directly or indirectly, unless:

(i)           the sale is to the Issuer;

(ii)           the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations;

(iii)           the sale is made pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder and in accordance with any applicable state Securities or “Blue Sky” laws; or

(iv)           the Securities are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of Shares, and, in the case of clauses (ii) or (iii) above, it has prior to such sale furnished to the Issuer an opinion of counsel or other evidence of exemption in form and substance reasonably satisfactory to the Issuer.

The Subscriber, by initially one of the categories below, represents and warrants to the Issuer that it is an “accredited investor” as defined in Regulation D (please place your initials on the appropriate line(s); if no categories are applicable, please do not place your initials beside any category):

33

_________	Category 1.	A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or
_________	Category 2.	A savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or
_________	Category 3.	A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; or
_________	Category 4.	An insurance company as defined in Section 2(13) of the U.S. Securities Act; or
_________	Category 5.	An investment company registered under the Investment Issuer Act of 1940; or
_________	Category 6.	A business development company as defined in Section 2(a)(48) of the Investment Issuer Act of 1940; or
_________	Category 7.	A small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; or
_________	Category 8.	A plan established and maintained by a state, its political subdivision or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with assets in excess of US$5,000,000; or
_________	Category 9.	An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment advisor, or an employee benefit plan with total assets in excess of US$5,000,000 or, if a self-directed plan, the investment decisions are made solely by persons who are accredited investors; or
_________	Category 10.	A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940; or
_________	Category 11.	An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of US$5,000,000; or
_________	Category 12.	A director, executive officer or general partner of the Issuer; or

34

_________	Category 13.	A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of this purchase exceeds US$1,000,000; or
_________	Category 14.	A natural person who had an individual income in excess of US$200,000 in each year of the two most recent years or joint income with that person’s spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
_________	Category 15.	A trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Securities offered, whose purchase is directed by a sophisticated person as described in SEC Rule 506(b)(2)(ii); or
_________	Category 16.	An entity in which each of the equity owners meets the requirements of one of the above categories.

__________________________________

Date

__________________________________ 
Duly authorized signatory for Subscriber

__________________________________
(Print name of Subscriber)

35

EXHIBIT B

FRAMEWORK AGREEMENT

36

SCHEDULE 4.03

CHINA TEL GROUP INC.

OUTSTANDING OPTIONS

AS AT THE DATE OF

REORGANIZATION AND MERGER AGREEMENT

Convertible Securities

Convertible Notes

Convertible Promissory Notes due December 31, 2008, in the principal amount of $17,240,440.26, convertible into shares of CTG Series A Common Stock at the conversion price of $0.95 per share.

Warrants

           None.

Options

           None.

Pending Options

           None.

ROFR and Pre-Emptive Rights

           None.

37

SCHEDULE 4.13

LIST OF CTG CONTRACTS

38

SCHEDULE 4.15

OPERATIONS OF CTG

39

SCHEDULE 5.03

CAI’S OUTSTANDING OPTIONS, WARRANTS, AGREEMENTS OR RIGHTS

AS AT THE DATE OF SHARE EXCHANGE AGREEMENT

None.

40

SCHEDULE 5.13

LIST OF CAI CONTRACTS

None.

41

SCHEDULE 5.14

OPERATIONS OF CAI

None.

42

SCHEDULE 6.16

LIST OF TUI CONTRACTS

1.           Framework Agreement by and between TUI and CECT-Chinacomm Communications Co, Ltd. (“Chinacomm”) dated April 7,  2008 (the “Framework Agreement”) attached as Exhibit A to this Agreement.

43

SCHEDULE 8.06

CANCELLATION OF CTG COMMON STOCK

MICHAEL LAIDLAW	36,000,000 SHARES
WILLIAM TIMMINS	21,600,000 SHARES

44

EX-10.2

EXHIBIT 10.2

CHINA TEL GROUP  INC. STOCK PLAN

2008 STOCK OPTION PLAN

1.           PURPOSE.  The purpose of this Plan is to advance the interests of CHINA TEL GROUP, INC (the "Company") by providing an opportunity to its selected key employees (as defined in Paragraph 2(b)) and consultants (as defined in Paragraph 2(a)) to purchase shares (the "Shares") of the Common Stock, par value $.001 per share (the "Common Stock"), of the Company.  By encouraging stock ownership, the Company seeks to attract, retain and motivate key employees and consultants.  It is intended that this purpose will be effected by the granting of (i) incentive stock options ("Incentive Options") as described in ' 422 of the Internal Revenue Code of 1986, as amended (the "Code"); and (ii) nonqualified stock options ("Nonqualified Options," and, together with the incentive options, the "Options") as provided herein.

2.           DEFINITIONS.

(a)           The term "consultants" means those persons, other than employees of the Company, who provide services to the Company, including members of a scientific advisory board of the Company and nonemployee directors of the Company, and who are determined by the Compensation Committee to be eligible for Options under this Plan.

(b)           The term "key employees" means those executive, administrative, operational, engineering or managerial employees who are determined by the Compensation Committee to be eligible for Options under this Plan.

(c)           The term "optionee" means an individual to whom an option is granted under this Plan.

3.           EFFECTIVE DATE.  This Plan became effective on October 27, 2008, the date it was adopted by the Board of Directors of the Company. Attached as Exhibit A is a form of the Stock Option to be issued under this Plan.

4.           STOCK SUBJECT TO THE PLAN.  The Shares that may be purchased (through the exercise of options) under this Plan shall not exceed in the aggregate Eight Million Shares.  If any Options granted under the Plan shall terminate, expire or be cancelled as to any Shares, new Options may thereafter be granted covering such Shares.  The Shares issued upon exercise of Options under this Plan may, in whole or in part, be either authorized but unissued Shares or issued Shares reacquired by the Company.  Notwithstanding any other provisions of this Plan, the aggregate number of Shares subject to outstanding options granted under the Plan, plus the aggregate number of Shares issued upon the exercise of all options granted under the Plan, shall never be permitted to exceed the number of Shares specified in the first sentence of section 4, except in accordance with subsection 8(a) below.

5.           ADMINISTRATION.  The Plan shall be administered by the Board of Directors of the Company (the "Board"), or by a committee appointed by the Board, which shall not have less than two (2) members (in either case, the "Compensation Committee").  No option shall be granted to a director or officer of the Company except: (a) by the Board when, as and if all of its members are disinterested persons, or (b) by a Compensation Committee other than the Board when the Compensation Committee is composed of two (2) or more directors having full authority to act in the matter and each member of the Compensation Committee is a disinterested person.  "Disinterested person" for this purpose, shall mean a person who, at the time he exercises discretion in administering the Plan, has not at any time within one (1) year prior thereto been a person to whom stock may be allocated or to whom stock options or stock appreciation rights may be granted pursuant to the Plan or any other plan of the Company or any of its affiliates entitling the participants therein to acquire stock, stock options or stock appreciation rights of the Company or any of its affiliates.  The Compensation Committee may delegate non-discretionary administrative duties to such employees of the Company as it deems proper.  Subject to the provisions of the Plan, the Compensation Committee shall have the sole authority, in its discretion:

(a)           to determine to which of the eligible individuals, and the time or times at which, options to purchase Common Stock of the Company shall be granted;

(b)           to determine the number of shares of Common Stock to be subject to options granted to each eligible individual;

(c)           to determine the price to be paid for the shares of Common Stock upon the exercise of each option;

(d)           to determine the term and the exercise schedule of each option;

(e)           to determine the terms and conditions of each stock option agreement (which need not be identical) entered into between the Company and any eligible individual to whom the Compensation Committee has granted an option;

(f)           to interpret the Plan; and

(g)           to make all determinations deemed necessary or advisable for the administration of the Plan.

The Compensation Committee, if any, shall be appointed by and shall serve at the pleasure of the Board of Directors of the Company.  No member of the Compensation Committee shall be liable for any action or determination made with respect to the Plan.

6.           ELIGIBLE EMPLOYEES AND CONSULTANTS.  Incentive Options may be granted to such key employees of the Company, including members of the Board of Directors who are also employees of the Company, as are selected by the Compensation Committee or Board of Directors.  Nonqualified Options may be granted to such key employees and consultants of the Company, including members of the Board of Directors, as are selected by the Compensation Committee or the Board of Directors.  The term "employee" includes an officer or director who is an employee of the Company or a parent or subsidiary of it, as well as a non-officer, non-director employee of the Company or a parent or subsidiary of it.

7.           DURATION OF THE PLAN.  This Plan shall terminate five (5) years from the effective date of this Plan, unless terminated earlier pursuant to Paragraph 13 hereof, and no Options may be granted after such termination.

8.           RESTRICTIONS ON INCENTIVE OPTIONS.  Incentive Options (but not Nonqualified Options) granted under this Plan shall be subject to the following restrictions:

(a)           Limitation on Number of Shares.  The aggregate fair market value, determined as of the date the Incentive Option is granted, of the Shares with respect to which Incentive Options are exercisable for the first time by an employee during any calendar year shall not exceed $2,500,000.  If an employee is eligible to participate in any other incentive stock option plans of the Company which are also intended to comply with the provisions of ' 422A of the Code, the applicable annual limitation shall apply to the aggregate number of Shares for which Incentive Options may be granted under all such plans.  No Incentive Options may be exercised until and unless the Plan is approved by the shareholders within one year of the date hereof, such approval to be expressed in any legal way under Nevada law.

(b)           10% Stockholder.  If any employee to whom an Incentive Option is granted pursuant to the provisions of the Plan is on the date of grant the owner of stock (as determined under Section 425(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company (or of any parent or subsidiary of the Company), then the following special provisions shall be applicable to the Incentive Option granted to such individual:

(i) The option price per Share subject to such Incentive Option shall not be less than 100% of the fair market value of one Share on the date of grant; and

(ii) The Incentive Option shall not have a term in excess of three (3) years from the date of grant.

In determining stock ownership, an optionee shall be considered as owning the voting capital stock owned, directly or indirectly, by or for his brothers and sisters, spouse, ancestors, and lineal descendants.  Voting capital stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries, as applicable.  Common Stock with respect to which any such optionee holds an option shall not be counted.  Additionally, outstanding capital stock shall include all capital stock actually issued and outstanding immediately after the grant of the option to the optionee.  Outstanding capital stock shall not include capital stock authorized for issue under outstanding options held by the optionee or by any other person.

9.           TERMS AND CONDITIONS OF OPTIONS.  Incentive and Nonqualified Options granted under this Plan shall be evidenced by stock option agreements in such form and not inconsistent with the Plan as the Compensation Committee or the Board of Directors shall approve from time to time, which agreements shall evidence the following terms and conditions:

(a)           Price.

(i)           Incentive Options.  Subject to the condition of subparagraph (b)(i) of Paragraph 8, if applicable, with respect to each Incentive Option, the purchase price per Share payable upon the exercise of each Incentive Option granted hereunder shall be $0.80 per share.

(ii)           Nonqualified Options.  With respect to each Nonqualified Option, the purchase price per Share payable upon the exercise of each Nonqualified Option granted hereunder shall be $0.80 per shares.

(b)           Number of Shares.  Each option agreement shall specify the number of Shares to which it pertains.

(c)           Exercise.  Subject to the conditions of subparagraphs (a) and (b)(ii) of Paragraph 8, if applicable, each option shall be exercisable for the full amount or for any part thereof and at such intervals or in such installments as the Compensation Committee or the Board of Directors may determine at the time it grants such option; provided, however, that no option shall be exercisable with respect to any Shares later than ten (10) years after the date of the grant of such option.

(d)           Notice of Exercise and Payment.  An option shall be exercisable only by delivery of a written notice to the Compensation Committee or the Board of Directors, any member of the Compensation Committee or the Board of Directors, the Company's Treasurer, or any other officer of the Company designated by the Compensation Committee or the Board of Directors to accept such notices on its behalf, specifying the number of Shares for which it is exercised.  If such Shares are not at the time effectively registered under the Securities Act of 1933, as amended, the optionee shall include with such notice a letter, in form and substance satisfactory to the Company, confirming that such Shares are being purchased for the optionee's own account for investment and not with a view to the resale or distribution thereof.  Payment shall be made in full at the time of delivery to the optionee of a certificate or certificates covering the number of Shares for which the option was exercised.  Payment shall be made (i) by cash or check, (ii) if permitted by the Compensation Committee or the Board of Directors, by delivery and assignment to the Company of shares of the Company's stock having a fair market value (as determined by the Compensation Committee) equal to the exercise price, (iii) if permitted by the Compensation Committee or the Board of Directors, by a promissory note, (iv) by a combination of (i), (ii), and (iii)or (v) (v) by a combination of (i), (ii), (iii), and (iv) by "cashless" exercise of vested options, i.e., surrender of vested options to purchase the number of shares resulting from the formula X divided by A, where X is the number of fully paid shares to be issued by the Company in consideration for the vested options surrendered, Y is the number of vested options being surrendered, A is the fair market value (as determined by the Compensation Committee) of the Common Stock at the time of exercise, and B is the exercise price of the option being exercised.

(e)           Withholding Taxes; Delivery of Shares.  The Company's obligation to deliver Shares upon exercise of a Nonqualified Option, in whole or in part, shall be subject to the optionee's satisfaction of all applicable federal, state, and local income and employment tax withholding obligations.  The optionee may satisfy the obligation, in whole or in part, by electing to have the Company withhold Shares having a value equal to the amount required to be withheld.  The value of Shares to be withheld shall be based on the fair market value of the Shares on the date the amount of tax to be withheld is to be determined.  If Common Stock acquired by exercise of an incentive stock option granted pursuant to this Plan is disposed of within two (2) years from the date of grant of the option or within one (1) year after the transfer of the Common Stock to the optionee, the holder of the Common Stock immediately prior to the disposition shall promptly notify the Company in writing of the date and terms of the disposition and shall provide such other information regarding the disposition as the Company may reasonably require.

(f)           Nontransferability.  No option shall be transferable by the Optionee otherwise than by will or the laws of descent or distribution, and each option shall be exercisable during his lifetime only by him (except as otherwise provided for in subparagraph (g) below).

(g)           Termination of Options.  Each option shall terminate and may no longer be exercised if the optionee ceases for any reason to be an employee of, or consultant to, the Company, except that:

(i)

if the optionee's performance of services shall have terminated for any reason other than cause, resignation or other voluntary action before his eligibility to retire, disability (as defined below) or death, he may at any time within a period of thirty (30) days after such termination of the performance of services exercise his option to the extent that the option was exercisable by him on the date of termination of his performance of services;

(ii)

if the Optionee's performance of services shall have been terminated because of disability within the meaning of 422(e)(3) of the Internal Revenue Code, the Optionee may, at any time within a period of one (1) year after the termination of performance of services, exercise his option to the extent that the option was exercisable by him on the date of termination of his employment or performance of services; and

(iii) if the optionee dies at a time when the option was exercisable by him, then his estate, personal representative or beneficiary to whom it has been transferred may, at any time within a period of one (1) year following his death if the optionee's performance of services shall have been terminated by his death, or for the period following the termination of his performance of services during which the option would have remained exercisable under clauses (i) or (ii) above if the optionee's performance of services shall have been terminated prior to his death, exercise the option to the extent the optionee might have exercised it at the time of his death; provided, however, that no option may be exercised to any extent by anyone after the date of expiration of the option.

(h)           Rights as Stockholder.  The optionee shall have no rights as a stockholder with respect to any Shares covered by his option until the date of issuance of a stock certificate to him for such Shares.

(i)           Repurchase of Shares by the Company.  Any Shares purchased by an optionee upon exercise of an option may in the discretion of the Compensation Committee or the Board of Directors be subject to repurchase by the Company if and to the extent specifically set forth in the agreement pursuant to which the Shares were purchased.

10.           STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS.  Appropriate adjustment shall be made in the maximum number of Shares of Common Stock subject to the Plan and in the number, kind and price of Shares covered by any Options granted hereunder to give effect to any stock dividends or other distributions, stock splits, stock combinations, re-capitalization’s and other similar changes in the capital structure of the Company after the effective date of the Plan.

11.           MERGER; SALE OF ASSETS; DISSOLUTION.  In the event of a change of the Common Stock resulting from a merger or similar reorganization as to which the Company is the surviving corporation, the number and kind of shares which thereafter may be subject to Options granted under this Plan and the number, kind and price of Shares then subject to Options shall be appropriately adjusted in such manner as the Compensation Committee or the Board of Directors may deem equitable to prevent substantial dilution or enlargement of the rights available or granted hereunder.  Except as otherwise determined by the Board of Directors of the Company, a merger or a similar reorganization that the Company does not survive, or a sale of all or substantially all of the assets of the Company, shall cause every Incentive Option and Nonqualified Option outstanding hereunder to terminate, to the extent not then exercised prior to the close of the merger or similar transaction.

12.           NO RIGHTS.  Except as hereinabove expressly provided in Section 10 and 11, no optionee shall have any rights by reason of any subdivision or consolidation of shares of the capital stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation, and any issue by the Company of shares of stock of any class or of securities convertible into shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to any option granted hereunder.  The grant of an option pursuant to this Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or consolidate or to dissolve, liquidate, sell, or transfer all or any part of its business or assets.

13.           COMPLIANCE WITH APPLICABLE LAWS.  Notwithstanding any other provision of the Plan, the Company shall have no liability to issue any shares under the Plan unless such issuance would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity.  Prior to the issuance of any shares under the Plan, the Company may require a written statement that the recipient is acquiring the shares for investment and not for the purpose or with the intention of distributing the shares.

14.           DEATH OF A PARTICIPANT.  In the event of the death of an optionee, any options which the optionee was entitled to exercise on the date immediately preceding his death shall be exercisable by the person or persons to whom those rights pass by will or by the laws of descent and distribution.  Any such exercise shall be by written notice thereof filed with the Secretary of the Company at the Company's corporate headquarters prior to the option's expiration date, and any person exercising such an option shall be treated as an optionee for purposes of the provisions of this Plan.

15.           EMPLOYMENT AND SHAREHOLDER STATUS.  The Plan does not constitute a contract of employment, and selection as an optionee will not give any employee the right to be retained in the employ of the Company.  The grant of an option under the Plan shall not confer upon the holder thereof any right as a shareholder of the Company.  As of the date on which an optionee exercises an option, the optionee shall have all rights of a stockholder of record with respect to the number of shares of Common Stock as to which the option is exercised, irrespective of whether certificates to evidence the shares of stock have been issued on such date.  If the redistribution of shares is restricted pursuant to Paragraph 12, certificates representing such shares may bear a legend referred to such restrictions.

16.           TERMINATION OR AMENDMENT OF PLAN.  The Board of Directors may at any time terminate this Plan or make such changes in or additions to the Plan as it deems advisable without further action on the part of the stockholders of the Company, provided that no such termination or amendment shall adversely affect or impair any then outstanding Options without the consent of the person holding such Options.

17.           TERMINATION.  The Plan shall terminate automatically on October 27, 2013, and may be terminated at any earlier date by the Board.  No option shall be granted hereunder after termination of the Plan, but such termination shall not affect the validity of any option then outstanding.

18.           TIME OF GRANTING OPTIONS.  The date of grant of an option hereunder shall, for all purposes, be the date on which the Compensation Committee makes the determination granting such option.

19.           RESERVATION OF SHARES.  The Company, during the terms of this Plan, will at all times reserve and keep available such number of shares of its Common Stock as shall be sufficient to satisfy the requirements of the Plan.

20.           EFFECTIVE DATE.  This Plan was adopted by the Board of Directors and shareholders in accordance with the requirements of the Internal Revenue Code and the Nevada General Corporation Law of the Company on October 27, 2008, and shall be effective on said date, provided the Plan is approved within twelve (12) months of said date.  Options may be granted, but may not be exercised, prior to the date of such shareholder approval.

21.           CORPORATION FINANCIAL INFORMATION.  The Company shall provide all optionees on an annual basis with a balance sheet and income statement for the then ending fiscal year.

EXHIBIT A

 OPTION CERTIFICATE AND AGREEMENT

THIS  OPTION CERTIFICATE AND AGREEMENT (this "Agreement") is made and entered into as of  the date set forth in Schedule 1 to this Agreement and is  by and between  China Tel Group, Inc. (the "Company") and   the holder of this Option set forth in Schedule 1 to this Agreement (“Holder”).

R E C I T A L S

WHEREAS, the Company has recently adopted its 2008 Stock Option Plan (the “Plan”), pursuant to which the Company has reserved up to 8 million options to acquire the common stock of the Company (the “Shares”);

WHEREAS, this Agreement is issued and signed pursuant to the terms of the Plan;

WHEREAS, this Option contains the terms, pursuant to which, the Holder shall have the right, but not the obligation. to acquire additional Shares of the Company.

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:

A G R E E M E N T

1. Shares.  This Option shall entitle the Holder to buy the number of Shares set forth in Schedule 1 hereto.

2. Term of  Option    This  Option shall be outstanding for eighteen months from the date  first set forth above.

3. Procedures for Exercise.   In the event Holder elects, at its sole and absolute discretion, to exercise this, it shall:

(a) Deliver the Exercise Form which is attached hereto as Schedule A to the Company secretary.

(b) The exercise form shall be accompanied by a check in the amount of the aggregate exercise price.

(c) Upon such exercise, this Certificate shall be canceled and anew  shall be issued to Holder reflecting the reduced number of s remaining outstanding.

4.           Mutilated or Missing  Certificates. In case any of the Certificates shall be mutilated, lost, stolen or destroyed prior to its expiration date, the Company shall issue and deliver, in exchange and substitution for and upon cancellation of the mutilated  Certificate, or in lieu of and in substitution for the  Certificate lost, stolen or destroyed, a new  Certificate of like tenor and representing an equivalent right or interest.

5.           Reservation of Shares.  The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Shares or its authorized and issued Shares held in its treasury for the purpose of enabling it to satisfy its obligation to issue Shares upon exercise of Options, the full number of Shares deliverable upon the exercise of all outstanding Options. The Company covenants that all Shares which may be issued upon exercise will be validly issued, fully paid and non-assessable outstanding Shares of the Company.

6.           Rights of Holder.  The Holder shall not, by virtue of anything contained in this  Agreement or otherwise, prior to exercise of this , be entitled to any right whatsoever, either in law or equity, of a stockholder of the Company, including without limitation, the right to receive dividends or to vote or to consent or to receive notice as a shareholder in respect of the meetings of shareholders or the election of directors of the Company of any other matter.

7.           Investment Intent.  Holder represents to the Company that Holder is acquiring the Shares for investment and with no present intention of distributing or reselling any of the Shares.

8.           Consolidation, Merger or Sale of the Company.  If the Company is a party to a consolidation, merger or transfer of assets which reclassifies or changes its outstanding Common Stock, the successor corporation (or corporation controlling the successor corporation or the Company, as the case may be) shall by operation of law assume the Company's obligations under this  Agreement.  Upon consummation of such transaction the Shares shall auto­matically become exercisable for the kind and amount of securities, cash or other assets which the holder of Shares would have owned immediately after the consolidation, merger or transfer if the holder had exercised the  Option immediately before the effective date of such transaction.  As a condition to the consummation of such transaction, the Company shall arrange for the person or entity obligated to issue securities or deliver cash or other assets upon exercise of the Option concurrently with the consummation of such transaction, assume the Company's obligations hereunder by executing an instrument so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section.

9.           Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or Holder shall bind and inure to the benefit of their respective successor and assigns hereunder.

10.           Counterparts.  This Agreement may be executed in any number of counterparts and each of such counterparts shall for all proposes be deemed to be an original, and such counterparts shall together constitute by one and the same instrument.

11.           Notices.  All notices or other communications under this  shall be in writing and shall be deemed to have been given if delivered by hand or mailed by certified mail, postage prepaid, return receipt requested, if to the Company at its principal business address, if to the Holder at the address of the Holder appearing on the books of the Company or the Company’s transfer agent, if any. Either the Company or the Holder may from time to time change the address to which notices to it are to be mailed hereunder by notice in accordance with the provisions of this Paragraph

12.           Severability.  If for any reason any provision, paragraph or term of this  Agreement is held to be invalid or unenforceable, all other valid provisions herein shall remain in full force and effect and all terms, provisions and paragraphs of this  shall be deemed to be severable.

13.           Governing Law and Venue.  This  shall be deemed to be a contract made under the laws of the State of Nevada and for all purposes shall be governed and construed in accordance with the laws of said State.  Any proceeding arising under this  Agreement shall be instituted in Clark County, State of  Nevada.

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

"COMPANY"

CHINA TEL GROUP, INC.

By:________________________

Title:  Chief Executive Officer

SCHEDULE 1

Name:    George Alvarez

Address:8105 Irvine Center Drive, Suite 800

Irvine, CA 92618

Number of Options: 4,000,000

Date of Issuance: October 27, 2008

SCHEDULE 1

Name:     Matthew Jennings

Address: 8141 West Kaiser Road, Suite 312

 Anaheim Hills, CA 92808

Number of Options: 2,000,000

Date of Issuance: October 27, 2008

SCHEDULE 1

Name:     Robert Jennings

Address: 339 North Hwy 101

 Solana Beach, CA 92075

Number of Options: 2,000,000

Date of Issuance: October 27, 2008

SCHEDULE 2

ST0CK OPTION EXERCISE FORM

The undersigned being the holder of options to acquire shares of common stock of Game Plan Holdings, Inc. (“Game Plan”) hereby exercises the number of options set forth below at the exercise price set forth below:

Number of Options Exercised:_________________

Exercise Price Per Option:____________________

Total Exercise Price:_________________________

Signature of Party Exercising Option:____________________________________________

EX-10.5

EXHIBIT 10.5

Framework Agreement

This document contains confidential and proprietary information of Trussnet USA, Inc. and is not

be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 1 of 8

Framework Agreement

	THIS FRAMEWORK AGREEMENT (this “Framework Agreement”) is dated 7th April 2008 and made between:
1	Trussnet USA, Inc. (“Trussnet”), a company incorporated under the laws of Nevada, USA; and
2	CECT-Chinacomm Communications Co., Ltd. (‘‘Chinacomm”), a company incorporated under the laws of the People’s Republic of China.
	Trussnet and at-Malcolm are each hereinafter referred to individually as a “Party" or collectively as “Parties”.
	Background

1	Trussnet is in the business of designing, developing, operating and maintaining wireless communications facilities globally. Chinacomm is the major holder of a 3.5G Hz spectrum licenses (“3.5 G Licenses”) from the Ministry of Information Industry of China and desires to deploy 3.5 GHz wireless broadband operation in 2 cities throughout China.
2	By an agreement dated l November 2007 (“Initial Agreement”) and made between the Parties, Trussnet: agrees to provide financial and professional assistance to Chinacomm for building and operating such 3.5 G Hz wireless broadband in 29 cities throughout China.
3	In accordance with the Initial Agreement, Trussnet may purchase up to 49% equity interests of Chinacomm.
4	To facilitate Chinacomm’s future financing plan, the Parties have agreed to jointly set up a wholy foreign owned company in China (“WOFIE”) (as defined below) with 49% equity interests owned indirectly by Trussnet and .51% equity interests owned indirectly by Chinacomm’s shareholders, WOFIE will enters series of exclusive agreements with Chinacormm in connection with the construction, operation and maintenance of such 3.5 G Hz wireless broadband in 29 cities throughout China.
5	Therefore, the Parties have agreed to enter into this Framework Agreement as an Addendum to. the Initial Agreement
	Definitions

The following capitalized terms used herein shall have the following meanings:

“Chinacomm Cayman” means Chinacomm Limited, a company incorporated under the laws of Cayman Islands and owned by two companies incorporated under the laws of British Virgin Islands both owned by Ms. Mang Sin, who is a Hong Kong resident:

“Chinacomm HK” means a company to be incorporated under the laws of Hong Kong and wholly owned by Chinacomm Cayman;

This document contains confidential and proprietary information of Trussnet USA, Inc. and is

not be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 2 of 8

Framework Agreement

“Gulfstream” means Gulfstream Limited, a company incorporated under the laws of Hong Kong and owned by Trussnet;

“WOFIE” means a wholly owned foreign invested enterprise to be incorporated under the laws China and wholly owned by Chinacomm HK.

“Trussnet WOFIE” means a company incorporated or to be incorporated under the laws of China and owned directly or indirectly by Trussnet;

“Nortel” means Nortel Networks (China) Limited.

Both Parities agree as follows:

Article 1. Proposed Transaction Structure

                     [INSERT ORG. CHART]

a Gulfstream will sign an investment agreement with Chinacomm Cayman and its owner(s) (“Investment Agreement”), by which Gulfstream will invest USD196,000,000.00 (“Acquisition Price”) to acquire 49% equity interests of Chinacomm Cayman.

This document contains confidential and proprietary information of Trussnet USA, Inc. and is

 not be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 3 of 8

Framework Agreement

b	Chinacomm Cayman will set up Chinacomm HK in Hong Kong, and then Chinacomm HK will set up WOFIE in China. The board of directors of WOFIE shall be appointed by both Parties in accordance with the percentage of the shareholdings of each shareholder of Chinacomm Cayman. The composition of the board of directors of Chinacomm Cayman, Chinacomm HK and WOFIE shall be identical. Each of the Parties shall appoint one person as bank signatory of Chinacomm Cayman, Chinacomm HK and WOFIE after the First Payment has been paid to Chinacomm Cayman.
c	Trussnet or Trussnet WOFIE will provide to WOFIE the relevant professional services and will enter into services agreements with WOFIE in connection with the operation and maintenance of 3.5G Hz wireless broadband and WOFIE shall pay the relevant service fees to Trussnet in accordance with such services agreements. Such service fees may be paid by Chinacomm Cayman for WOFIE in any lawful way. Such services agreements should be exclusive and WOFIE will not enter any similar agreements with any other parties, unless agreed by Trussnet.
d	WOFIE will provide to Chinacomm the relevant professional services and will enter into services agreements with Chinacomm in connection with the operation and maintenance of 3.5G Hz wireless broadband and Chinacomm shall pay the relevant service fees to WOFIE in accordance with the such services agreements. Such services agreements should be exclusive and Chinacomm will not enter any similar agreements with any other parties, unless agreed by Trussnet.
e	Trussnet and WOFIE will have priority to purchase from Nortel (or other manufactures of which the products arc recognized by Nortel) the necessary equipments required by Chinacomm for the construction and operation of 3.5G Hz wireless broadband network after Trussnet has received the documents listed in Article2 (b) below and sign lease agreement with WOFIE (“Lease Agreements”), by which Trussnet will lease such equipments to WOFTE. Such equipments expenditure shall not exceed USD50,000,000.00. Such equipments will be transferred to WOFIE at USD1.00 of the transfer price when Chinacomm Cayman goes to listing in stock exchange.
f	The WOFIE will sub-lease the same equipments to Chinacomm. WOFIE and Chinacomm. shall enter into a sub-lease agreement (“Sub-Lease Agreements”), by which Chinacomm shall pay rental to WOFIE.
g	Subject to the laws of PRC the annual rental and service fees payable by Chinacomm to WOFIE under the various agreements above shall be 100% of the turnover after deducted the all the tax payable and other necessary operation cost in accordance with the approved budget by both Parties.
h	The certain shares (up to 49%) of Chinacomm shall be legally and validly transferred to Mr. Xing Hongjin or a Chinese company designated by Mr. Xing proportionally in accordance with the payment of the Acquisition Price at the transfer price of USD1.00. The ownership of such shares shall be held by Mr. Xing through a qualified trust company or other legal mechanism mutually agreed by the parties and Mr. Xing shall have the right to appoint the directors of Chinacomm in accordance with the percentage of the shares owned by him Such transfer of the slims to Mr. Xing shall be conducted at the same time when Trussnet obtains equity of Chinacomm Cayman through Gulfstream. Such 49% shares of Chinacomm will be transferred back to the previous shareholders after Chinacomm Cayman goes to listing in stock exchange at the transfer price of USD1.00.
i	The Parties have agreed to have Chinacomm Cayman or another mutually agreed upon company in having an exit plan strategy of an IPO in an agreed upon stock exchange.
	Article 2. The Payment of Acquisition Price

This document contains confidential and proprietary information of Trussnet USA, Inc. and is

not be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 4 of 8

Framework Agreement

a	After the execution of this Framework Agreement by both Parties and within 10 business days after Trussnet has duly received the originals of the signed shareholders’ meeting resolution and board resolution of Chinacomm Cayman both approving the acquisition of the 49%.equity interests of Chinacomm Cayman by Trussnet through Gulfstream, Trussnet will pay USD5,000,000,00 (“First Payment”) in cash in two separate payment as part of the above Acquisition Price into Chinacomm Cayman through Gulfstream, then Chinacomm HK shall pay such First Payment into WOFIE as part of the capital injection required by the laws of China.
b	Trussnet will pay USD141,000,000.00 of the Acquisition Price in cash, within 10 business days upon the receipt of the following documents, into Chinacomm Cayman through Gulfstream then Chinacomm HK shall pay such payments into WOFIE as part of the capital injection required by the laws of China, subject to the following documents being received and acceptable by Trussnet:
	I	the Investment Agreement for the acquisition of 49% shares of Chinacomm Cayman duly signed by the relevant parties and, disbursement plan of all parts of the Acquisition Price shall be provided in the Investment Agreement;
	ii	the revised articles of association of Chinacomm Cayman reflecting that the certain equity interests of Chinacomm Cayman proportionally in accordance with the payment of the Acquisition Price are owned by Gulfstream;
	iii	the written documents showing that Trussnet has validly appointed directors, bank signatory, general manager and corporate financial officer for Chinacomm Cayman and Chinacomm HK;
	iv	the governmental approval in relation to the establishment of WOFIE and the certificate of approval and business license of WOFIE and the articles of association of WOFIE agreed by Trussnet;
	v	the certified copies of all corporate documents of Chinacomm HK, including but not limited, commercial certificates, certificate of incorporation, articles of associations, the list of the shareholders and the directors, bank information, etc.;
	vi	the Lease Agreements duly signed by Trussnet WOFIE and WOFIE and the Sub-Lease Agreements and the service agreements duly signed by Trussnet and WOFIE and the service agreements duly signed by WOFIE and Chinacomm;
	vii	the written legal evidence showing that the Article 1 (h) is duly performed; and
	viii	all the documents and information materially necessary for conducting the comprehensive legal and financial due diligence on Chinacomm.
		The above documents shall be provided by Chinacomm with 30 business days after the payment of the First Payment.

This document contains confidential and proprietary information of Trussnet USA, Inc. and is

not be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 5 of 8

Framework Agreement

a	The remaining USD50,000,00000 of the Acquisition Price shall be deemed being fully paid by Trussnet if Trussnet WOFIE has transferred the equipments to WOFIE in accordance with Article 1(e).
b	If Chinacomm fails to provide the documents listed in the Article2 (b) above within the time required herein the First Payment shall be refundable to Trussnet within 180 days after expiration of such required time limit.
c	Within 7 business days after the payment of above USD141,000,000,00 Chinacomm shall provide to Trussnet the written evidences showing that the acquisition of 49% equity interests or Chinacomm Cayman and its amended articles of association, as well as the change of directors, managers, and bank signatory of Chinacomm Cayman and Chinacomm HK have been properly filed with relevant agencies (if necessary).
d	Chinacomm shall provide to Trussnet the legal evidences showing that all of the 3.5G Licenses for 29 cities have been duly extended, and valid.
Article 3. The validity of this Framework Agreement and the Governing Law

a	The Framework Agreement will be valid after it has been duly signed by the authorized representatives of Chinacomm and Trussnet respectively.
b	This Framework Agreement shall be governed by and construed in accordance with the laws of Hong Kong. Any disputes arising from this Framework Agreement shall be submitted to arbitration at Hong Kong International Arbitration Center applying its arbitration rules then applicable and the arbitration reward will be final.
c	Notwithstanding other provisions herein if the First Payment is not paid by Trussnet in accordance with Article 2(a) above, this Framework Agreement shall be void.
	Article 4. The validity of the Initial Agreement
a	Except for otherwise provided in this Framework Agreement, the provisions of the initial Agreement shall remain valid.
b	Recitals H, I, K, M, N and O as relevant provisions of the Initial Agreement shall be void.
c	Recital E o the Initial Agreement shall be replaced with the following: “The parties have also reached an agreement pursuant to which Trussnet will: (i) build and operate Beijing (Chaoyang District), Shanghai (Jiading District), and Shenzen (Futian District) initially; (ii) complete initial coverage for aforementioned cities, Beijing, Shanghai, and Shenzhen in the future, (iii) build and operate additional broadband wireless networks in Guangzhou, Tianjin, Dalian, Ningbo, Xiamen, Hangzhou, Nanjing and other 19 cities, for a grand total of 19 cities, for Chinacomm in connection wit Chinacomm’s 3.5G Hz spectrum license and to deploy such networks utilizing similar equipment ad services to those being deployed for the Beijing (Chaoyang District), Shanghai (Jiading Dsitrict), and Shenzhen (Futian District);”

This document contains confidential and proprietary information of Trussnet USA, Inc. and is

not be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 6 of 8

Framework Agreement

d	Recital G of the Initial Agreement shall be replaced with the following: “The Parties are entering into this Agreement to set forth their respective rights, duties and obligations the equipment, services and related activities related to the Beijing (Chaoyang District), Shanghai (Jiading District), Shenzhen (Futian District) cities along with Guangzhou, Tianjin, Dalian, Nignbo, Xiamen, Hangzhou, Nanjing and other 19 cities for a grand total of 29 cities.”
e	Recitals F and K and relevant provisions of the Initial Agreement shall be replaced with relevant articles of this Framework Agreement.
	Article 5. Exclusivity of this Framework .Agreement.
	After the payment made by Trussnet according to Articie2 (a) above in this Framework Agreement, Chinacomm and Chinacomm registered/actual shareholders shall not, without Trussnet’s prior written consent, enter into any agreement or arrangement which may directly or indirectly load to the transfer of shares or business of Chinacomm onshore or offshore.
	IN .WITNESS whereof, the Parties have execute d. this Framework Agreement on the date first written above.

This document contains confidential and proprietary information of Trussnet USA, Inc. and is

not be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 7 of 8

Framework Agreement

Trussnet USA, Inc.

Signature

Name: Colin Tay YongLee

Title: Managing Director / Co-Founder

CECT-Chinacomm Communications Co., Ltd.

Signature

Name: iu Ping

Title: President

This document contains confidential and proprietary information of Trussnet USA, Inc. and is

not be disclosed, reviewed or used, except with the express written consent of Trussnet.

Page 8 of 8

EX-10.6

EXHIBIT 10.6

AGREEMENT FOR PROFESSTIONAL SERVICES

    by and between

TRUSSNET USA, INC. (a Nevada corporation)

and

TRUSSNET USA, INC. (a Delaware Corporation)

1

Agreement for Professional Services

This Agreement for Professional Services ("Agreement") is entered into as of April 10, 2008 ("Effective Date") by and between Trussnet USA, Inc., a Nevada corporation (“TNN”), andTrussnet USA, Inc., a Delaware corporation (“TND”).  TNN and TND are hereinafter referred to individually as a "Party" and collectively as "Parties."

RECITALS

A.   TND and its affiliated companies worldwide are in the business of designing, developing, operating, and providing managerial services for the construction of wireless telecommunications facilities globally and maintaining the same;

B.   TNN is in the process of acquiring, designing, developing operating and maintaining wireless telecommunications facilities in South America, Europe, Russia and the People’s Republic of China (“PRC”);

C.   CECT-Chinacomm Communications Co. Ltd. (“Chinacomm”) is a telecommunications operator which holds licenses for the use of 3.5GHz spectrum to deploy, maintain and operate a wireless telecommunications broadband network in 29 cities throughout the PRC;

D.   TNN has agreed to provide financial and professional assistance to Chinacomm for building, deploying and operating Chinacomm’s 3.5GHz wireless telecommunications broadband network in the 29 cities throughout the PRC; and

E.   TND has agreed to provide professional services to TNN to fulfill its contractual obligations to Chinacomm for building, deploying and operating Chinacomm’s 3.5GHz wireless telecommunications broadband network in the 29 cities throughout the PRC in accordance with the terms and conditions of this Agreement.

2

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:

1.     Term of this Agreement

The term of this Agreement shall be for two years, effective as April 10, 2008 and expiring April 9, 2010 (“Term”).  Notwithstanding the foregoing, either party to this Agreement shall have the right to terminate the Term of this Agreement by providing the other party with sixty (60) days prior written notice of its desire to terminate the Agreement.  TNN shall be obligated to pay for Services provided by TND to TNN during the sixty (60) day notice of termination period.

3.      Services to be Performed by TND

TND shall perform the following professional services (the “Services”) as an independent contractor to TNN in connection with the deployment of the wireless telecommunications broadband network in the 29 cities in the PRC: (i) architectural and engineering services; (ii) project management services; (iii) site acquisition services: (iv) deployment supervision services; (v) general administrative services to the extent not otherwise included in the charge for Services; and (vi) any other professional services TNN deems necessary to fully deploy Chinacomm’s wireless telecommunications broadband network in the 29 cities in the PRC.

4.     Payment

TNN shall pay TND for the Services it provides to itat TND’s standard hourly rates and/or based upon a fixed fee for specific Services.  Hourly time charges are subject to change by TND upon thirty (30) days prior written notice to TNN.Within ten (10) days after the end of each calendar month during the Term of this Agreement, or at such other intervals as TNN and TND mutually agree, TND shall submit an invoice to TNN, generally describing the Services during the prior month or agreed upon time interval and identifying the amount of compensation due TND for the Services it has provided to TNN.   TNN shall pay TND’s invoice for the Services performed within thirty (30) days of receipt thereof by TNN, unless the Parties mutually agree upon a different payment schedule.

5.     State and Federal Taxes

TND shall assume full responsibility for the payment of any taxes (or any other obligations or payments) that may be claimed as owed by any unit of government, as a result of remuneration paid to TND for performance of the Services.  This includes income, Social Security, Medicare and self-employment taxes.  TND shall also pay all unemployment contributions related to the performance of the Services.  TND shall defend and indemnify TNN with regard to any such payments.

6.     Fringe Benefits

Neither TND nor any of its employees shall be eligible to receive any employee benefits from TNN, including, but not limited to, medical, dental, vision, long-term disability, accidental death and dismemberment, flexible spending account, mental health services, family and medical care leave benefits, vacation benefits and participation in any TNN 401 (k) plan.

3

7.     Independent Contractor Status

The Parties intend TND to act as an independent contractor in the performance of the Services.  TND shall have the right to control and determine the methods and means of performing the Services.  TND shall use his own expertise and judgment in performing the Services.

8.    Equipment and Supplies

TND, at its sole expense, shall provide all equipment, tools and supplies necessary to perform the Services.

9.     Expenses

TND shall be responsible for all expenses required for the performance of the Services.

10.   Confidential Information

In order to assist TND in the performance of the Services, TNN may supply TND, from time to time, with confidential information concerning TNN and its operations, customers and suppliers, hereinafter referred to as “Confidential Information.”  TND shall hold confidential and not disclose to others, either directly or indirectly, any and all Confidential Information, propriety information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, customers, customer lists, markets, software, developments, inventions, processes, formulas, technology, designs, financial data and other business information which may be learned from TNN before and during the term of this Agreement (collectively, “TNN Confidential Information”), unless the same have been furnished directly to TND by TNN and TND is advised in writing by TNN that such information is not TNN Confidential Information.  TND acknowledges that the terms and conditions of this Agreement are deemed confidential by TNN and agrees not to disclose any information regarding it to any third party, without TNN’s prior written consent.  All documents containing TNN Confidential Information shall be returned to TNN, and no copies shall be retained by TND upon the termination or expiration of this Agreement.  Not withstanding the foregoing, such duty of confidentiality shall not extend to information which is or comes into the public domain, is rightfully obtained from third parties under a duty of confidentiality, or which is independently developed without reference to TNN’s Confidential Information.  The duties of confidentiality imposed by this Agreement shall survive any termination or expiration of this Agreement for a period of three (3) years.  All data and information developed by TND (including notes, summaries, and reports), while performing the Services, shall be kept strictly confidential and shall not be revealed to third parties, without TNN’s prior written consent thereto. All such data and information shall be delivered to TNN by TND at the request of TNN.

11.   Dispute Resolution

If a dispute arises relating to this Agreement or the termination thereof, claims for breach of contract or breach of the covenant of good faith and fair dealing, claims of discrimination or any other claims under any federal, state or local law or regulation now in existence or hereinafter enacted, and as amended from time to time (“Dispute), the Parties shall attempt in good faith to settle the Dispute through mediation conducted by a mediator to be mutually selected by the Parties. The Parties shall share the costs of the mediator equally.  Each Party shall cooperate fully and fairly with the mediator, and shall attempt to reach a mutually satisfactory compromise of the Dispute.  If the Dispute is not resolved within thirty (30) days after it is referred to the mediator, it shall be resolved through final and binding arbitration, as specified in this Section 11.

4

Binding arbitration shall be conducted by the Judicial Arbitration and Mediation Services, Inc. (“JAMS”), sitting in Orange County, California, for resolution by a single arbitrator acceptable to both Parties.  If the Parties fail to agree to an arbitrator within ten (10) days of a written demand for arbitration being sent by one Party to the other Party, then JAMS shall select the arbitrator according to the JAMS Rules for Commercial Arbitration.  The arbitration shall be conducted pursuant to the California Code of Civil Procedure and the California Code of Evidence.  The award of such arbitrator shall be final and binding on the Parties, and may be enforced by any court of competent jurisdiction.  In the event of arbitration to resolve a Dispute or enforce an arbitrator’s award, the prevailing Party shall be entitled to recover its attorney’s fees and other out-of-pocket costs incurred in connection therewith from any non-prevailing Party involved therein.

12.  Assignment of the Agreement; Delegation of Responsibilities; Successors and Assignees

TND shall not assign any of its rights under this Agreement or delegate any of its responsibilities without the prior written consent of TNN, which may be exercised in its sole discretion. This Agreement binds and benefits the heirs, successors and assignees of the Parties to this Agreement, subject to the prohibition on assignments contained in this Section 12.

13.  Notices

All notices, requests and demands to or upon a Party hereto, to be effective, shall be in writing and shall be sent: (i) certified or registered mail, return receipt requested; (ii) by personal delivery against receipt; (iii) by overnight courier; or (iv) by facsimile and, unless otherwise expressly provided herein, shall be deemed to have been validly served, given, delivered and received: (a) on the date indicated on the receipt, when delivered by personal delivery against receipt or by certified or registered mail; (b) one business day after deposit with an overnight courier; or (c) in the case of facsimile notice, when sent. Notices shall be addressed as follows:

       Trussnet USA, Inc. (Nevada)

8105 Irvine Center Drive, Suite 800

Irvine, California 92618

Fax No. (949) 453-1822

Attention: George Alvarez

Trussnet USA, Inc. (Delaware)

8105 Irvine Center Drive, Suite 820

Irvine, California 92618

Fax No. (949) 453-1882

Attention: Mr. Christopher B. Young

14.  Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of California, without resort to California’s conflict-of-laws rules.

15.  Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to be one and the same agreement.

5

16.  Waiver

If one Party waives any term or provision of this Agreement at any time, that waiver will be effective only for the specific instance and specific purpose for which the waiver was given.  If any Party fails to exercise or delays exercising any of its rights or remedies under this Agreement, the Party retains the right to enforce that term or provision at a later time.

17.  Severability

If any court determines that any provision of this Agreement is invalid or unenforceable, any invalidity or unenforceability will affect only that provision and will not make any other provision of this Agreement invalid or unenforceable, and such provision shall be modified, amended or limited only to the extent of necessary to render it valid and enforceable.

18.  Entire Agreement and Modification

This Agreement supersedes all prior agreements between the Parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of this Agreement with respect to its subject matter. This Agreement may not be amended, except in writing signed by both Parties.

Trussnet USA Inc. (Nevada)

By: _____________________________________

Printed Name: George Alvarez

Title: President

Dated: April 10, 2008

    Trussnet USA, Inc. (Delaware)

By: _____________________________________

Printed Name: Christopher B. Young

Title: Chief Operating Officer

Dated: April 10, 2008

6

EX-10.7

  
    chtl_10k-ex1007.htm




    
    

EX-10.8

EXHIBIT 10.8

EXCLUSIVE TECHNICAL AND MANAGEMENT

CONSULTING SERVICES AGREEMENT

between

Yunji Communications Technology (China) Co. Ltd

and

CECT Chinacomm Communications Co. Ltd.

TABLE OF CONTENTS

CLAUSE		PAGE
1.	SCOPE OF SERVICES	3
2.	PERSONNEL	4
3.	FEES AND EXPENSES	4
4.	INVOICE AND PAYMENTS	5
5.	ASSISTANCE OF CHINACOMM	6
6.	FINANCIAL RECORDS OF CHINACOMM	6
7.	EXCLUSIVITY	6
8.	COLLATERALS	6
9.	REPRESENTATIONS AND WARRANTIES	6
10.	CHINACOMM’S COVENANTS	8
11.	ASSIGNMENT AND SUBCONTRACT	8
12.	LIMITATION OF LIABILITY AND INDEMNITY	9
13.	INTELLECTUAL PROPERTY	9
14.	TERM AND EXTENSION	10
15.	TERMINATION	10
16.	CONFIDENTIALITY	10
17.	GOVERNING LAW AND DISPUTE SETTLEMENT	11
18.	MISCELLANEOUS PROVISIONS	11

ANNEX 1 LIST OF EQUIPMENTS

ANNEX 2 LIST OF COLLATERALS

1

This Exclusive Technical and Management Consulting Services Agreement (this “ Agreement”) is made on May 23, 2008 by and between:

(1)	Yunji Communications Technology (China) Co. Ltd. (运基通信科技中国有限公司), whose registered office is at No. 18 Xihuan Nan Road, Economic and Technology Development Zone, Beijing, PRC (“Yunji”)
ON THE ONE HAND
AND
(2)	CECT Chinacomm Communications Co. Ltd. (中电华通通信有限公司), whose registered office is at No.17# Building, Yuhai Yuan Er Li, Haidian District, Beijing,PRC (“Chinacomm”)
ON THE OTHER HAND
(hereinafter collectively referred to as the “Parties” and individually as a “Party”).

WHEREAS:

(i)	Chinacomm is a telecom operator which holds licenses for the use of 3.5G Hz spectrum to deploy, maintain and operate wireless broadband in 29 cities throughout China;
(ii)	Yunji is in the business of telecom technology development, technical services, consulting and training, and telecom equipments leasing;
(iii)	Chinacomm and Yunji has entered into a Equipments Lease Agreement, according to which Yunji will lease equipments and materials to Chinacomm to deploy and operate 3.5G Hz wireless broadband in 29 cities (the “ Project”) ;
(iv)	According to the Equipments Lease Agreement, Chinacomm shall appoint Yunji to provide technical services and management consulting services (the “ Services”) in relation to the
	procurement, installation, operation and maintainance of the Equipments (as defined in the Equipments Lease Agreement), and other Services to carry out the Project ; Yunji agrees to accept such appointment; and
(v)	Adhering to the principles of mutual benefit in accordance with Chinese laws and regulations, the Parties have decided to enter into this Agreement.

2

IT IS AGREED AS FOLLOWS:

1.	SCOPE OF SERVICES
1.1	Technical Services
	Yunji shall provide technical services to Chinacomm in relation to:
	(a)	Architectural and engineering;
	(b)	Site acquisition and construction;
	(c)	Equipment procurement;
	(d)	IT software systems and licensing;
	(e)	Mesh point to point backhaul nodes;
	(f)	IT systems hardware;
	(g)	Project management;
	(h)	Network management systems;
	(i)	Value added platforms;
	(j)	IP transit and backhaul;
	(k)	IT solutions and systems;
	(l)	Security and redundancy;
	(m)	Network optimization;
	(n)	Billing systems;
	(o)	Training of technical staff; and
	(p)	Other technical assistance as may be agreed by the Parties.
1.2	Management Consulting Services
	Yunji shall provide management consulting services to Chinacomm in the following areas:
	(a)	Business development strategy;
	(b)	Human resources recruitment management, training and personnel development policies;
	(c)	Accounting policies and systems according to International Accounting Standards and PRC Accounting Standards;
	(d)	Risk management policies and systems;
	(e)	Security policies and systems;
	(f)	Management information systems;
	(g)	Environmental compliance and monitoring systems and the observance of applicable environmental laws;
	(h)	Procurement polices and inventory management systems;

3

	(i)	Implementation of Code of Conduct for employees; and
	(j)	Other management assistance as may be agreed by the Parties.
1.3	License
	If the performance of any of the above services requires specific qualification, license or permit under PRC law, Yunji shall obtain such qualification, license or permit promptly, or cooperate with a third party which holds such qualification, license or permit to carry out such Services in a manner that permitted by PRC law.
2.	PERSONNEL
2.1	Staffing
	Yunji shall assign personnel as needed to meet its obligations under this Agreement to this Project. The personnel assigned to this Project shall have requisite skill, expertise, and experience to perform the Services.
2.2	Provision of Key Personnel
	In order to assist in the performance of the Services, Yunji shall provide key technical and management personnel on short term secondment, from time to time, as may be reasonably required by Chinacomm.
2.3	Cost Recovery
	Where a technical or management staff of Yunji is seconded to Chinacomm under Clause 2.2, Chinacomm shall pay Yunji for the use of the seconded staff on a full cost recovery basis, which shall include his salary, medical insurance, traveling, accommodation, lodging, pension contribution, holiday entitlement and other benefits.
3.	FEES AND EXPENSES
3.1	Retainer
	During the continuance of this Agreement, Chinacomm shall pay Yunji an amount which equals to 【 】of Chinacomm’ s annual turnover (“Retainer”).  The Retainer shall be paid monthly based on Chinacomm’ s monthly turnover, and each monthly payment shall be made within twenty (20) days following the end of each month.  The Retainer will cover the Services rendered by Yunji for up to 【 】man-days for each year.  Once such amount of Services is reached for a specific year, Yunji will be entitled to charge Chinacomm additional fees, costs and expenses incurred for additional Services provided during that year in accordance with the rates set forth in Clause 3.2 below.
	Any services not indicated in this Agreement shall be subject to a different quotation to be agreed by the Parties.
23.2	Additional Fees
	Where in any year, the Services provided by Yunji to Chinacomm exceed 【 】man-days, for every man-day of Services in excess of 【 】man-days (the “ Excess Services”), Yunji shall be paid by Chinacomm in accordance with the following rates (for the year 2008):

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(i)	Level I
	【 】	【 】/ day
(ii)	Level II
	【 】	【 】/ day
(iii)	Level III
	【 】
		【 】/ day

	The above rates shall be reviewed annually, and the new rates shall be applicable as from the first day of each year. In case no special agreement has been reached by the Parties in this regard, such rates shall be increased in accordance with the increase of Consumer Price Index of PRC over the same period.
3.3	Expenses
	In addition to the payment of fees pursuant to Clauses 3.1 and 3.2 above, Chinacomm shall reimburse Yunji for all expenses incurred by Yunji ‘s personnel, including without limitation to travelling expenses, hotel expenses, communication costs and food expenses, resulting from the provision of Services pursuant to this Agreement.
4.	INVOICE AND PAYMENTS
4.1	Invoice
	Yunji shall send to Chinacomm an invoice specifying the Services rendered and Retainer payable for each specific month as soon as practicable following the end of such month. Where Excess Services are rendered or where technical and/or management staff of Yunji is seconded to Chinacomm in any month, as soon as practicable after the end of the month, Yunji shall send to Chinacomm an invoice that details the Services provided or the staff seconded and the amounts payable by Chinacomm to Yunji (the “Invoice”).
4.2	Payments
	Within ten (10) Days after Chinacomm receives each Invoice, Chinacomm shall pay the amounts stated to be payable in the Invoice, without deduction, set-off or counterclaim, by wire transfer in immediately available funds to the account designated in the Invoice for such payment.
4.3	Interest on Overdue Payments
	If any payment required to be made pursuant to Clause 3 is not made within thirty (30) days of receipt by Chinacomm of the relevant invoice, Chinacomm shall be liable to pay penalty to Yunji at the interest rate of 0.1% per day of the overdue amount from the date on which such payment was due until the date of full payment.
4.4	Taxes
	All taxes, duties, charges and fees of any nature whatsoever in connection with Yunji’ s performance of Services under this Agreement or any payment thereunder shall be the obligation of and be paid by Chinacomm as a direct expense. Yunji shall invoice Chinacomm for such taxes and Chinacomm shall pay these taxes together with other fees and expenses stated in the invoice.

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5.	ASSISTANCE OF CHINACOMM
	Chinacomm shall make available all personnel, materials and information necessary, and allow access to all sites and facilities for Yunji to perform the Services.
6.	FINANCIAL RECORDS OF CHINACOMM
	To determine the amount of Retainer provided in Clause 3.1 above, Chinacomm shall make all of its accounts, books, ledgers, tax statements, vouchers, invoices, receipts, contracts, and other materials available to Yunji, at any time upon Yunji’ s request. Chinacomm shall promptly reply to Yunji’ s inquiries and/or questions regarding such materials, and provide full cooperation to the auditor appointed by Yunji.
7.	EXCLUSIVITY
	Chinacomm hereby undertakes that it will not, either directly or indirectly or through any other person or entity, enter into any agreement or contractual arrangement with a third party to seek any kind of technical or managerial service for the Project, without the express written consent of Yunji.
	Chinacomm further undertakes that, upon Yunji’s request, it will assign whole or part of its rights and obligations under the agreements which have been entered into with third parties before the date of this Agreement regarding the provision of Services, and procure the third parties to agree with such assignment.
8.	COLLATERALS
	To guarantee the performance of its payment obligations under this Agreement, Chinacomm hereby agrees to provide fibre back-bone, equipments and other assets to which it holds ownership as collaterals (“Collaterals”) to Yunji.  A list of the Collaterals are provided in Annex 4.
	After the execution of this Agreement, Chinacomm shall, with the assistance of Yunji, promptly complete all the formalities required under PRC law to validate such guarantee.
9.	REPRESENTATIONS AND WARRANTIES
9.1	Yunji’s Representations and Warranties
	Yunji represents and warrants to Chinacomm that:
	(i)	it is a corporation duly established under the laws of PRC and has full power and capacity to enter into this Agreement;
	(ii)	it has taken all necessary action for the corporate authorisation of its entry into this Agreement and the performance of its obligations under this Agreement;
	(iii)	its execution of this Agreement and its exercise of its rights and performance of its obligations hereunder does not and will not conflict with any law or regulation applicable to it or its constitutional documents or any agreement or other instrument to which it is a party or which is binding on it or any of its assets;

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	(iv)	its obligations under this Agreement are legally binding and enforceable pursuant to this Agreement ;
	(v)	it will perform the Services in accordance with (a) generally accepted industry practices; (b) all applicable PRC laws and regulations; and (c) the Order and/or Change Order; and
	(vi)	it will perform the Services in a good and workmanlike manner.
9.2	Chinacomm’s Representations and Warranties
	Chinacomm represents and warrants to Yunji that:
	(i)	it is a corporation duly established under the laws of the PRC and has full power and capacity to enter into this Agreement;
	(ii)	it has taken all necessary action for the corporate authorisation of its entry into this Agreement and the performance of its obligations under this Agreement;
	(iii)	its execution of this Agreement and its exercise of its rights and performance of its obligations hereunder does not and will not conflict with any law or regulation applicable to it or its constitutional documents or any agreement or other instrument to which it is a party or which is binding on it or any of its assets;
	(iv)	its obligations under this Agreement are legally binding and enforceable pursuant to this Agreement;
	(v)	it is not involved in liquidation, bankruptcy, merger, consolidation, division, re­organization, dissolution, winding-up or similar legal or administrative proceedings, nor in any events or situations that may result in the involvement into such legal or administrative proceedings;
	(vi)	it holds valid permits or licenses required by applicable PRC laws and regulations in order to carry out the Project;
	(vii)	no material assets is subject to any court enforcement, attachment, detention, lien or other restrictions, nor is there any event or situation that may cause any material assets of Chinacomm subject to such restrictions;
	(viii)	it will comply with all laws and regulations and assume all liabilities with respect to the Services rendered upon its request; and
	(ix)	all accounting records, vouchers, invoices, ledgers, contracts and memoranda and all other accounting documents of Chinacomm and records of all transactions thereof will be accurately and properly written up, kept and maintained in accordance with generally accepted accounting practice in the PRC and together shows a true and fair view of the affairs and financial position of Chinacomm.
9.3	Liability
	If any representation made by either of the Parties under this Clause 8 proves to have been materially incorrect when made, the suffering Party shall be entitled to compensation for any related damages.

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10.	CHINACOMM’ S COVENANTS
10.1	Positive Covenants
	During the term of this Agreement, Chinacomm undertakes to the WFOE that it shall:

	(i)	keep its operation of business in accordance with good commercial practice;
	(ii)	promptly after its awareness of the same, notify the WFOE in writing of the details of any involvement of it or any of its material assets into any litigation, arbitration or administrative proceedings, court enforcement or attachment, detention or other similar restrictions, or any events or situation which may give rise to the involvement into such proceedings or restrictions; within three (3) Business Days after its awareness of the same, specifying the effect or possible effect of such involvement and the measures it has taken or will take as remedy;
	(iii)	promptly provide the WFOE with all its financial records and any other information or document as requested;
	(iv)	comply with the applicable laws and regulations to maintain its existence and its business license and to avoid any material adverse effect on (a) its business, operations, property, condition (financial or otherwise) or prospects; (b) its ability to perform its obligations hereunder; or (c) the validity or enforceability of this Agreement;
	(v)	promptly upon becoming aware of its occurrence, notify Yunji any Event of Default and the steps it has taken or will take to remedy it.
10.2	Negative Covenants

	Without written consent from the WFOE, Chinacomm shall not:
	(i)	directly or indirectly engage in any business beyond the scope of business permitted in its business license;
	(ii)	proceed in liquidation, bankruptcy, dissolution, winding-up or other similar legal proceedings;
	(iii)	make any disposal to the Collaterals without prior consent of the WFOE ;
	(iv)	change its scope or general nature of business or modify its articles of association;
	(v)	enter into any amalgamation, demerger, merger or corporate reconstruction;
	(vi)	lease, transfer, assign or sale any of its material assets; and
	(vii)	create or permit to subsist any encumbrance over any of its material assets.
11.	ASSIGNMENT AND SUBCONTRACT
11.1	Assignment

A Party may assign its rights and/or obligations under this Agreement in part or in whole to a third party only with the prior consent of the other Party.

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11.2	Sub-contract
	Yunji may delegate or subcontract the provision of any of the Services to a third party when such delegation or sub-contracting is, in its respective judgment, appropriate and necessary for the successful completion of the Services.
	Yunji shall be responsible for all the work conducted by third party. Yunji will be entitled to receive Service Fee for such Services as if it was performed by Yunji, provided that Chinacomm shall not be liable to pay any fees or disbursements to the third party providing such Services.
	Yunji agrees, before contracting with any third party, it shall obtain Chinacomm’s confirmation on the choice of the third party service provider.

12.	LIMITATION OF LIABILITY AND INDEMNITY
12.1	Limitation of Liability
	None of Yunji or the third party designated by Yunji shall be liable to Chinacomm for any direct or indirect loss, liability or other damages (other than those caused by gross negligence, fraud or willful misconduct), including consequential damages, arising out of the Services provided or use of any information transferred.

12.2	Indemnity
	In the absence of gross negligence or fraud or wilful misconduct on the part of Yunji or its employees, Chinacomm shall hold harmless and indemnify Yunji for itself and as trustee for its employees from and against, any and all claims (and reasonable costs and expenses incurred while defending them) connected with the performance of the Services.

13.	INTELLECTUAL PROPERTY
13.1	Non-exclusive License
	Drawings, specifications and other documents, including those in electronic form, prepared by Yunji are instruments of services (“Instrument of Services”)for use solely with respect to the Project. Yunji shall be deemed the author and owner of such instruments of Services and retain all intellectual property rights contained therein. Upon execution of this Agreement, Yunji grants to Chinacomm a non-exclusive license to reproduce such Instruments of Services solely for the purposes related to the Project. Any termination of this Agreement shall terminate any such license. Without prior written agreement of Yunji, Chinacomm shall not assign, sublicense or otherwise transfer any license granted herein to any other party.

13.2	Data Products and Software
	All software licensed to be used by Yunji in the performance of Services is and shall remain the licensed property of Yunji. Yunji shall own exclusively the rights to any software, program, algorithm or other copyrightable material that was owned by or licensed to Yunji, regardless of the use or presence of such material in the creation of any work product or deliverable for Chinacomm.

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14.	TERM AND EXTENSION
14.1	Term of this Agreement
	This Agreement shall come into force upon signing, and shall continue and remain valid for thirty (30) years (“ Term” )unless otherwise extended or terminated in accordance with this Agreement.

14.2	Extension of the Term
	The Term shall be automatically extended for additional ten (10) year period(s), at Yunji’ s sole discretion, subject to sixty (60) days prior notice served by Yunji to Chinacomm before the expiry of the Term.

15.	TERMINATION
15.1	Events of Default

(a)	Each of the following events shall constitute an “Event of Default” under this Agreement:
	(i)	Chinacomm fails to pay the Service Fee (or any part thereof) or any Invoice in accordance with the terms hereof, and such failure is not remedied within 90 days following the delivery of written notice thereof to Chinacomm of such failure;
	(ii)	Yunji fails to provide the Services and such failure continues for a period of 90 days following notice from Yunji to Yunji of the failure;
	(iii)	A party becomes bankrupt or insolvent, goes into liquidation, has a receiving or administration order made against it, or if any act is done or event occurs which under the PRC laws has a similar effect to any of these acts or events;
	(iv)	Any material assets of Chinacomm is involved in any court enforcement, attachment, detention, lien, custody or similar restrictions; and
	(v)	This Agreement is or becomes invalid or illegal due to any change in applicable laws or any order from government authorities.
(b)	The election by the non-defaulting party to terminate this Agreement under Clause 15.2(b) shall not prejudice any other rights and remedies of the non-defaulting party under this Agreement or in law.

15.2 Termination

This Agreement shall terminate:
(a)	upon the mutual agreement of the Parties; or
(b)	at the election of the non-defaulting party by giving a thirty (30)-day prior notice, upon the occurrence of an Event of Default.

16.	CONFIDENTIALITY
16.1	Scope of Confidentiality

Each Party shall not disclose, during the term of this Agreement and for a period of three (3) years after termination thereof, and shall take all necessary measures to avoid the disclosure to any third party of any and all information concerning the other Party, and notably its business, products, technology or clients, as well as information regarding this Agreement, including but not limited to, the existence of this Agreement and the business contemplated under the Agreement (“Confidential Information”).

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16.2	Permitted Disclosure
	Either Party may disclose Confidential Information to its own employees and/or consultants, but only to the extent such disclosure is strictly necessary for the negotiation or performance of this Agreement.
	Furthermore, either Party may disclose Confidential Information either (i) with the written consent of the other Party, (ii) to its agent, legal or financial advisor bound by a duty of confidentiality, (iii) obtained though other means than breach of this obligation of confidentiality; or (iv) pursuant to the order or requirement of a court, administrative agency, or regulatory body.

17.	GOVERNING LAW AND DISPUTE SETTLEMENT
17.1	Governing Law

	This Agreement shall be governed and construed by the published and publicly available laws and regulations of the PRC.
17.2	Dispute Settlement
	Any dispute arising from or related to this Agreement shall firstly be resolved through consultation by both parties based on the spirit of mutual understandings and friendly cooperation.
	On the occurrence of a specific dispute, either party may notify the other party in writing of the existence of the dispute and its contents. If the dispute cannot be resolved through consultation within ninety (90) days of the issuance of the notice, either party may terminate the consultation and refer the dispute to China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration.
	The arbitration shall be conducted in accordance with CIETAC’s arbitration rules in effect at the time of applying for arbitration. The arbitration tribunal shall consist of three (3) members. The arbitral award shall be final and binding upon the Parties. The arbitration proceedings shall be held in Beijing.
18.	MISCELLANEOUS PROVISIONS
18.1	Amendments
	No modification, amendment, or other change to the Agreement or any of its Annexes will be binding on any Party unless it is made in writing and signed by both Parties.
18.2	Severability
	If any provision of this Agreement or any part of an Annex shall be held or adjudged illegal, invalid or unenforceable, such provision shall not affect this Agreement or the Annex as a whole or the legality or binding effect of other provisions.

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18.3	Non-waiver
	No failure to exercise and no delay in exercising, on the part of either Party, of any right, power or the privilege under this Agreement nor any single or partial exercise thereof, or the exercise of any other right, power or privilege shall operate as a waiver thereof. No waiver by any Party of any of its respective rights or obligations under this Agreement shall be effective unless it is in writing.
18.4	Entire Agreement
	This Agreement and the Annexes hereto constitute the entire agreement between the Parties and supersede all prior discussions, negotiations and agreements. The Annexes form an integral part hereof and have the same legal effect as this Agreement. If there is any inconsistency between the provisions of this Agreement and any of the Annexes, the provisions of this Agreement shall prevail to the extent of such inconsistency.
18.5	Notice

(i) Any notice required to be given under this Agreement shall be in writing and may be given by personal delivery, or delivery through courier or facsimile transmission as follows:

To Yunji:	to the attention of 【 】
	Address: 【 】
	Telephone number: 【 】
	Fax number: 【 】
To Chinacomm:	to the attention of 【 】
	Address: 【 】
	Telephone number: 【 】
	Fax number: 【 】

	(ii)	All notices and communications under this Agreement shall be deemed to be duly given or made (a) in the case of communication by letter when delivered by hand, international courier or by registered mail or (b) in the case of communication by fax when transmitted properly to such fax number.
18.6	Language
	This Agreement shall be written in English and Chinese. Both Chinese and English versions shall have the same legal effect.
18.7	Execution
	Each language version of this Agreement has eight duplicates, and is executed on the date first written above by the authorized representatives of the parties.

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

Yunji Communications Technology (China) Co. Ltd.:

Signature:

Name:	Colin Tay
Title:	Co-President

CECT Chinacomm Communications Co. Ltd.: Signature:

Name:	Qiu Ping
Title:	President

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ANNEX 1

LIST OF EQUIPMENTS

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ANNEX 2

LIST OF COLLATERALS

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EX-10.9

EXHIBIT 10.9

EQUIPMENT LEASE AGREEMENT

Between

Trussnet Gulfstream (Dalian) Co., Ltd

And

Yunji Communications Technology (China) Co., Ltd.

TABLE OF CONTENTS

CLAUSE		PAGE
1.	SCOPE OF EQUIPMENTS	2
2.	SELECTION OF EQUIPMENTS	2
3.	PAYMENT	3
4.	RIGHTS AND OBLIGATIONS REGARDING THE EQUIPMENTS	3
5.	SERVICES IN RELATION TO THE EQUIPMENTS	5
6.	EXCLUSIVITY	5
7.	LIMITATION OF LIABILITY	5
8.	REPRESENTATIONS AND WARRANTIES	6
9.	THE LESSEE’S COVENANTS	7
10.	TRANSFER OF PROPERTY	8
11.	ASSIGNMENT	8
12.	TERM	8
13.	TERMINATION	8
14.	CONFIDENTIALITY	9
15.	GOVERNING LAW AND DISPUTE SETTLEMENT	10
16.	MISCELLANEOUS PROVISIONS	10

ANNEX 1 LIST OF EQUIPMENTS

ANNEX 2 AMOUNT AND PAYMENT OF RENTAL

1

This Equipments Lease Agreement (this “Agreement”)is made on May 23, 2008 by and between:

Trussnet Gulfstream (Dalian) Co., Ltd, whose registered office is at, Dalian, PRC (the “the Lessor”);

ON THE ONE HAND

AND

Yunji Communications Technology (China) Co. Ltd. (____________), whose registered office is at No. 18 Xihuan Nan Road, Economic and Technology Development Zone, Beijing, PRC (the “the Lessee”);

ON THE OTHER HAND

(hereinafter collectively referred to as the "Parties"and individually as a "Party").

WHEREAS:

(i)	The Lessee has entered into an Equipments Lease Agreement with CECT Chinacomm Communication Co. Ltd. (“Chinacomm”), according to which the Lessee will lease Equipments (as defined in Clause 1 below) to Chinacomm, who holds licenses for the use of 3.5G Hz spectrum in 29 major Chinese cities, to deploy, maintain and operate wireless broadband in such 29 cities (the “Project”);
(ii)	The Lessor is a wholly foreign owned enterprise which is licensed to conduct leasing business, including inter alia, telecom equipments financial leasing;
(iii)	Adhering to the principles of mutual benefit in accordance with Chinese laws and regulations, the Parties have decided to enter into this Agreement.

IT IS AGREED AS FOLLOWS:

1.	SCOPE OF EQUIPMENTS
	For the purpose of this Agreement, the term “Equipments”shall include any and all materials, equipments and facilities to be leased by the Lessor to the Lessee which are necessary for the development and operation of the Project.
2.	SELECTION OF EQUIPMENTS
	Before purchasing any equipment to be leased to the Lessee, the Lessor shall obtain the Lessee’s confirmation on the type, vendor, specifications, quantity, and price of the Equipments.

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3.	PAYMENT
3.1	Rental
	In consideration of the use of the Equipments, the Lessee shall pay rental to the Lessor  (“Rental”).Such Rental shall be determined and paid in accordance with Annex 1.
3.2	Late Payment Penalty
	In case of late payment of the Rental and/or any other payment obligations specified under this Agreement, the Lessee shall pay penalty to the Lessor at the interest rate of 0.1% per day of the overdue amount.
3.3	Method of Payment
	Except for otherwise agreed by the Parties in writing, the Lessee shall pay the Rental and/or any other payment obligations to the Lessor by wire transfer to the bank account designated by the Lessor.
3.4	Taxes
	Taxes, duties, charges and fees of any nature whatsoever in connection with this Agreement or any payment thereunder shall be paid and borne by the Parties in accordance with PRC laws and regulations.
4.	RIGHTS AND OBLIGATIONS REGARDING THE EQUIPMENTS
4.1	Delivery of the Equipments
	The Lessee shall take delivery of the Equipments from the Lessor’s premise or other place designated by the Lessor, provided that the Lessee has carried out an inspection of the Equipments and signed a written statement certifying the acceptance of the Equipments. The Lessee shall carry out such inspection within thirty (30) business days upon receipt of a notice from the Lessor. In the event that the Lessee failed to perform such inspection within the given period, the Equipments shall be deemed to have been accepted by the Lessee.
4.2	Sublease
	The Lessee shall sublease the Equipments to Chinacomm or Chinacomm’s subsidiary (collectively referred to as “Chinacomm”)for Chinacomm to carry out the Project. The Lessee shall not, during the term of this Agreement, sublease all or part of the Equipments to any other parties without the written authorization of the Lessor.
4.3	Use of the Equipments
	The Lessee shall take whatever measures which are necessary with due diligence to ensure that the Equipments are used by Chinacomm for the correct functioning of the Equipments, and follows all the instructions and procedures specified in the specifications and/or manuals of the Equipments.
4.4	Alteration of the Equipments
	If the Lessee or Chinacomm intends to make alterations, additions, improvements, and/or renovations onto the Equipments, it should notify the Lessor and obtain the Lessor’s approval (which should not be unreasonably withheld).

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	All such alterations, additions, improvement, and/or renovations should be conducted by the Lessor or contractor(s) appointed by the Lessor against payment of the related costs and service fee by the Lessee to the Lessor, which should be made in accordance with the exclusive services agreement between the Lessor and the Lessee (as specified in Clause 4.2 below).
4.5	Maintenance and Repair
	In relation to the maintenance and repair of the Equipments, the Lessee shall:
	(i)	be responsible for the repair and maintenance of the Equipments at its own cost or at Chinacomm’s cost; and
	(ii)	report to the Lessor any fault occurred to the Equipments within three (3) days after the occurrence of such fault
	In the event of failure of the Lessee to perform such maintenance and repair obligations, the Lessor may perform such work itself, at the expenses of the Lessee.
4.6	Risks
	The Lessee shall take all necessary action to protect the Equipments from any risk of damage, impair, loss, or destroy. The Lessee shall bear the risks in relation to the damage, impair, loss, or destroy of the Equipments, which can not be attributed to the fault of either of the Parties.
4.7	Insurance
	In relation to the insurance of the Equipments, the Lessee shall procure Chinacomm to:
	(i)	procure and maintain sufficient and effective insurance against all risks threatening the upkeep and conservation of the Equipments, including those of force majeure and civil liability arising from the use thereof or the use thereof vis-a-vis third parties; and
	(ii)	provide a copy of the insurance policies (or any policies amending or replacing such policies in the future) and on an annual basis the receipts evidencing the payment of premiums under such insurance policies to the Lessor; and
	The Lessor shall promptly provide all necessary assistance to the Lessee and Chinacomm to procure insurance for the Equipments.
4.8	Replacement of the Equipments
	In case any item of the Equipments has become obsolete or scrapped due to fair wear and tear, upon its receipt of the Lessee or Chinacomm’s notification, the Lessor shall provide replacement of such item of Equipments at its own expenses. If any item of the Equipments has become obsolete or scrapped due to improper use or unfair wear and tear, the Lessor shall provide replacement of such item of Equipments at the cost of the Lessee.
4.9	Disposal of the Equipments
	Except for otherwise provided in this Agreement or authorized by the Lessor in writing, the Lessee shall not transfer, sale, gift or make any other disposal of any item of the Equipments, or create any encumbrance over the Equipments.

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4.10	Vendor’s Warranty
	The Lessor shall obtain on behalf of the Lessee or Chinacomm and in the Lessee or Chinacomm's name, from all vendors from whom it procures Equipments for the Project, warranties with respect to such Equipments as are reasonably and customarily provided by the vendor and/or manufacturer. The Lessor does not warrant that any Equipment procured for the use of the Lessee or Chinacomm meets or complies with the requirements of any Laws.
5.	SERVICES IN RELATION TO THE EQUIPMENTS
5.1	Services
	To ensure the performance of the Equipments, the Lessee shall sub-contract all the technical services in relation to the deployment of the Project, as specified under the Exclusive Technical Services and Management Consulting Services Agreement which are entered into by the Lessee and Chinacomm, to the Lessor (“Services”).
5.2	Service Agreement
	For the purpose described in Clause 4.1, the Lessee shall enter into an exclusive service agreement with the Lessor, according to which the Lessee shall exclusively subcontract all the Services to the Lessor, against payment of service fee to the Lessor, which is to be determined in the exclusive service agreement.
5.3	Subcontract
	The Lessor may delegate or subcontract the provision of any of the Services to a third party when such delegation or sub-contracting is, in its respective judgment, appropriate and necessary for the successful completion of the Services.
6.	EXCLUSIVITY
	The Lessee hereby undertakes that it will not, during the Term of this Agreement, either directly or indirectly or through any other person or entity, enter into any agreement or contractual arrangement with third parties, which would compete with or contravene any matter which is covered by this Agreement, without the express written consent of the Lessor.
7.	LIMITATION OF LIABILITY
7.1	Limitation of Liability
	The Lessor shall not be liable to the Lessee and/or Chinacomm for any direct or indirect loss, liability or other damages (other than those caused by gross negligence, fraud or willful misconduct), including consequential damages, arising out of the use of Equipments by the Lessee. The lessor shall not, in its capacity of lessor, be liable to third parties for death, personal injury or damage to property caused by the Equipments.
7.2	Indemnity
	In the absence of gross negligence or fraud or wilful misconduct on the part of the Lessor, the Lessee shall hold harmless and indemnify the Lessor and/or its employees from and against, any and all claims (and reasonable costs and expenses incurred while defending them) connected with the use of the Equipments by the Lessee or Chinacomm.

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	The Lessee shall assume the liabilities in relation to any property damage or personal injury caused by the Equipments.  In case the Lessor is hold liable by a court or arbitration body for such damage or injury, the Lessee shall reimburse the Lessor for any loss it suffered.
8.	REPRESENTATIONS AND WARRANTIES
8.1	The Lessor’s Representations and Warranties
	The Lessor represents and warrants to the Lessee that:
	(i)	it is a corporation duly established under the laws of Delaware, USA and has full power and capacity to enter into this Agreement;
	(ii)	it has taken all necessary action for the corporate authorisation of its entry into this Agreement and the performance of its obligations under this Agreement;
	(iii)	the Equipments are its absolute property or in its exclusive possession authorized by the legal owner of the Equipments;
	(iv)	the Equipments are not subject to any bankruptcy, insolvency or similar proceeding which may affect the title on them or their use;
	(v)	there are no unsatisfied, pending or threatened judgments, actions, suits, claims, demands or proceedings against or affecting the Lessor, the execution or performance of this Agreement by the Lessor, in any court, or before any arbitrator or any public authority;
	(vi)	the Equipments are in good condition to be used for the Project; and
	(vii)	all the information disclosed by the Lessor are true, correct, complete and set forth in a manner that is not misleading.
8.2	The Lessee’s Representations and Warranties
	The Lessee represents and warrants to the Lessor that:
	(i)	it is a corporation duly established under the laws of the PRC and has full power and capacity to enter into this Agreement;
	(ii)	it has taken all necessary action for the corporate authorisation of its entry into this Agreement and the performance of its obligations under this Agreement;
	(iii)	there are no unsatisfied, pending or threatened judgments, actions, suits, claims, demands or proceedings against or affecting the Lessee, the execution or performance of this Agreement by the Lessee, in any court, or before any arbitrator or any public authority;
	(iv)	its obligations under this Agreement are legally binding and enforceable pursuant to this Agreement;
	(v)	it holds valid permits or licenses required by applicable PRC laws and regulations in order to use the Equipments and carry out the Project; and
	(vi)	all the information disclosed by the Lessor are true, correct, complete and set forth in a manner that is not misleading.

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8.3	Liability
	If any representation made by either of the Parties under this Clause 7 proves to have been materially incorrect when made, the suffering Party shall be entitled to compensation for any related damages.
9.	THE LESSEE’S COVENANTS
9.1	Positive Covenants
	During the term of this Agreement, the Lessee undertakes to the Lessor that it shall:
	(i)	keep its operation of business in accordance with good commercial practice;
	(ii)	promptly after its awareness of the same, notify the Lessor in writing of the details of any involvement of it or any of its material assets into any litigation, arbitration or administrative proceedings, court enforcement or attachment, detention or other similar restrictions, or any events or situation which may give rise to the involvement into such proceedings or restrictions; within three (3) Business Days after its awareness of the same, specifying the effect or possible effect of such involvement and the measures it has taken or will take as remedy;
	(iii)	comply with the applicable laws and regulations to maintain its existence and its business license and to avoid any material adverse effect on (a) its business, operations, property, condition (financial or otherwise) or prospects; (b) its ability to perform its obligations hereunder; or (c) the validity or enforceability of this Agreement;
	(iv)	use or procure Chinacomm to use the Equipments in compliance with environmental law and other applicable laws;
	(v)	comply and procure Chinacomm to comply with all legal obligations relating to the health and safety of employees who carrying out work on the Equipments; and
	(vi)	protect the Lessor's property rights in the Equipments against the Lessee's trustee in bankruptcy and creditors.
9.2	Negative Covenants
	Without written consent from the Lessor, the Lessee shall not:
	(i)	directly or indirectly engage in any business beyond the scope of business permitted in its business license;
	(ii)	proceed in liquidation, bankruptcy, dissolution, winding-up or other similar legal proceedings;
	(iii)	take any action that may result in any authority taking action which could be detrimental to the Lessor, or could have any adverse effect on the Equipments; and
	(iv)	change its scope or general nature of business or modify its articles of association;
	(v)	enter into any amalgamation, demerger, merger or corporate reconstruction;
	(vi)	lease, transfer, assign or sale any of its material assets; and
	(vii)	create or permit to subsist any encumbrance over any of its material assets.

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10.	TRANSFER OF PROPERTY
	Subject to PRC law, the ownership of the Equipments shall be transferred to the Lessee at the time of delivery.  As a security against the full payment of Rental, the Lessee shall provide all the Equipments as collaterals to the Lessor. The mortgage of part of the Equipments of which the purchase price amounts to USD50,000,000 shall be released upon the Initial Public Offering in a stock exchange of the Lessee.
11.	ASSIGNMENT
	A Party may assign its rights and/or obligations under this Agreement in part or in whole to a third party only with the prior consent of the other Party. Notwithstanding the above, an assignment to a third party that controls, is controlled by, is under common control with, or is the legal successor of the assigning Party shall not require such consent.  Specifically, the Lessor may assign its rights and/or obligations under this Agreement to its direct or indirect affiliate company established or to be established in the PRC.
12.	TERM
12.1	Term of this Agreement
	This Agreement shall come into force upon signing, and shall continue and remain valid for thirty (30) years (“Term”) unless otherwise extended or terminated in accordance with this Agreement.
12.2	Extension of the Term
	The Term shall be automatically extended for additional ten (10) year period(s), at the Lessor’s sole discretion, subject to sixty (60) days prior notice served by the Lessor to the Lessee before the expiry of the Term.
12.3	Expiry of the Term
	Upon expiry of the Term, the Lessee shall return the Equipments to the Lessor at the location indicated by the Lessor, in good condition and without damage other than normal wear and tear. The Lessee shall be responsible for all expenses incurred by the said return.
13.	TERMINATION
13.1	Termination by the Lessor
	Each of the following events shall constitute an “Event of Default” of the Lessee under this Agreement:
	(i)	the Lessee fails to pay the Rental (or any part thereof) or any payment obligation in accordance with the terms hereof, and such failure is not remedied within 90 days following the delivery of written notice thereof to the Lessee of such failure; or
	(ii)	the Lessee becomes bankrupt or insolvent, goes into liquidation, has a receiving or administration order made against it, or if any act is done or event occurs which under the PRC laws has a similar effect to any of these acts or events.
	Lessor may elect to terminate this Agreement by giving a thirty (30)-day prior notice, upon the occurrence of an Event of Default.

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	Such termination being without prejudice to the Lessor's right under this Agreement or applicable laws to indemnification or compensation for damages suffered as a result of such material breach.
13.2	Termination by the Lessee
	The Lessee hereby acknowledges that the Equipments are specifically purchased for the use of Chinacomm as required by the Lessee, and termination of this Agreement will cause inestimable losses to the Lessor. Unless the Lessor or Gulfstream Capital Partners Ltd. (the Lessor’s affiliate) fails to pay the Subscription Price in accordance with the Share Subscription and Shareholders Agreement for the subscription of 49% of shares of Chinacomm Limited by the Lessor or Gulfstream Capital Partners Ltd., the Lessee shall not terminate this Agreement during the Term for whatever reasons.
13.3	Consequences of Early Termination
	Where this Agreement is terminated by the Lessor in accordance with Clause 12.1 above, the Lessee shall:
	(i)	pay all the Rental due until the date of termination of this Agreement and penalty for late payment (if any);
	(ii)	pay penalty to the Lessor for the early termination, the amount of which shall be equal to the amount of Rental calculated from the Termination Date until twenty (20) years following such date, or the expiry date of this Agreement, which ever is the earlier; and
	(iii)	return all of the Equipments to the Lessor within ten (10) days after the Termination Date, in good state of repair and upkeep, and bear any and all expenses in relation to the removal and delivery of the Equipments. Failure of the Lessee to return the Equipments in the given time period shall entitle the Lessor to withdraw the Equipments by itself and the Lessee shall indemnify the Lessor any costs incurred thereof.
14.	CONFIDENTIALITY
14.1	Scope of Confidentiality
	Each Party shall not disclose, during the term of this Agreement and for a period of three (3) years after termination thereof, and shall take all necessary measures to avoid the disclosure to any third party of any and all information concerning the other Party, and notably its business, products, technology or clients, as well as information regarding this Agreement, including but not limited to, the existence of this Agreement and the business contemplated under the Agreement ("Confidential Information").
14.2	Permitted Disclosure
	Either Party may disclose Confidential Information to its own employees and/or consultants, but only to the extent such disclosure is strictly necessary for the negotiation or performance of this Agreement. Furthermore, either Party may disclose Confidential Information either (i) with the written consent of the other Party, (ii) to its agent, legal or financial advisor bound by a duty of confidentiality, (iii) obtained though other means than breach of this obligation of confidentiality; or (iv) pursuant to the order or requirement of a court, administrative agency, or regulatory body.

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15.	GOVERNING LAW AND DISPUTE SETTLEMENT
15.1	Governing Law
	This Agreement shall be governed and construed by the published and publicly available laws and regulations of the PRC.
15.2	Dispute settlement
	Any dispute arising from or related to this Agreement shall firstly be resolved through consultation by both parties based on the spirit of mutual understandings and friendly cooperation. On the occurrence of a specific dispute, either party may notify the other party in writing of the existence of the dispute and its contents.  If the dispute cannot be resolved through consultation within ninety (90) days of the issuance of the notice, either party may terminate the consultation and refer the dispute to China International Economic and Trade Arbitration Commission (“CIETAC”)for arbitration. The arbitration shall be conducted in accordance with CIETAC's arbitration rules in effect at the time of applying for arbitration. The arbitration tribunal shall consist of three (3) members.  The arbitral award shall be final and binding upon the Parties.  The arbitration proceedings shall be held in Beijing.
16.	MISCELLANEOUS PROVISIONS
16.1	Amendments
	No modification, amendment, or other change to the Agreement or any of its Annexes will be binding on any Party unless it is made in writing and signed by both Parties. The Parties may amend this Agreement after the execution of this Agreement to satisfy the requirements of relevant PRC law.
16.2	Severability
	If any provision of this Agreement or any part of an Annex shall be held or adjudged illegal, invalid or unenforceable, such provision shall not affect this Agreement or the Annex as a whole or the legality or binding effect of other provisions.
16.3	Non-waiver
	No failure to exercise and no delay in exercising, on the part of either Party, of any right, power or the privilege under this Agreement nor any single or partial exercise thereof, or the exercise of any other right, power or privilege shall operate as a waiver thereof.  No waiver by any Party of any of its respective rights or obligations under this Agreement shall be effective unless it is in writing.
16.4	Entire Agreement
	This Agreement and the Annexes hereto constitute the entire agreement between the Parties and supersede all prior discussions, negotiations and agreements.  The Annexes form an integral part hereof and have the same legal effect as this Agreement.  If there is any inconsistency between the provisions of this Agreement and any of the Annexes, the provisions of this Agreement shall prevail to the extent of such inconsistency.

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16.5	Notices and Communications
	(i)	Any notice required to be given under this Agreement shall be in writing and may be given by personal delivery, or delivery through courier or facsimile transmission as follows:
		The Lessor:	to the attention of  o o
			Address:  o o
			Telephone number: o o
			Fax number:  o o
		The Lessee:	to the attention of  o o
			Address:  o o
			Telephone number:  o o
			Fax number:  o o
	(ii)	All notices and communications under this Agreement shall be deemed to be duly given or made (a) in the case of communication by letter when delivered by hand, international courier or by registered mail or (b) in the case of communication by fax when transmitted properly to such fax number.
	(iii)	A notice or other communication received on a non-working day or after business hours of the receiving Party shall be deemed to be served on the next following working day.
16.6	Language
	This Agreement shall be written in English and Chinese.  Both Chinese and English versions shall have the same legal effect.
16.7	Execution
	Each language version of this Agreement has eight duplicates, and is executed on the date first written above by the authorized representatives of the parties.

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

Trussnet Gulfstream (Dalian) Co., Ltd. :
Signature:
Name:	Colin Tay
Title:	Executive Director
Yunji Communications Technology (China) Co. Ltd.
:
Signature:
Name:	Qiu Ping
Title:	Co-President

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ANNEX 1

AMOUNT AND PAYMENT OF RENTAL

1.	The Lessor agrees that the Equipments of which the total value of the purchase price amounts to USD50,000,000 shall be leased to the Lessee without any charge.
2.	The Rental for the Equipments which are purchase outside the USD50,000,000 expenditure shall be calculated in the method to be decided by the Parties, the pricing of which shall not be lower than the market price for financial leasing.
3.	The Rental shall be paid monthly to the bank account of the Lessee within ten (10) business days following the end of each month.

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EX-10.10

EXHIBIT 10.10

EQUIPMENT LEASE AGREEMENT

Between

Yunji Communications Technology (China) Co. Ltd.

And

CECT Chinacomm Communications Co. Ltd.

TABLE OF CONTENTS

CLAUSE		PAGE
1.	SCOPE OF EQUIPMENTS	2
2.	SELECTION OF EQUIPMENTS	2
3.	PAYMENT	3
4.	RIGHTS AND OBLIGATIONS REGARDING THE EQUIPMENTS	3
5.	SERVICES IN RELATION TO THE EQUIPMENTS	5
6.	EXCLUSIVITY	5
7.	LIMITATION OF LIABILITY	5
8.	REPRESENTATIONS AND WARRANTIES	6
9.	THE LESSEE’S COVENANTS	7
10.	TRANSFER OF PROPERTY	8
11.	SHARE PLEDGE	8
12.	TERM	8
13.	TERMINATION	8
14.	CONFIDENTIALITY	9
15.	GOVERNING LAW AND DISPUTE SETTLEMENT	10
16.	MISCELLANEOUS PROVISIONS	10

ANNEX 1 LIST OF EQUIPMENTS

ANNEX 2 AMOUNT AND PAYMENT OF RENTAL

ANNEX 3 SHARE PLEDGE AGREEMENT

2

This Equipments Lease Agreement (this “Agreement”) is made on May 23, 2008 by and between:

Yunji Communications Technology (China) Co. Ltd. Ltd.(____________), whose registered office is at No. 18 Xihuan Nan Road, Economic and Technology Development Zone, Beijing, PRC (the “the Lessor”);

ON THE ONE HAND

AND

CECT Chinacomm Communications Co. Ltd. (__________), whose registered office is at No.17# Building, Yuhai Yuan Er Li, Haidian District, Beijing,PRC (the “the Lessee”);

ON THE OTHER HAND

(hereinafter collectively referred to as the “Parties” and individually as a “Party”).

WHEREAS:

(i)	The Lessor is in the business of telecom technology development, technical services, consulting and training, and telecom equipments leasing;
(ii)	The Lessee is a telecom operator which holds licenses for the use of 3.5G Hz spectrum to deploy, maintain and operate wireless broadband in 29 cities throughout China;
(iii)	The Lessor wishes to lease to the Lessee and the Lessee wishes to rent from the Lessor certain Equipments (as defined in Clause 1 below) for the deployment and operation of wireless broadband in 29 cities in China (the “Project”);
(iv)	Adhering to the principles of mutual benefit in accordance with Chinese laws and regulations, the Parties have decided to enter into this Agreement.

IT IS AGREED AS FOLLOWS:

1.	SCOPE OF EQUIPMENTS
	For the purpose of this Agreement, the term “Equipments” shall include any and all materials, equipments and facilities to be leased by the Lessor to the Lessee for the development and operation of the Project.
2.	SELECTION OF EQUIPMENTS
	Before purchasing any equipment to be leased to the Lessee, the Lessor shall obtain the Lessor’s confirmation on the type, vendor, specifications, quantity, and price of the Equipments.

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3.	PAYMENT
3.1	Rental
	In consideration of the use of the Equipments, the Lessee shall pay rental to the Lessor  (“Rental”).  Such Rental shall be determined and paid in accordance with Annex 1.
3.2	Late Payment Penalty
	In case of late payment of the Rental and/or any other payment obligations specified under this Agreement, the Lessee shall pay penalty to the Lessor at the interest rate of 0.1% per day of the overdue amount.
3.3	Method of Payment
	Except for otherwise agreed by the Parties in writing, the Lessee shall pay the Rental and/or any other payment obligations to the Lessor by wire transfer to the bank account designated by the Lessor.
3.4	Taxes
	Taxes, duties, charges and fees of any nature whatsoever in connection with this Agreement or any payment thereunder shall be paid and borne by the Parties in accordance with PRC laws and regulations.
4.	RIGHTS AND OBLIGATIONS REGARDING THE EQUIPMENTS
4.1	Delivery of the Equipments
	The Lessee shall take delivery of the Equipments from the Lessor’s premise or other place designated by the Lessor, provided that the Lessee has carried out an inspection of the Equipments and signed a written statement certifying the acceptance of the Equipments.
	The Lessee shall carry out such inspection within thirty (30) business days upon receipt of a notice from the Lessor. In the event that the Lessee failed to perform such inspection within the given period, the Equipments shall be deemed to have been accepted by the Lessee.
4.2	Installation of the Equipments
	The Lessee shall be responsible for the assembly and installation of the Equipments and connecting the Equipments with adequate power at its own cost.
4.3	Use of the Equipments
	The Lessee has the right to use and operate the Equipments in accordance with the terms and conditions of this Agreement. The Lessee shall take whatever measures which are necessary with due diligence for the correct functioning of the Equipments, and follows all the instructions and procedures specified in the specifications and/or manuals of the Equipments. Without written consent of the Lessor, the Lessee shall not remove or dismantle any item of the Equipments from the place it was installed.
4.4	Alteration of the Equipments
	If the Lessee or Chinacomm intends to make alterations, additions, improvements, and/or renovations onto the Equipments, it should notify the Lessor and obtain the Lessor’s approval (which should not be unreasonably withheld).
	All such alterations, additions, improvement, and/or renovations should be conducted by the Lessor or contractor(s) appointed by the Lessor against payment of the related costs and

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service fee by the Lessee to the Lessor, which should be made in accordance with the exclusive services agreement between the Lessor and the Lessee (as specified in Clause 4.2 below).

4.5	Maintenance and Repair
	In relation to the maintenance and repair of the Equipments, the Lessee shall:
	(i)	maintain the Equipments in a state adapted to the implementation of the Project and the conservation of the Equipments in a good condition (excluding normal wear and tear);
	(ii)	be responsible for the repair and maintenance of the Equipments at its own cost; and
	(iii)	report to the Lessor any fault occurred to the Equipments within three (3) days after the occurrence of such fault. In the event of failure of the Lessee to perform such maintenance and repair obligations, the Lessor may perform such work itself, at the expenses of the Lessee.
4.6	Risks
	The Lessee shall take all necessary action to protect the Equipments from any risk of damage, impair, loss, or destroy.
	The Lessee shall bear the risks in relation to the damage, impair, loss, or destroy of the Equipments, which can not be attributed to the fault of either of the Parties.
4.7	Insurance
	In relation to the insurance of the Equipments, the Lessee shall:
	(i)	procure and maintain sufficient and effective insurance against all risks threatening the upkeep and conservation of the Equipments, including those of force majeure and civil liability arising from the use thereof or the use thereof vis-a-vis third parties;
	(ii)	provide a copy of the insurance policies (or any policies amending or replacing such policies in the future) and on an annual basis the receipts evidencing the payment of premiums under such insurance policies to the Lessor.
	The Lessor shall promptly provide all necessary assistance to the Lessee to procure insurance for the Equipments.
4.8	Replacement of the Equipments
	In case any item of the Equipments has become obsolete or scrapped due to fair wear and tear, upon its receipt of the Lessee’s notification, the Lessor shall provide replacement of such item of Equipments at its own expenses.
	If any item of the Equipments has become obsolete or scrapped due to improper use or renovation or unfair wear and tear, the Lessor shall provide replacement of such item of Equipments at the cost of the Lessee.
4.9	Disposal of the Equipments
	Except for otherwise provided in this Agreement or authorized by the Lessor in writing, the Lessee shall not transfer, sale, gift or make any other disposal of any item of the Equipments, or create any encumbrances over the Equipments.

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4.10	Sublease
	The Lessee shall not, during the Term of this Agreement, sublease all or part of the Equipments without the written authorization of the Lessor.
4.11	Vendor’s Warranty
	The Lessor shall obtain on behalf of the Lessee and in the Lessee's name, from all vendors from whom it procures Equipments for the Project, warranties with respect to such Equipments as are reasonably and customarily provided by the vendor and/or manufacturer.
	The Lessor does not warrant that any Equipments procured for the use of the Lessee meets or complies with the requirements of any Laws.
5.	SERVICES IN RELATION TO THE EQUIPMENTS
5.1	Services
	To ensure the performance of the Equipments, the Lessee shall contract all the activities in relation to the use of the Equipments and the development and operation of the Project to the Lessor. The Lessor agrees to assist the Lessee to carry out the Project and provide services in relation to the use of the Equipments to the Lessee (“Services”).
5.2	Service Agreement
	For the purpose described in Clause 4.1, the Lessee shall enter into an service agreement with the Lessor, according to which the Lessee shall exclusively entrust all the Services to the Lessor, against payment of service fee to the Lessor, which is to be determined in the exclusive service agreement.
5.3	Subcontract
	The Lessor may delegate or subcontract the provision of any of the Services to a third party when such delegation or sub-contracting is, in its respective judgment, appropriate and necessary for the successful completion of the Services.
6.	EXCLUSIVITY
	The Lessee hereby undertakes that it will not, during the Term of this Agreement, either directly or indirectly or through any other person or entity, enter into any agreement or contractual arrangement with third parties, which would compete with or contravene any matter which is covered by this Agreement, without the express written consent of the Lessor.
7.	LIMITATION OF LIABILITY
7.1	Limitation of Liability
	The Lessor shall not be liable to the Lessee for any direct or indirect loss, liability or other damages (other than those caused by gross negligence, fraud or willful misconduct), including consequential damages, arising out of the use of Equipments by the Lessee.
	The lessor shall not, in its capacity of lessor, be liable to third parties for death, personal injury or damage to property caused by the Equipments.
7.2	Indemnity
	In the absence of gross negligence or fraud or wilful misconduct on the part of the Lessor, the Lessee shall hold harmless and indemnify the Lessor and/or its employees from and against,

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	any and all claims (and reasonable costs and expenses incurred while defending them) connected with the use of the Equipments by the Lessee.
	The Lessee shall assume the liabilities in relation to any property damage or personal injury caused by the Equipments. In case the Lessor is hold liable by a court or arbitration body for such damage or injury, the Lessee shall reimburse the Lessor for any loss it suffered.
8.	REPRESENTATIONS AND WARRANTIES
8.1	The Lessor's Representations and Warranties
	The Lessor represents and warrants to the Lessee that:
	(i)	it is a corporation duly established under the laws of the PRC and has full power and capacity to enter into this Agreement;
	(ii)	it has taken all necessary action for the corporate authorisation of its entry into this Agreement and the performance of its obligations under this Agreement;
	(iii)	the Equipments are its absolute property or in its exclusive possession authorized by the legal owner of the Equipments;
	(iv)	the Equipments are not subject to any bankruptcy, insolvency or similar proceeding which may affect the title on them or their use;
	(v)	there are no unsatisfied, pending or threatened judgments, actions, suits, claims, demands or proceedings against or affecting the Lessor, the execution or performance of this Agreement by the Lessor, in any court, or before any arbitrator or any public authority;
	(vi)	the Equipments are in good condition to be used for the Project; and
	(vii)	all the information disclosed by the Lessor are true, correct, complete and set forth in a manner that is not misleading.
8.2	The Lessee's Representations and Warranties
	The Lessee represents and warrants to the Lessor that:
	(i)	it is a corporation duly established under the laws of the PRC and has full power and capacity to enter into this Agreement;
	(ii)	it has taken all necessary action for the corporate authorisation of its entry into this Agreement and the performance of its obligations under this Agreement;
	(iii)	there are no unsatisfied, pending or threatened judgments, actions, suits, claims, demands or proceedings against or affecting the Lessee, the execution or performance of this Agreement by the Lessee, in any court, or before any arbitrator or any public authority;
	(iv)	its obligations under this Agreement are legally binding and enforceable pursuant to this Agreement;
	(v)	it holds valid permits or licenses required by applicable PRC laws and regulations in order to use the Equipments and carry out the Project; and
	(vi)	all the information disclosed by the Lessor are true, correct, complete and set forth in a manner that is not misleading.

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8.3	Liability
	If any representation made by either of the Parties under this Clause 7 proves to have been materially incorrect when made, the suffering Party shall be entitled to compensation for any related damages.
9.	THE LESSEE’S COVENANTS
9.1	Positive Covenants
	During the term of this Agreement, the Lessee undertakes to the Lessor that it shall:
	(i)	keep its operation of business in accordance with good commercial practice;
	(ii)	promptly after its awareness of the same, notify the Lessor in writing of the details of any involvement of it or any of its material assets into any litigation, arbitration or administrative proceedings, court enforcement or attachment, detention or other similar restrictions, or any events or situation which may give rise to the involvement into such proceedings or restrictions; within three (3) Business Days after its awareness of the same, specifying the effect or possible effect of such involvement and the measures it has taken or will take as remedy;comply with the applicable laws and regulations to maintain its existence and its business license and to avoid any material adverse effect on (a) its business, operations, property, condition (financial or otherwise) or prospects; (b) its ability to perform its obligations hereunder; or (c) the validity or enforceability of this Agreement;
	(iii)	use the Equipments in compliance with environmental law and other applicable laws;
	(iv)	comply with all legal obligations relating to the health and safety of employees who carrying out work on the Equipments; and
	(v)	protect the Lessor or the legal owner’s property rights in the Equipments against the Lessee's trustee in bankruptcy and creditors.
9.2	Negative Covenants
	Without written consent from the Lessor, the Lessee shall not:
	(i)	directly or indirectly engage in any business beyond the scope of business permitted in its business license;
	(ii)	proceed in liquidation, bankruptcy, dissolution, winding-up or other similar legal proceedings;
	(iii)	take any action that may result in any authority taking action which could be detrimental to the Lessor, or could have any adverse effect on the Equipments; and
	(iv)	change its scope or general nature of business or modify its articles of association;
	(v)	enter into any amalgamation, demerger, merger or corporate reconstruction;
	(vi)	lease, transfer, assign or sale any of its material assets; and
	(vii)	create or permit to subsist any encumbrance over any of its material assets.

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10.	TRANSFER OF PROPERTY
	Subject to PRC law, the ownership of the Equipments shall be transferred to the Lessee at the time of delivery. As a security against the full payment of Rental, the Lessee shall provide all the Equipments as collaterals to the Lessor.
11.	SHARE PLEDGE
	As security for the performance in full of the obligations of the Lessee under this Agreement, the Lessee hereby agrees to procure its shareholders to pledge to the Lessor, and creates in favor of the Lessor or any party designated by the Lessor, a first priority security interest in all of the rights, title and interest in and to the shares the shareholders own over the Lessee, and all of their incidental rights with respect to the shares. The Lessee shall procure its shareholders to execute a share pledge agreement with the Lessor, and attach hereto as Annex 2 of this Agreement.
12.	TERM
12.1	Term of this
Agreement
	This Agreement shall come into force upon signing, and shall continue and remain valid for thirty (30) years (“Term”) unless otherwise extended or terminated in accordance with this Agreement. The Parties may amend this Agreement after the execution of this Agreement to satisfy the requirements of relevant PRC law.
12.2	Extension of the Term
	The Term shall be automatically extended for additional ten (10) year period(s), at the Lessor’s sole discretion, subject to sixty (60) days prior notice served by the Lessor to the Lessee before the expiry of the Term.
12.3	Expiry of the Term
	Upon expiry of the Term, the Lessee shall return the Equipments to the Lessor at the location indicated by the Lessor, in good condition and without damage other than normal wear and tear. The Lessee shall be responsible for all expenses incurred by the said return.
13.	TERMINATION
13.1	Termination by the Lessor
	Each of the following events shall constitute an “Event of Default” of the Lessee under this Agreement:
	(i)	the Lessee fails to pay the Rental (or any part thereof) or any payment obligation in accordance with the terms hereof, and such failure is not remedied within 90 days following the delivery of written notice thereof to the Lessee of such failure; or
	(ii)	the Lessee becomes bankrupt or insolvent, goes into liquidation, has a receiving or administration order made against it, or if any act is done or event occurs which under the PRC laws has a similar effect to any of these acts or events.
	Lessor may elect to terminate this Agreement by giving a thirty (30)-day prior notice, upon the occurrence of an Event of Default.

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	Such termination being without prejudice to the Lessor's right under this Agreement or applicable laws to indemnification or compensation for damages suffered as a result of such material breach.
13.2	Termination by the Lessee
	The Lessee hereby acknowledges that the Equipments are specifically purchased for the use by the Lessee, and termination of this Agreement will cause inestimable losses to the Lessor. The Lessee further agrees that it will not terminate this Agreement during the Term for whatever reasons.
13.3	Consequences of Early Termination
	Where this Agreement is terminated by the Lessor in accordance with Clause 11.1 above, the Lessee shall:
	(i)	pay all the Rental due until the date of termination of this Agreement and penalty for late payment (if any);
	(ii)	pay penalty to the Lessor for the early termination, the amount of which shall be equal to the amount of Rental calculated from the Termination Date until twenty (20) years following such date, or the expiry date of this Agreement, which ever is the earlier; and
	(iii)	return all of the Equipments to the Lessor within ten (10) days after the Termination Date, in good state of repair and upkeep, and bear any and all expenses in relation to the removal and delivery of the Equipments. Failure of the Lessee to return the Equipments in the given time period shall entitle the Lessor to withdraw the Equipments by itself and the Lessee shall indemnify the Lessor any costs incurred thereof.
14.	CONFIDENTIALITY
14.1	Scope of Confidentiality
	Each Party shall not disclose, during the term of this Agreement and for a period of three (3) years after termination thereof, and shall take all necessary measures to avoid the disclosure to any third party of any and all information concerning the other Party, and notably its business, products, technology or clients, as well as information regarding this Agreement, including but not limited to, the existence of this Agreement and the business contemplated under the Agreement (“Confidential Information”).
14.2	Permitted Disclosure
	Either Party may disclose Confidential Information to its own employees and/or consultants, but only to the extent such disclosure is strictly necessary for the negotiation or performance of this Agreement.
	Furthermore, either Party may disclose Confidential Information either (i) with the written consent of the other Party, (ii) to its agent, legal or financial advisor bound by a duty of confidentiality, (iii) obtained though other means than breach of this obligation of confidentiality; or (iv) pursuant to the order or requirement of a court, administrative agency, or regulatory body.

10

15.	GOVERNING LAW AND DISPUTE SETTLEMENT
15.1	Governing Law
	This Agreement shall be governed and construed by the published and publicly available laws and regulations of the PRC.
15.2	Dispute settlement
	Any dispute arising from or related to this Agreement shall firstly be resolved through consultation by both parties based on the spirit of mutual understandings and friendly cooperation.
	On the occurrence of a specific dispute, either party may notify the other party in writing of the existence of the dispute and its contents. If the dispute cannot be resolved through consultation within ninety (90) days of the issuance of the notice, either party may terminate the consultation and refer the dispute to China International Economic and Trade Arbitration Commission (“CIETAC”) for arbitration.
	The arbitration shall be conducted in accordance with CIETAC's arbitration rules in effect at the time of applying for arbitration.  The arbitration tribunal shall consist of three (3) members.  The arbitral award shall be final and binding upon the Parties.  The arbitration proceedings shall be held in Beijing.
16.	MISCELLANEOUS PROVISIONS
16.1	Amendments
	No modication, amendment, or other change to the Agreement or any of its Annexes will be binding on any Party unless it is made in writing and signed by both Parties.
16.2	Severability
	If any provision of this Agreement or any part of an Annex shall be held or adjudged illegal, invalid or unenforceable, such provision shall not affect this Agreement or the Annex as a whole or the legality or binding effect of other provisions.
16.3	Non-waiver
	No failure to exercise and no delay in exercising, on the part of either Party, of any right, power or the privilege under this Agreement nor any single or partial exercise thereof, or the exercise of any other right, power or privilege shall operate as a waiver thereof. No waiver by any Party of any of its respective rights or obligations under this Agreement shall be effective unless it is in writing.
16.4	Entire Agreement
	This Agreement and the Annexes hereto constitute the entire agreement between the Parties and supersede all prior discussions, negotiations and agreements. The Annexes form an integral part hereof and have the same legal effect as this Agreement. If there is any inconsistency between the provisions of this Agreement and any of the Annexes, the provisions of this Agreement shall prevail to the extent of such inconsistency.
16.5	Notices and Communications
	(i)	Any notice required to be given under this Agreement shall be in writing and may be given by personal delivery, or delivery through courier or facsimile transmission as follows:

11

The Lessor:	to the attention of o
	Address: o
	Telephone number: o
	Fax number: o
The Lessee:	to the attention of o
	Address: o
	Telephone number: o
	Fax number: o

	(ii)	All notices and communications under this Agreement shall be deemed to be duly given or made (a) in the case of communication by letter when delivered by hand, international courier or by registered mail or (b) in the case of communication by fax when transmitted properly to such fax number.
	(iii)	A notice or other communication received on a non-working day or after business hours of the receiving Party shall be deemed to be served on the next following working day.
16.6	Language
	This Agreement shall be written in English and Chinese. Both Chinese and English versions shall have the same legal effect.
16.7	Execution
	Each language version of this Agreement has eight duplicates, and is executed on the date first written above by the authorized representatives of the parties.

12

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

Yunji Communications Technology (China) Co. Ltd. :

Signature:
Name:	Colin Tay
Title:	Co-President
CECT Chinacomm Communications Co. Ltd.:
Signature:
Name:	Qiu Ping
Title:	President

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ANNEX 1

AMOUNT AND PAYMENT OF RENTAL

a)	The Rental for the Equipments shall be calculated in the method to be decided by the Parties, the pricing of which shall not be lower than the market price for financial leasing.
b)	The Rental shall be paid monthly to the bank account of the Lessee within ten (10) business days following the end of each month.

14

ANNEX 2

SHARE PLEDGE AGREEMENT

15

EX-10.13

EXHIBIT 10.13

Mortlock Ventures Inc.

US $15,000,000

CONVERTIBLE NOTES

Due December 31, 2008

______________

CONVERTIBLE NOTE PURCHASE AGREEMENT

_____________

DATED FEBRUARY 12, 2008

NEITHER THE NOTE DESCRIBED HEREIN NOR THE SHARES OF COMMON STOCK THAT MAY BE ISSUED UPON CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, HYPOTHECATED, GIVEN, BEQUEATHED, TRANSFERRED, ASSIGNED PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF (“TRANSFERRED”) EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER THE ACT, AND APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SUCH SECURITIES, PROVIDED THAT AN OPINION OF COUNSEL IS FURNISHED TO THE COMPANY, TO THE EXTENT REASONABLY REQUESTED BY THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS AVAILABLE.

IN ADDITION, THE NOTE MAY NOT BE TRANSFERRED UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF THE NOTE.  NO TRANSFER OF THE NOTE WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF THE NOTE.  THE NOTE IS ALSO SUBJECT TO OTHER RIGHTS AND OBLIGATIONS AS SET FORTH IN THE NOTE.

MORTLOCK VENTURES INC.

Convertible Promissory Notes due December 31, 2008

February 12, 2008

TO:_________________________

____________________________

____________________________                                                      

Ladies and Gentlemen:

Mortlock Ventures, Inc., a corporation organized under the laws of the State of Nevada (the “Company”), agrees with you (the “Purchaser”)as follows:

SECTION 1.  AUTHORIZATION OF NOTE. 

The Company has authorized the offering and sale (the “Offering”) of Convertible Notes in the aggregate principal amount of up to $15 million, with such terms as set forth below. Upon (a) your completion and execution of this Convertible Note Purchase Agreement (this “Agreement”),  (b) satisfaction of your obligations provided in Sections 3 and 4 hereof, and (c) the Company’s acceptance and execution of this Agreement, the Company shall issue to you a Convertible Note in the principal amount set forth on Schedule A - INFORMATION RELATING TO PURCHASER, attached hereto, accruing interest at the rate of ten percent (10%) per annum, convertible in accordance with the terms and conditions set forth in Section 9 hereof (the “Note”, such term to include any such notes issued in substitution therefore pursuant to Section 14.3 of this Agreement) and due December 31, 2008 (the “Maturity Date”). The Note shall be substantially in the form set out in Exhibit A, with such changes thereto, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined below in Section 22; references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

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SECTION 2.  SALE AND PURCHASE OF NOTE. 

Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, the Note at the purchase price of 100% of the principal amount of the Note (the “Purchase Price”).

SECTION 3.  CLOSING.

The Purchaser agrees that the following will be delivered to the Company on the Closing Date (as such term is defined below in this Section 3) at the offices of Lawler & Associates, a professional law corporation (the “Closing”):

                 (a)                  One completed and duly signed copy of this Agreement and all applicable Schedules and Certificates attached hereto;

(b)	A wire transfer in immediately available funds in the principal amount of the Note purchased by the Purchaser to the following client trust account held by Lawler & Associates (or to such other account as the Company may direct):
	LAWLER & ASSOCIATES,
	a professional law corporation, IOLTA
	Wells Fargo Bank
	27630 Ynez Road
	Temecula, California 92591
	Account Number:     645 198 9161
	Bank Routing Number:       121000248
	Swift Number:                       WFBIUS6S

and

                (c)                   All other documentation as may be required by applicable securities legislation.

The Closing shall be effected, subject to the satisfaction of all of the conditions of purchase set forth in this Agreement, on February 18, 2008, or on such other date  and at such other time as may be set by the Company (the “Closing Date”).

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At Closing, the Company will deliver the Note in the name of the Purchaser or its nominee as specified in Schedule A - INFORMATION RELATING TO PURCHASER.

SECTION 4.  CONDITIONS TO CLOSING.

Section 4.1.Conditions to Purchaser's Obligation to Purchase Notes.

Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your reasonable satisfaction, prior to or at the Closing, of the following conditions, one or more of which may be waived in accordance with the provisions of Section 17:

Section 4.1.1. Representations and Warranties. Each of the representations and warranties contained in Section 5 of this Agreement that are not qualified by materiality shall be true and correct in all Material respects as of the Closing Date and each of the representations and warranties contained in Section 5 of this Agreement that are qualified by materiality shall be true and correct as of the Closing Date, with the same force and effect as if made as of the Closing Date (other than such representations and warranties as are made as of another date, which shall have been true and correct as of such other date and such representations and warranties not qualified by materiality shall be true and correct in all Material respects as of such other date and except as permitted by this Agreement to change between the date of this Agreement and the Closing Date).

Section 4.1.2. Performance; No Default. The Company shall have performed and complied in all Material respects with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing; and after giving effect to the issue and sale of the Note, no Default or Event of Default shall have occurred and be continuing. The Company shall not have entered into any transaction since its date of incorporation that would have been prohibited by Section 11 hereof had such Section applied since such date. Without limiting your rights with respect to a breach of any representations, warranties or covenants herein, your purchase of the Note shall be deemed to constitute conclusive evidence of your agreement that all such agreements and conditions contained in this Agreement required to be performed or complied with by the Company prior to or at the Closing have been performed or waived to your satisfaction.

Section 4.1.3. Compliance Certificates.

(a) Officer’s Certificate.  The Company shall have delivered to you an Officer’s Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1.1 and 4.1.2 have been fulfilled.

(b)           Secretary’s Certificate.  The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Note and this Agreement.

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Section 4.1.4. Opinion of Counsel. You shall have received an opinion in form and substance satisfactory to you, dated the date of the Closing from Lawler & Associates, PLC, corporate counsel to the Company, in such form and covering such matters incident to such transactions as you may reasonably request.

Section 4.1.5. Purchase Permitted by Applicable Law, etc.  On the Closing Date, your purchase of the Note shall (i) be permitted by the applicable laws and regulations of each jurisdiction to which you are subject, (ii) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof.  Your purchase of the Note at Closing shall be deemed conclusive evidence of your compliance with clauses (i) through (iii) above.

Section 4.1.6. Loan Documents.  The Company will execute and deliver or cause to be executed and delivered to Purchaser each of the Loan Documents executed by the Company on the Closing Date.

Section 4.1.7. Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated by the Loan Documents and all documents and instruments incident to such transactions shall be reasonably satisfactory to the special counsel for the Purchasers, and such special counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request.

Section 4.1.8  Due Diligence Review.  The Purchaser shall have received copies of and shall be satisfied with the due diligence documents and materials regarding the Company and the Note that the Purchaser requests.

Section 4.2 Conditions to Obligations of the Company.

The Company's obligation to issue and sell the Note at Closing is subject to the fulfillment to the Company's reasonable satisfaction, prior to or at Closing, of the following conditions, one or more of which may be waived in writing by the Company:

Section 4.2.1 Representations and Warranties. Each of the representations and warranties of the Purchaser contained in Section 6 of this Agreement that are not qualified by materiality shall be true and correct in all Material respects as of the Closing Date and each of the representations and warranties contained in Section 6 of this Agreement that are qualified by materiality shall be true and correct as of the Closing Date, with the same force and effect as if made as of the Closing Date (other than such representations and warranties as are made as of another date, which shall have been true and correct as of such other date and such representations and warranties not qualified by materiality shall be true and correct in all material respects as of such other date and except or permitted by this Agreement to change between the date of this Agreement and the Closing Date).

Section 4.2.2.  Performance.  The Purchaser shall have performed and complied in all Material respects with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing.

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Section 4.2.3  Proceedings and Litigation.  No action shall have been taken by any Governmental Authority against any party hereto seeking to delay the purchase and sale of the Note or other transactions contemplated by the Loan Documents.

Section 4.2.4 Proceedings and Documents.  All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be reasonably satisfactory to the Company and special counsel for the Company, and such special counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request.

Section 4.2.5 Additional Conditions.  The Purchaser acknowledges and agrees that the Company’s obligation to sell the Note to the Purchaser is further subject to the following conditions:

(a)	that the issue, sale and delivery of the Note is exempt from all registration requirements and the requirements to file a prospectus or registration statement, or deliver an offering memorandum under applicable securities legislation relating to the sale of the Note or that the Company has received such orders, consents, or approvals as may be required to permit such sale without the requirement of filing a prospectus or registration statement, or delivering an offering memorandum;
(b)	the completion, execution and delivery by the Purchaser of the documents and items referred to in Section 3 of this Agreement;
(d)	the Closing conditions contained in this Agreement being satisfied or waived by the relevant party;
(e)	all documentation relating to the offer, sale and issuance of the Note being in form and substance satisfactory to the Company;
(f)	that the representations and warranties of the Purchaser contained in this Agreement and the Schedules hereto remain true and correct as of the Closing Date; and
(g)	the Company shall obtain and deliver an opinion of counsel regarding (i) its due incorporation, valid existence and good standing, and (ii) the due execution, delivery and enforceability of this Agreement.

SECTION 5.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to you on the Closing Date that:

Section 5.1. Organization; Power and Authority.  The Company is a corporation validly existing and in good standing under the laws of the State of California and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Company has the legal power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts, to execute and deliver the Loan Documents to which it is a party and to perform the provisions hereof and thereof.

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Section 5.2.  Authorization, etc.  Each of the Loan Documents have been duly authorized by all necessary corporate action on the part of the Company, and each such Loan Document constitutes, and upon execution and delivery thereof each such Loan Document will constitute (assuming due execution and delivery by the Purchaser to the extent provided for therein), a legal, valid and binding obligation of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 5.3.  Disclosure.  This Agreement, the Loan Documents, the certificates or Schedules delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby taken as a whole, do not contain any untrue statement of a Material fact or omit to state any Material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made.

Section 5.4.  Compliance with Laws, Other Instruments, etc.  The execution, delivery and performance by the Company of the Loan Documents will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien, except as contemplated in the Loan Documents, in respect of any property of the Company under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, Charter Document, or any other agreement or instrument to which the Company is bound or by which the Company or any of its properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or (iii) violate any provision of any current statute or other rule or regulation of any Governmental Authority applicable to the Company, in each case the effect of which could have a Material Adverse Effect.

Section 5.5. Governmental Authorizations, etc.  No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes that will not have been obtained prior to the Closing.

Section 5.6. Litigation; Observance of Agreements, Statutes and Orders.

(a)           There are no actions, suits or proceedings pending or, to the Knowledge of the Company, threatened against or affecting the Company or any property of the Company in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected, if adversely determined, to have a Material Adverse Effect.

(b)           The Company is not in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

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Section 5.7.  Licenses, Permits, etc.

(a)           The Company owns or possesses all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material to the conduct of its business as currently being conducted, without, to the Knowledge of the Company, conflict with the rights of others;

(b)           To the Knowledge of the Company, no product of the Company infringes in any Material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and

(c)           To the Knowledge of the Company, there is no Material violation by any Person of any right of any the Company with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company.

Section 5.8.  Private Offering by the Company.  Neither the Company nor to the Knowledge of the Company anyone authorized to act on its behalf has offered the Note or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you and not more than thirty-five (35) other investors, each of which has been offered the Note at a private sale for investment and not with a view to the distribution thereof or any interest therein.  Neither the Company nor to the Knowledge of the Company anyone authorized to act on its behalf has taken, or will take, any action that would subject the issuance or sale of the Note to the registration requirements of Section 5 of the Securities Act; provided, however, the availability of an exemption from the registration requirements of Section 5 is based upon the accuracy and completeness of the representations and warranties of each Purchaser (and each other Person acquiring the Note from such Purchaser) set forth in Section 6 on which the Company will rely. In connection with the offer and sale of the Note, the Company has not conducted any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, the Internet or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

Section 5.9.  Capitalization. The authorized capital of the Company consists of one (1) class of common stock. The Company has 200 million authorized shares of common stock, par value $0.001 per share, of which 76,808,000 shares _____ are issued and outstanding as of the date of this Agreement. All of the shares of the Company are duly authorized, validly issued, fully paid and non-assessable.

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SECTION 6.  REPRESENTATIONS OF THE PURCHASER.

Section 6.1.  Due Authorization; Absence of Conflicts; Enforceability; Purchase for Investment, etc.

(a)           You represent and warrant to Company that you have the full legal capacity, power and authority to execute, deliver and perform the Loan Documents to which you are a party; the execution, delivery and performance by you of each Loan Document to which you are a party has been duly authorized by all necessary legal action on your part; your execution, delivery and performance of the Loan Documents to which you are a party and the consummation of the transactions contemplated hereby and thereby will not (a) conflict with (i) any provision of any governing instrument applicable to you, or (ii) any Material permit, franchise, judgment, decree, law, rule or regulation applicable to you or your assets, or (b) result in any Material breach of any terms or provisions of, or constitute a Material default under, any Material contract, agreement or instrument to which you are a party or by which you are bound; and such Loan Document constitutes a legal, valid and binding obligation enforceable against you in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(b)           You represent and warrant to the Company that you are purchasing for your own account or for one or more separate accounts maintained by you and not with a view to the distribution thereof or any interest therein (i) the Note and, (ii) upon conversion of the Note, the Shares; provided that the disposition of your or their property shall at all times be within your or their control and in compliance with applicable Securities Laws. You understand that the Note and the Shares have not been and will not be registered under any Securities Laws and may be resold only if registered pursuant to the provisions of applicable Securities Laws or if an exemption from such registration is available, except under circumstances where neither such registration nor such an exemption is required by law. You represent and warrant to the Company that you are an “accredited investor” as defined under Rule 501(a) of the Securities Act.

(c)           You understand that you must bear the economic risk of an investment in the Securities because, among other reasons, the offering and sale of Note and the Shares have not been and will not be registered under applicable Securities Laws; the Note and the Shares are “restricted securities” as defined in Rule 144 promulgated under the Securities Act and, therefore, the Securities cannot be re-sold unless such sales are subsequently registered under applicable Securities Laws or an exemption from such registration is available. A legend to this effect shall be set forth on the face of the Note and absent an effective registration under the Securities Act each certificate evidencing any Shares issued upon conversion of the Note.

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(d)           You have sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of your investment in the Securities and you are capable of bearing the economic risks of such investment, including a complete loss of your investment.

Section 6.2. Access to Information.  Without affecting your right to rely on the Company’s representations and warranties set forth herein, you have been given the opportunity to examine all documents and to ask questions of, and to receive answers from, the Company and its representatives and to obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense concerning the Company, its business affairs, financial condition and terms and conditions of the purchase of the Note and conversion of the Note as you have requested in order to enable you to evaluate the merits and risks of an investment in the Note and upon its conversion to Common Stock.

Section 6.3   Risks, Lack of Information, Resale Restrictions.  The Purchaser is aware and represents, acknowledges and/or agrees that:

(a)AN INVESTMENT IN THE SECURITIES INCLUDES A HIGH DEGREE OF RISK AND THE PURCHASER MAY LOSE ITS ENTIRE INVESTMENT;

(b) IT HAS HAD THE OPPORTUNITY TO ASK QUESTIONS AND RECEIVED ANSWERS FROM AN EXECUTIVE OFFICER OF THE COMPANY REGARDING THE OPERATIONS OF THE COMPANY, INCLUDING, BUT NOT LIMITED TO, RISK FACTORS APPLICABLE TO THE COMPANY;

(c) The Company may complete additional financings in the future in order to develop the business of the Company and fund its ongoing development, and such future financings may have a dilutive effect on current security holders of the Company, including the Purchaser;

 (d) The Purchaser has not been provided with, nor has it requested, an offering memorandum or any similar document in connection with its subscription for the Note, and its decision to execute this Agreement and to purchase the Note has been based upon the representations and warranties of the Company made herein, the publicly available information concerning the Company and the Purchaser's own due diligence regarding the Company and not upon any verbal or other written representation as to fact or otherwise made by or on behalf of the Company or any employees, agents or affiliates thereof, and the Company assumes no responsibility or liability of any nature whatsoever for the accuracy or adequacy of the publicly available information upon which the investment decision may have been made or as to whether all information concerning the Company required to be disclosed by the Company has been disclosed;

(e) No agency, governmental authority, regulatory body, stock exchange or other entity has made any finding or determination as to the merit for investment of, nor have any such agencies or governmental authorities made any recommendation or endorsement with respect to the Securities or the Offering;

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(f) The purchase of the Note has not been made through, or as a result of, and the distribution of the Note is not being accompanied by, and the Purchaser is not aware of, any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, internet or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

(g) The Note is being offered for sale on a “private placement” basis only;

(h) The issuance, sale and delivery of the Note to the Purchaser or (if applicable) to any purchaser on whose behalf it is contracting hereunder, is conditional upon such issuances and sales being exempt from the registration requirements and the prospectus requirements, or the requirement to file a registration statement, of all applicable securities legislation relating to the issuance and sale of the Note, or upon the issuance of such orders, consents or approvals as may be required to permit such sales without the requirement of filing a prospectus or complying with the registration requirements;

(i)  The Company, or its successors, may be required to disclose to applicable securities regulatory authorities the identity of the beneficial purchasers of the Note;

(j) The certificates representing the Securities shall bear a legend to the effect that transfer is prohibited except (i) pursuant to registration under the U.S. Securities Act, or (ii) pursuant to an available exemption from registration;provided that an opinion of counsel is furnished to the Company, to the extent reasonably requested by the Company, in form and substance reasonably satisfactory to the Company, to the effect that an exemption from the registration requirements of the Securities Act of 1933 and/or applicable state securities law is available;

 (k) The Securities will be subject to resale restrictions under applicable securities legislation, rules, regulations and policies, and the Purchaser or (if applicable) others for whom it is contracting hereunder will comply with all relevant securities legislation, rules, regulations and policies concerning the Securities and will consult with its own legal advisers with respect to complying with all restrictions applying to any such resale and further agrees that it, or (if applicable) others for whom it is contracting, is solely responsible for compliance with all applicable resale restrictions and will only resell the Securities in compliance with all applicable securities laws;

Section 6.4. Qualification for Offering and Purchase of Note. The Purchaser further represents and warrants as to the following:

(a) it is either (i) an accredited investor at the time of the purchase of the Securities    and is purchasing the Securities as principal for its own account or for the account of another accredited investor as to which it exercises sole investment discretion, and not with a view to the resale, distribution or other disposition of all or any of the Securities, and is delivering concurrently with this Agreement the Certification for U.S. Securities Law Compliance – Regulation D in the form attached to this Agreement as Schedule B; or (ii) a non-U.S. Person, is outside of the U.S. at the time of the purchase of the Securities and is purchasing the Securities as principal for its own account or for the account of another non-U.S. person as to which it exercises sole investment discretion, and not with a view to the resale, distribution or other disposition of all or any of the Securities, and is delivering concurrently with this Agreement the Certificate of Non-U.S. Person in the form attached to this Agreement as Schedule C;

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(b) it consents to the Company making a notation on its records or giving instructions to any transfer agent of the Securities in order to implement the restriction on transfer set forth and described herein;

(c) it (and if the Purchaser is acting as agent for a disclosed principal, such disclosed principal) was offered the Note in, and does business in, the jurisdiction of the Purchaser’s place of business as referenced on Schedule A attached hereto;

(d) it (and any beneficial purchaser for whom it is acting) has been independently advised as to, and is aware of, the restrictions with respect to trading in the Securities pursuant to the applicable securities laws and the rules of any applicable stock exchanges and further agrees that it (and any beneficial purchaser for whom it is acting) is solely responsible for compliance with all such restrictions;

(e) if required by applicable securities laws or order of a securities regulatory authority, stock exchange or other regulatory authority, it will execute, deliver, file and otherwise assist the Company in filing such reports, undertakings and other documents with respect to the issuance of the Note and the underlying Common Shares;

(f) it (and if the Purchaser is acting as agent for a disclosed principal, such disclosed principal) is responsible for obtaining such legal, including tax, advice as it considers necessary or appropriate in connection with the execution, delivery and performance by it of this Agreement and the transactions contemplated herein;

(g) it is solely responsible for its own due diligence investigation of the Company, its business and financial condition, for its own analysis of the merits and risks of its investment in the Securities made pursuant to this Agreement and for its own analysis of the terms of its investment;

(h) it is solely responsible for obtaining such advice concerning the tax consequences of its investment in the Securities and it is not relying on the Company or its respective counsel for advice concerning such tax consequences;

(i) the purchase of the Note by the Purchaser hereunder is not a transaction in which any director or officer of the Company, or any beneficial owner of securities carrying more than ten percent (10%) of the voting rights attaching to all outstanding voting securities of the Company, has a direct or indirect beneficial interest; and

(j) if it decides to offer, sell or otherwise transfer any of the Securities, the Purchaser will not offer, sell or otherwise transfer any of such Securities directly or indirectly, unless:

i.   the sale is to the Company;

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ii.   the sale is made outside the United States in a transaction meeting the requirements of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations and the Purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration pursuant to Regulation S under the U.S. Securities Act;

iii.   the sale is made in the United States pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder and in accordance with any applicable state securities or “blue sky” laws, and the Purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration pursuant to Rule 144 under the U.S. Securities Act;

iv.   the Securities are sold in the United States in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities, and the Purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration; or

v.   the sale is made in the United States pursuant to an effective registration statement filed under the U.S. Securities Act.

The Purchaser acknowledges and agrees that the Company will refuse to register any sale of Securities made in breach of the provisions hereof; and all of the acknowledgements, representations, warranties and covenants set out in Schedule B or Schedule C, whichever is delivered by Purchaser pursuant to Section 6.4(a) hereto are true and correct as of the day hereof and are incorporated by reference herein.

Section 6.5. Source of Funds.  You represent and warrant to the Company that the source of funds to be used by you to pay the purchase price of the Note to be purchased by you hereunder is from your own personal assets and is not: an “insurance company general account” within the meaning of Department of Labor Prohibited Transaction Exemption (“PTE”) 95-60 (issued July 12, 1995); an employee benefit plan or group of plans maintained by the same employer or employee organization or a separate account or trust fund comprised of one or more employee benefit plans; an insurance company pooled separate account, within the meaning of PTE 90-1 (issued February 29, 1990); a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991); an “investment fund” (within the meaning of Part V of the QPAM Exemption) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption); or a governmental plan.

As used in this Section 6.5, the terms “employee benefit plan”, “governmental plan”, “party in interest” and “separate account” shall have the respective meanings assigned to such terms in Section 3 of Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

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Section 6.6  Payment of Commissions. You hereby represent and warrant that you are aware of and agree that the Company shall pay a commission equal to six percent (6%) of the principal amount of the Note to Westmoore Securities Inc. and upon the sale of all other convertible notes sold by the Company under the Offering.

SECTION 7.  INFORMATION AS TO THE COMPANY.

Section 7.1. Inspection.  Subject to the provisions of Section 20, the Company shall permit the representatives of each holder of Notes to meet with an executive officer of the Company, to discuss the affairs, finances and accounts of the Company with such executive officer.

SECTION 8.  PRINCIPAL AND INTEREST; MATURITY.

Section 8.1  Principal and Interest. (a) The Company shall repay in full the Note on the Maturity Date in an amount equal to the aggregate principal amount of the Note outstanding on the Maturity Date, plus accrued and unpaid interest thereon, unless and to the extent that the Note is earlier redeemed, repurchased, repaid or converted in accordance with the terms of the Note.

(b)           Interest shall accrue on the unpaid principal amount of the Note at the rate of ten percent (10%) per annum from the Closing Date, until and to the extent that the principal amount of the Note is paid or the principal amount of the Note has been converted as provided in Section 9 hereof. Interest on the Note shall be computed on the basis of a 360-day year comprised of twelve (12) 30-day months.

(c) If a date for payment of principal is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and interest shall accrue for the intervening period.

(d) Except as provided in the following sentence, the Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts in immediately available funds by wire transfer to a U.S. dollar account maintained by the holder with a bank in the United States designated in writing by the holder.

SECTION 9.  CONVERSION OF NOTES.

Section 9.1. Conversion by Holder.  (a) The Holder shall have the option to convert the Note, and all accrued interest on the principal amount of the Note, for Common Shares at the Conversion Price upon completion of both of the Capital Truss RTO and the Trussnet RTO. In the event that the Holder wishes to convert the Note, the Holder shall deliver to the Company a Notice of Election to Convert in the form attached hereto as Exhibit B and the other items described in subsection (b) of this Section 9.1.

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(b) The principal balance and all accrued and unpaid interest thereon (for purposes of this Section 9, such amount is referred to as the “Amount Owing”), shall be converted into Shares at the Conversion Price as defined in Section 9.2 below on the date that the Company receives the following items from the Holder (such shall be deemed to be the “Conversion Date”): (1) the Holder’s signed Notice of Election to Convert and (2) the original, signed copy of the Note.

(c) The Holder shall also provide to the Company, if required and instructed to do so by the Company: (1) appropriate endorsements and transfer documents; and (2) payment of transfer or similar tax.

(d) Nothing in this Section 9.1 shall be deemed to require the Holder to elect to convert the Note.

Section 9.2 Conversion Price. The Amount Owing shall be converted into Shares (as such term is defined in Section 22 below) at a conversion price (the “Conversion Price”) per Share equal to eighty-percent (80%) of the offering price of the shares of common stock in the Company’s equity offering of up to $150 million.

Section 9.3. Taxes on Conversion.

(a) If the Holder converts the Note, the Holder shall pay any documentary, stamp or similar issue or transfer tax due on the issue of Common Shares upon the conversion.  The Company may refuse to deliver the certificates representing the Common Shares being issued in a name other than the Holder’s name until the Company receives a sum sufficient to pay any tax which shall be due.

(b) The Company may refuse to deliver the certificates representing the Common Shares being issued in a name other than the Holder’s name unless the Company receives documentation pursuant to Section 14.2(b) hereof with respect to the transfer of such Note in respect of the transfer of Common Shares.

SECTION 10.  AFFIRMATIVE COVENANTS.

The Company covenants that so long as any principal amount of the Note issued by the Company pursuant to this Agreement or any similar Notes are outstanding:

Section 10.1. Insurance. The Company will maintain with insurers which on the date the policy commences are financially sound and reputable, insurance with respect to its Material properties and business against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

Section 10.2. Maintenance of Properties. The Company will maintain and keep, or cause to be maintained and kept, its interests in all of its assets constituting Material tangible personal property in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be conducted in the ordinary course at all times, provided that this Section shall not prevent the Company from discontinuing the operation and the maintenance of any of its assets if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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Section 10.4. Corporate Existence, etc. The Company will at all times preserve and keep in full force and effect its corporate existence.

SECTION 11.  NEGATIVE COVENANTS.

Except with the prior written consent of the Purchaser, so long as any principal amount of any of the Notes issued in this Offering is outstanding, the Company covenants with the Purchaser as follows in this Section 11:

Section 11.1. Transactions with Affiliates.  The Company will not enter into directly or indirectly any transaction or group of related transactions (including, without limitation, the purchase, lease, sale or exchange of Material properties of any kind or the rendering of any service) with any Affiliate (other than another Material Subsidiary or the Asset Acquisition), except in the ordinary course and pursuant to the reasonable requirements of the Company’s business and upon fair and reasonable terms no less favorable to the Company than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.

Section 11.2. Restricted Payments.  The Company will not make any Restricted Payments, except (a) the Company may declare and pay (i) dividends with respect to its Equity Interests payable solely in additional shares of its Equity Interests or Indebtedness and (ii) interest and principal on Indebtedness owed by the Company to a Subsidiary, and (b) the Company may make distributions pursuant to and in accordance with stock incentive plans or other compensation plans for management or employees of the Company and its Subsidiaries.

Section 11.3. Sale of Assets, etc.  Except as may be contemplated by the RTO with Mortlock, the Company will not make any Transfer of assets, other than to a wholly owned subsidiary.

SECTION 12.  EVENTS OF DEFAULT.

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

(a)           the Company defaults in the payment of any principal at the applicable Redemption Price, if any, on the Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

(b)           the Company defaults in the payment of any interest on the Note for more than five (5) Business Days after the same becomes due and payable; or

(c)           the Company defaults in the performance of or compliance with any term contained in Section 8.6 or Section 11 and remains in default after the expiration of a thirty (30) day cure period; or

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(d)           the Company defaults in the performance or compliance in any Material respect with any other material term herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 12) and such default is not remedied within thirty (30) days after the earlier of (i) a Senior Financial Officer obtaining actual and not constructive knowledge of such default and (ii) the Company receiving written notice of such default from any holder of the Note (any such written notice to be identified as a “notice of default” and to refer specifically to this paragraph (d) of Section 12); or

(e)           any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement, in any Loan Document or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any Material respect on the date as of which made; or

(f)           the Company (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

(g)           a court or governmental authority of competent jurisdiction enters an order appointing a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company, or any such petition shall be filed against the Company and such petition shall not be dismissed or stayed pending appeal within ninety (90) days, or are not discharged within sixty (60) days after the expiration of such stay; or

(h)           a final judgment or judgments for the payment of money aggregating in excess of US$7,500,000 (to the extent not covered by insurance) are rendered against the Company and which judgments are not, within ninety (90) days after entry thereof, bonded, discharged, finally settled or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; or

(i)           (i) this Agreement, the Note, or any other Loan Document ceases to be in full force and effect (except in accordance with its terms) or is declared null and void or the validity or enforceability is contested or challenged by Company, any Affiliate of Company or any of its respective partners or shareholders; or (ii) Company denies that it has any further liability or obligation under any of the Loan Documents prior to the indefeasible satisfaction in full of all Obligations under the Loan Documents.

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SECTION 13.  REMEDIES ON DEFAULT, ETC.

Section 13.1.                                Acceleration.

(a)           If an Event of Default with respect to the Company described in paragraph (f) or (g) of Section 12 (other than an Event of Default described in clause (i) of paragraph (f) or described in clause (vi) of paragraph (f) by virtue of the fact that such clause encompasses clause (i) of paragraph (f)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

(b)           If any other Event of Default has occurred and is continuing, the Purchaser may at any time at its option, by notice to the Company, declare the Note then outstanding to be immediately due and payable.

Upon the Note becoming due and payable under this Section 13.1, whether automatically or by declaration, it will forthwith mature and the entire unpaid principal amount thereof at the applicable Redemption Price, if any, plus all accrued and unpaid interest thereon (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.

Section 13.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether the Note has become or has been declared immediately due and payable under Section 13.1, the holder thereof may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in the Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

Section 13.3. Costs and Expenses.  The Company shall pay all costs and expenses of amending, administering, implementing, collecting, defending, declaring and enforcing holder rights under this Agreement, the Note or other instrument or agreement delivered in connection with any of the Loan Documents, including searches and filings at all times, and holder’s reasonable attorneys’ fees (actually incurred, regardless of whether any litigation is commenced or default is declared and regardless of tribunal or jurisdiction).

Section 13.4.  Rescission.  At any time after the Note has been declared due and payable pursuant to clause (b) or (c) of Section 13.1, the Purchaser, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Note and all principal at the applicable Redemption Price, if any, on the Note that is due and payable and is unpaid other than by reason of such declaration, and all interest on such overdue principal at the applicable Redemption Price, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Note, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Note.  No rescission and annulment under this Section 13.4 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

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Section 13.5.  No Waivers or Election of Remedies, Expenses, etc.  No course of dealing and no delay on the part of the Purchaser in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice the Purchaser’s rights, powers or remedies.  No right, power or remedy conferred by this Agreement or by any Note thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. The Company will pay to the holder of the Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 13, including, without limitation, reasonable attorneys’ fees, expenses and disbursements actually incurred.

SECTION 14.  REGISTRATION AND TRANSFER

The Company and, by acceptance of the Note, the Purchaser hereby agree that the following provisions shall govern the registration, sale, assignment, pledge, transfer, encumbrance or other disposition of the Note.

Section 14.1  Note Registration.  The Company shall keep at its principal office a register (the “Register”) in which the Company shall enter the name and address of the registered holder of the Note.  References to the “Holder” or “Holders” of the Note shall mean the person listed in the Register as the payee of the Note unless the payee shall have presented the Note to the Company for transfer and the transferee shall have been entered in the Register as a subsequent holder, in which case the term shall mean such subsequent holder.  The registered Holder of the Note may be treated as the owner of it for all purposes.

Section 14.2  Disposition.  (a)  The Holder may not Transfer the Note, in whole or in part, directly or indirectly, except in accordance with Section 14.2(b).  Any purported Transfer other than in accordance with the terms hereof and thereof shall be void and without force or effect.

(b) A Transfer of the Note shall only be effected by the Holder hereof by delivery of the Note to the Company (with the instrument of assignment provided on the Note properly completed in accordance with the terms and conditions of the Note), accompanied by an opinion of counsel, in form and substance, and from counsel, reasonably satisfactory to the Company to the effect that such Transfer does not violate the Securities Act or any applicable state or foreign securities laws, and by such other evidence as the Company may reasonably require of compliance with the Securities Act and applicable state or foreign securities laws and with the provisions of the Note, at the Company’s principal office or at such other location as the Company shall designate in writing to the Holder; provided, however, that such transfer of the Note shall become effective only upon, and shall not be effective for any purpose until, the Company has received the Note.

Section 14.3.  Replacement of Note.  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of the Note (which evidence shall be notice from the Purchaser of such loss, theft, destruction or mutilation), and upon surrender and cancellation thereof, the Company, at its own expense, shall execute and deliver in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon, as the case may be.

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SECTION 15.  PAYMENTS ON NOTE.

Section 15.1. Place of Payment.  Subject to Section 15.2, payments of principal and interest becoming due and payable on the Note shall be made at the principal office of the Holder of the Note. The Holder of the Note may at any time, by notice to the Company, change the place of payment of the Note so long as such place of payment shall be either the principal office of the Holder of such Note in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

Section 15.2. Home Office Payment.  So long as you or your nominee shall be the Holder of the Note, and notwithstanding anything contained in Section 15.1 or in the Note to the contrary, the Company will pay all sums becoming due on such Note for principal and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of the Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of the Note, you shall surrender the Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 15.1.

SECTION 16.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained in the Loan Documents shall survive the execution and delivery of the Loan Documents and the Note, the purchase by you of the Note and any partial payment on the Note and shall expire and be of no further force and effect when all principal, interest and other amounts payable on the Note shall have been indefeasibly paid in full in accordance with the provisions thereof. The Loan Documents embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

SECTION 17.  AMENDMENT AND WAIVER.

Section 17.1. Requirements.  This Agreement and the Note may be amended, and the observance of the Note may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Purchaser.

Section 17.2. Binding Effect, etc.  Any amendment or waiver consented to as provided in this Section 17 is binding upon the Holder of the Note and upon each future Holder of the Note and upon the Company without regard to whether the Note has been marked to indicate such amendment or waiver.  No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon.  No course of dealing between the Company and the Holder of the Note or any delay in exercising any rights hereunder or under the Note shall operate as a waiver of any rights of the Holder.  As used herein, the term “this Agreement” and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

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SECTION 18.  NOTICES.

All notices and communications provided for hereunder shall be in writing and sent:

(a)           by facsimile transmission if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or

(b)           by registered or certified mail with return receipt requested (postage prepaid), or

(c)           by a recognized overnight delivery service (with charges prepaid).  Any such notice must be sent:

(i)           if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing,

(ii)           if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Executive Officer, or at such other address as the Company shall have specified to the Holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19.  REPRODUCTION OF DOCUMENTS.

This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) subject to the provisions of Section 20, financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced.  The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.  This Section 19 shall not prohibit the Company or the Holder of Note from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

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SECTION 20.  CONFIDENTIAL INFORMATION.

For the purposes of this Section 20, “Confidential Information” means information delivered to you or any holder by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to the Loan Documents that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you or such Holder as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you or such Holder prior to the time of such disclosure through no act or omission by you or any Person authorized to act on your behalf in breach of any duty of confidentiality, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary from any Person who has not breached any duty of confidentiality owed to the Company or any Subsidiary, or (d) concerns or relates to the U.S. federal income tax treatment or U.S. federal income tax structure of the transactions contemplated hereby (and you may disclose to any and all persons, without limitation of any kind, any such information with respect to such U.S. federal income tax treatment and U.S. federal income tax structure). You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you and you may only use the Confidential Information in connection with the transactions contemplated by the Loan Documents, including, without limitation, the administration, preservation, or enforcement of your rights relating to your investment represented by your Notes, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and Affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes) who are subject to a duty of confidentiality or otherwise agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other Holder of any Note who agrees to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement; provided, however, prior to disclosing any Confidential Information pursuant to clauses (vi), (vii) or (viii) (other than in connection with clause (z) of clause (viii)) you shall (if reasonably practicable under the circumstances and provided that you are not legally prohibited from doing so) notify the Company of the proposed disclosure and afford it a reasonable opportunity to seek an injunction or other protective order against the public release of all or any portion of such Confidential Information.  Each Holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement.  On reasonable request by the Company in connection with the delivery to any Holder of a Note of information required to be delivered to such Holder under this Agreement or requested by such Holder (other than a Holder that is a party to this Agreement or its nominee), such Holder will enter into an agreement with the Company embodying the provisions of this Section 20.

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SECTION 21.  MISCELLANEOUS.

Section 21.1. Successors and Assigns.  All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent Holder of a Note) whether so expressed or not.

Section 21.2. Payments Due on Non-Business Days.  Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day.

Section 21.3. Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

Section 21.4. Construction and Interpretation.  Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant.  Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.  All references to immediately available funds or dollar amounts contained in this Agreement shall mean United States dollars.  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 acknowledge and agree that (i) each party and its counsel have reviewed the terms and provisions of this Agreement and have contributed to its revision, (ii) the normal rule of construction, to the effect that any ambiguities are resolved against the drafting party, shall not be employed in the interpretation of it, and (iii) the terms and provisions of this Agreement shall be constructed fairly as to all parties hereto and not in favor or against any party, regardless of which party was generally responsible for the preparation of this Agreement.  The terms “herein”, "hereof"" or “hereunder” shall refer to the entire Agreement; all references to Sections shall refer to sections of this Agreement; “including” means “and including without limitation.”  Words importing the singular also include the plural and vice versa.

Section 21.5. Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument.  Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

Section 21.6. Governing Law.  This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California, excluding choice of law principles of the law of such locale that would require the application of the laws of a jurisdiction other than such locale.

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Section 21.7  Submission to Jurisdiction.  For the purposes of any action or proceeding involving this Agreement, the Notes or any other agreement or document referred to herein or therein, the Company hereby expressly submits to the nonexclusive jurisdiction of all courts sitting in the State of California and consents that any order, process, notice of motion or other application to or by any of said courts or a judge thereof may be served within or without such court’s jurisdiction by registered mail or by personal service, provided that a reasonable time for appearance is allowed.  The Company hereby waives, and shall cause its Subsidiaries to irrevocably waive any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, the Notes or any other agreement or document referred to herein or therein brought in any court sitting in the State of New York and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

SECTION 22.  DEFINED TERMS

As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:

“Affiliate” means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests.  As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.  Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.

 “This Agreement” means this Convertible Note Purchase Agreement.

 “Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed.

“Closing” is defined in Section 3.

“Closing Date” is defined in Section 3.

“Code” means the US Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.

“Common Stock” or “Common Shares” means the common stock, par value $0.001 per share, of the Company.

“Company” means Mortlock Ventures Inc., a Nevada corporation.

“Confidential Information” is defined in Section 20.

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“Consolidated Assets” means the total assets of the Company and its Subsidiaries which would be shown as assets on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with applicable GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries.

"Conversion Price" has the meaning set forth in Section 9.2.

“Default” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.

“Distribution” means, in respect of any corporation, association or other business entity:

(a)           dividends or other distributions or payments on capital stock or other Equity Interests of such corporation, association or other business entity (except distributions in such stock or other Equity Interests or Indebtedness as permitted by the Agreement); and

(b)           the redemption or acquisition of such stock or other Equity Interests or of warrants, rights or other options to purchase such stock or other Equity Interests (except when solely in exchange for such stock or other Equity Interests or Indebtedness as permitted by the Agreement) unless made, contemporaneously, from the net proceeds of a sale of such stock or other Equity Interests.

 “Dollar” or “$” means lawful money of the United States of America.

“Environmental Laws” means any and all federal, state, provincial, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code.

“Event of Default” is defined in Section 13.

“Exchange Act” means the US Securities Exchange Act of 1934.

“Fair Market Value” means, at any time and with respect to any property, the sale value of such property that would be realized in an arm’s-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell).

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“Foreign Pension Plan” means any plan, fund (including, without limitation, any superannuation fund but excluding any governmental plan or program requiring the mandatory payment of social insurance taxes or similar contributions to a governmental fund with respect to the wages of an employee) or other similar program established or maintained outside the United States of America by the Company or any ERISA Affiliate for the benefit of employees of the Company or any ERISA Affiliate residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment excluding contractual notice payments, and which plan is not subject to ERISA or the Code.

“Fundamental Change” means, with respect to the Company, the occurrence of any transaction to which the Company is a party (including without limitation any recapitalization or reclassification of the Common Shares (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Ordinary), any consolidation of the Company with, or merger of the Company into, any other person, any merger of another person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding Common Shares of the Company) or any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange) pursuant to which all Common Shares are converted into or exchangeable for the right to receive other securities, cash or other property.

“GAAP” means generally accepted accounting principles as in effect from time to time in the stated jurisdiction.

“Governmental Authority” means

(a)           the governments of

(i)           the United States of America, or the United Kingdom or any State, province or other political subdivision thereof, or

(ii)           any jurisdiction in which the Company conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company, or

(b)           any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government, including any stock exchange.

“Holder” is defined in Section 14.1.

 “Indebtedness” with respect to any Person means, at any time, without duplication,

(a)           its liabilities for the deferred purchase price of property acquired by such Person (excluding (i) accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property and (ii) where such deferred purchase price is in the form of equity);

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(b)           all liabilities appearing on its balance sheet in accordance with GAAP in respect of capital leases;

(c)           all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);

(d)           all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money) other than with respect to letters of credit which are 100% cash collateralized;

(e)           interest rate, currency or commodity (including crude oil and natural gas) swaps, caps, collars, forwards, futures or derivatives transactions or similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency of such Person; and

(f)           any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof..

Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (f) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.

“Institutional Investor” means (a) any Purchaser (including beneficial owners of the Notes), or (b) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form.

“Knowledge” means, either:

(i)  in respect of the Company, the actual and not constructive knowledge of   any officers of the Company or any Subsidiary or any employees of the Company that report directly to any officers of the Company or any Material Subsidiary; or

(ii)  in respect of the Purchaser, the actual and not constructive knowledge of the officer of the Purchaser with responsibility for making or administering of the investment in the Notes.

“Legal Holiday” means any day on which commercial banks in New York City, NY are required or authorized to be closed.

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 “Loan Documents” means this Agreement, the Note, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith, all as amended, modified, restated or reassigned from time to time.

“Material” means material in relation to the business, operations, financial condition, assets or properties of the Company taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, financial condition, assets or properties of the Company taken as a whole, (b) the ability of the Company to perform its obligations under the Loan Documents to which it is a party or (c) the validity or enforceability of any of the Loan Documents.

“Note” is defined in Section 1.

“Obligations” means and include all Indebtedness, liabilities, obligations, covenants, duties and amounts owing or to be owing by Company to Purchasers of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising directly or indirectly, under any Loan Documents, and all renewals, extensions and/or rearrangements of any of the foregoing.  The term includes, but is not limited to, all interest, reasonable charges, expenses, consultants’ and attorneys’ fees and any other sum chargeable to Company under any of the Loan Documents.

“Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.

“Payment Default” means an event of default which occurs and is continuing pursuant to Sections 12(a) or 12(b).

 “Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof.

“Register” is defined in Section 14.1.

“Restricted Payments” means any Distribution in respect of the Company, including, without limitation, any Distribution resulting in the acquisition by the Company of securities which would constitute treasury stock.

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“Capital Truss RTO” shall mean the transaction by which the Company acquires all of the issued and outstanding shares of Capital Truss Inc., a California corporation in exchange for a certain number of shares of the Company’s Common Stock.

“Trussnet RTO” shall mean the transaction by which the Company acquires all of the issued and outstanding shares of Trussnet USA., Inc., a California corporation in exchange for a certain number of shares of the Company’s Common Stock.

“SEC” means the United States Securities and Exchange Commission or any other successor Governmental Authority.

“Securities” means the Note and the Shares.

“Securities Act” means the Securities Act of 1933.

“Securities Laws” means the Securities Act and all other federal, provincial or state securities or “blue sky” laws or foreign securities laws and all rules or regulations promulgated thereunder by any Governmental Authority, each as amended from time to time.

“Shares” means shares of the Company’s Common Stock.

“Senior Financial Officer” means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company.

“Subsidiary” means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership of which the Company or a Subsidiary is the general partner.

 “Transfer” or “Transferred” means, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property having a Fair Market Value of greater than US $5 million.

The Company will be entitled to rely on delivery by facsimile of an executed copy of this Agreement, including the completed attachments hereto, and acceptance by the Company of such facsimile copy will be legally effective to create a valid and binding agreement between the Company and the Purchaser in accordance with the terms hereof.  

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Signature of Purchaser (on its own behalf and, if applicable, on behalf of each principal for whom it is contracting hereunder).

_______________________________________________________

(Signature of Purchaser)

_______________________________________________________

(Full Name of Purchaser - please print)

_______________________________________________________

(Authorized Signature)

_______________________________________________________

(Name and Official Capacity - please print)

CONFIRMATION AND ACCEPTANCE

This Convertible Note Purchase Agreement is confirmed and accepted by the MORTLOCK VENTURES, INC.

DATED as of the _____________ day of  ___________________, 2008.

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SCHEDULE A

INFORMATION RELATING TO PURCHASER

NAME AND ADDRESS OF PURCHASER	PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
_____________________________________________ _____________________________________________ _____________________________________________ Attn: Telephone No.:  Facsimile No.:	US$____________________________________
(1)      All payments by wire transfer of immediately available funds to: _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________
(2)      All communications and notices of payments and written confirmations of such wire transfers to: _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________
(3)      Details of Nominee (if applicable): _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________

SCHEDULE A

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SCHEDULE B

U.S.-Accredited Investor Certificate

Defined terms used but not defined herein hall have the meaning ascribed to such terms in the Convertible Note Purchase Agreement (for U.S. Purchasers) (the "Note Purchase Agreement"), dated February 12, 2008, between Mortlock Ventures Inc. (the "Company") and each Purchaser of Notes of the Company outside of Canada and the United States (the "Offering").

In connection with the execution of the Note Purchase Agreement to which this Schedule B is attached, the Purchaser represents and warrants to the Company that:

(a)   It has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Securities and it is able to bear the economic risk of loss of its entire investment;

(b)   The Company has provided to it the opportunity to ask questions and receive answers concerning the terms and conditions of the Offering and it has had access to such information concerning the Company as it has considered necessary or appropriate in connection with its investment decision to acquire the Shares;

(c)   It is acquiring the Securities for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Securities in violation of the United States securities laws;

(d)   It understands the Securities have not been and will not be registered under the U.S. Securities Act of 1933 (the “U.S. Securities Act”) or the securities laws of any state of the United States and that the sale contemplated hereby is being made in reliance on an exemption from such registration requirement provided by Rule 506 of Regulation D.  It also understands that it will be required to furnish certain information about it and its holdings of the Company’s securities as part of the information that will be included in any registration statement with respect to the Securities;

(e)   The Purchaser acknowledges and agrees with the Company that the Company shall refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation D, pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration under the U.S. Securities Act;

(f)   It has not purchased the Securities as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, or television, or other form of telecommunications, including electronic display, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

SCHEDULE B

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(g)   If it decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such Securities directly or indirectly, unless:

(i)   the sale is to the Company;

(ii)   the sale is made pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder and in accordance with any applicable state securities or “blue sky” laws;

(iii)   the Securities are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities, and it has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration; or

(iv)   the sale is made pursuant to an effective registration statement filed under the U.S. Securities Act.

(h) The Securities are “restricted securities” as that term is defined in Rule 144 under the U.S. Securities Act, and the certificates representing the Shares, as well as all certificates issued in exchange for or in substitution of the foregoing, until such time as is no longer required under the applicable requirements of the U.S. Securities Act or applicable state securities laws, will be subject to the terms of and bear, on the face of such certificate, a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “U.S. SECURITIES ACT”) AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT FOUND IN REGULATION D PROMULGATED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION.  THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED THEREUNDER, OR PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.  HEDGING TRANSACTIONS INVOLVING THESE AND ANY UNDERLYING SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.

(i)   It understands and agrees that there may be material tax consequences to the Purchaser of an acquisition or disposition of the Securities, or any portion thereof.  The Company gives no opinion and makes no representation with respect to the tax consequences to the Purchaser under United States, state, local or foreign tax law of the undersigned’s acquisition or disposition of such Securities;

(j)   It understands and agrees that the unaudited financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles;

SCHEDULE B

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(k)   It consents to the Company making a notation on its records or giving instructions to any transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Certification and the Note Purchase Agreement of which this Certification is a part;

(l)   if an individual, it is a resident of the state or other jurisdiction listed in its address on the Note Purchase Agreement, or if the Purchaser is not an individual, the office of the Purchaser at which the Purchaser received and accepted the offer to purchase the Securities is the address listed on Schedule A to the Note Purchase Agreement;

(m)   the Purchaser has properly complied with and duly executed this Certification for U.S. Securities Law Compliance and confirms the truth and accuracy of all statements made by the Purchaser in such certificate; and

(n)   The Purchaser, by initialing one of the categories below, represents and warrants to the Company that it is an “accredited investor” as defined in Regulation D (please place your initials on the appropriate line(s); if no categories are applicable, please do not place your initials beside any category):

______	Category 1.	A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or
______	Category 2.	A savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or
______	Category 3.	A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; or
______	Category 4.	An insurance company as defined in Section 2(13) of the U.S. Securities Act; or
______	Category 5.	An investment company registered under the Investment Issuer Act of 1940; or

______ Category 6. A business development company as defined in Section 2(a)(48) of the Investment Issuer Act of 1940; or

SCHEDULE B

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______	Category 7.	A small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; or
______	Category 8.	A plan established and maintained by a state, its political subdivision or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with assets in excess of US$5,000,000; or
______	Category 9.	An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment advisor, or an employee benefit plan with total assets in excess of US$5,000,000 or, if a self-directed plan, the investment decisions are made solely by persons who are accredited investors; or
______	Category 10.	A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940; or
______	Category 11.	An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of US$5,000,000; or
______	Category 12.	A director, executive officer or general partner of the company; or

______ Category 13. A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of this purchase exceeds US$1,000,000; or

SCHEDULE B

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______	Category 14.	A natural person who had an individual income in excess of US$200,000 in each year of the two most recent years or joint income with that person’s spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
______	Category 15.	A trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Shares offered, whose purchase is directed by a sophisticated person as described in SEC Rule 506(b)(2)(ii); or
______	Category 16.	An entity in which each of the equity owners meets the requirements of one of the above categories.

__________________________

Date

__________________________
Duly authorized signatory for Purchaser

__________________________

(Print name of Purchaser)

SCHEDULE B

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SCHEDULE C

Non-U.S. Person Certificate

Dated __________________, 2008

Mortlock Ventures, Inc.

c/o Lawler & Associates, APC

11622 El Camino Real, Suite 100

San Diego, CA 92130

Defined terms used but not defined herein hall have the meaning ascribed to such terms in the Convertible Note Purchase Agreement (for Purchasers outside of the United States) (the "Convertible Note Purchase Agreement"), dated February 12, 2008, between Mortlock Ventures, Inc., a Nevada corporation (the "Company") and each Purchaser of Notes of the Company outside of the United States (the "Shares").

1.           The undersigned hereby represents, warrants and certifies that:

(a) it is not a "U.S. person" (as such term is defined by Rule 902 of Regulation S under the U.S. Securities Act) and is not acquiring the Shares, directly or indirectly, for the account or benefit of any U.S. person.

Rule 902 under the U.S. Securities Act, defines a "U.S. person" as:

(A) Any natural person resident in the United States;

(B) Any partnership or corporation organized or incorporated under the laws of the United States;

(C) Any estate of which any executor or administrator is a U.S. person;

(D) Any trust of which any trustee is a U.S. person;

(E) Any agency or branch of a foreign entity located in the United States;

(F) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;

(G) Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and

SCHEDULE C

Page 1 of 5

(H) Any partnership or corporation if:

(1) organized or incorporated under the laws of any foreign jurisdiction; and

(2) formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts.

The following are not "U.S. persons":

(A) Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States;

(B) Any estate of which any professional fiduciary acting as executor or administrator is a U.S. person if:

(1) An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and

(2) The estate is governed by foreign law;

(C) Any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person;

(D) An employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country;

(E) Any agency or branch of a U.S. person located outside the United States if:

(1) The agency or branch operates for valid business reasons; and

(2) The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and

SCHEDULE C

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(F) The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.

(b) the offer and sale of the Shares was made in an "offshore transaction" (as defined under Regulation S under the U.S. Securities Act), in that:

(i) the undersigned was outside the United States at the time the buy order for such Shares was originated; and

(ii) the offer to sell the Shares was not made to the undersigned in the United States.

(c) the transaction (i) has not been pre-arranged with a purchaser located inside of the United States or who is a U.S. person, and (ii) is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act.

2. The undersigned hereby covenants that:

(a) during the period prior to one year after the Closing (the "Restricted Period") it will not engage in hedging transactions with regard to the Shares unless such transactions are made in compliance with the U.S. Securities Act;

(b) if it decides to offer, sell or otherwise transfer any of the Shares, it will not offer, sell or otherwise transfer any of such Shares directly or indirectly, unless:

(i) the sale is to the Company;

(ii) the sale is made outside the United States in a transaction meeting the requirements of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations; provided, however, that during the period prior to the expiration of the Restrictive Period no sale may be made to any U.S. person or for the account or benefit of a U.S. person (other than a distributor) and all purchasers of such Shares will be required to execute and deliver to the Company a certificate substantially in the form hereof;

(iii)

the sale is made in the United States pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder and in accordance with any applicable state securities or "blue sky" laws and the purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration pursuant to Rule 144 under the U.S. Securities Act;

(iv)

the Shares are sold in the United States in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and

SCHEDULE C

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(v)	regulations governing the offer and sale of securities, and it has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration; or
(vi)	the sale is made in the United States pursuant to an effective registration statement filed under the U.S. Securities Act.

3. The undersigned acknowledges and agrees that:

(a) the Shares are and will be "restricted securities" as that term is defined in Rule 144 under the U.S. Securities Act, and the certificates representing the Shares, as well as all certificates issued in exchange for or in substitution of the foregoing, until such time as is no longer required under the applicable requirements of the U.S. Securities Act or applicable state securities laws, will be subject to the terms of and bear, on the face of such certificate, a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "U.S. SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT. THESE SECURITIES ARE RESTRICTED SECURITIES (AS DEFINED UNDER RULE 144 UNDER THE U.S. SECURITIES ACT) AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION THEREUNDER.

DURING THE PERIOD PRIOR TO MARCH ____, 2009 [ONE YEAR AFTER THE CLOSING] (THE "RESTRICTED PERIOD"), THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY WITHIN THE UNITED STATES, TO A U.S. PERSON (AS DEFINIED IN REGULATION S UNDER THE U.S. SECURITIES ACT), OR FOR THE ACOUNT OR BENEFIT OF A U.S. PERSON, EXCEPT PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION THEREUNDER. DURING THE RESTRICTED PERIOD HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS SUCH TRANSACTIONS ARE MADE IN COMPLIANCE WITH THE U.S. SECURITES ACT.  THIS PARAGRAPH SHALL HAVE NO FURTHER EFFECT SUBSEQUENT TO THE EXPIRATION OF THE RESTRICTED PERIOD AND THEREAFTER MAY BE REMOVED.

(b) the Company will refuse to register any sale of Shares made in breach of the provisions hereof.

SCHEDULE C

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(c) the Company may make a notation on its records or give instructions to its registrar(s) and transfer agent(s) in order to implement the restrictions on transfer set forth and described herein.

(d) the addressees of this certificate and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations, warranties and agreements, and irrevocably authorizes the addressees of this certificate to produce the same or a copy thereof to any interested party in any administrative or legal proceeding or official enquiry with respect to the matters set forth herein. The undersigned further agrees that if any of the acknowledgements, representations, warranties or agreements made herein is no longer accurate, it shall promptly notify the Company.

________________________________________ 

Print name of Purchaser 

By: _____________________________________ 

Signature 

_____________________________________ 

Title 

_____________________________________ 

(please print name of individual whose signature appears above, if different from name of purchaser printed above) 

SCHEDULE C

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EXHIBIT A

FORM OF CONVERTIBLE NOTE

EXHIBIT A

EXHIBIT B

NOTICE OF ELECCTION TO CONVERT

PURSUANT TO SECTION 9.1 OF

CONVERTIBLE NOTE PURCAHSE AGREEMENT

TO MORTOLOCK VENTURES INC.:

The undersigned Holder of this Note hereby irrevocably exercises the option to convert this Note into Common Shares of MORTLOCK VENTURS INC. in accordance with the terms of this Note, and directs that the shares and the Common Shares issuable and deliverable upon the conversion be issued and delivered to the Holder hereof unless a different name has been indicated below.  If shares are to be issued in the name of a person other than the Holder, the Holder will pay all transfer taxes payable with respect thereto.

__________________________________ 

Signature 

(Use exact name of Holder as shown on this Note.) 

Dated: ______________________________, 2____

______________________________

Signature Guaranteed

Fill in for name in which Shares are to be issued:

______________________________________

______________________________________

______________________________________

______________________________________

(Please print name and address, including zip code)

______________________________________

Social Security or other Taxpayer Identification Number

EXHIBIT B

EX-10.14

EXHIBIT 10.14

CHINA TEL GROUP, Inc.

US $45,000,000

CONVERTIBLE NOTES

Due December 31, 2009

______________

AMENDED AND RESTATED CONVERTIBLE NOTE

PURCHASE AGREEMENT

_____________

DATED NOVEMBER 17, 2008

NEITHER THE NOTE DESCRIBED HEREIN NOR THE SHARES OF COMMON STOCK THAT MAY BE ISSUED UPON CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, HYPOTHECATED, GIVEN, BEQUEATHED, TRANSFERRED, ASSIGNED PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF (“TRANSFERRED”) EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER THE ACT, AND APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SUCH SECURITIES, PROVIDED THAT AN OPINION OF COUNSEL IS FURNISHED TO THE COMPANY, TO THE EXTENT REASONABLY REQUESTED BY THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS AVAILABLE.

IN ADDITION, THE NOTE MAY NOT BE TRANSFERRED UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF THE NOTE.  NO TRANSFER OF THE NOTE WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF THE NOTE.  THE NOTE IS ALSO SUBJECT TO OTHER RIGHTS AND OBLIGATIONS AS SET FORTH IN THE NOTE.

CHINA TEL GROUP INC.

Convertible Promissory Notes due December 31, 2009

THIS AMENDED AND RESTATED CONVERTIBLE NOTE PURCHASE AGREEMENT (the “Agreement”), is entered into on the date forth below, to be effective as of November 17, 2008 (the “Effective Date”), by and among China Tel Group, Inc., a Nevada corporation formerly known as Mortlock Ventures, Inc. (the “Company”), and the undersigned as “Purchaser”.

RECITALS

This Agreement is entered into with reference to the following facts:

A. WHEREAS, Purchaser previously executed that certain Convertible Note Purchase Agreement dated February 12, 2008 with Mortlock Ventures, Inc. (the prior name of China Tel Group, Inc.) (the “February 2008 Purchase Agreement”).

B. WHEREAS, the February 2008 Purchase Agreement was amended on three occasions with amendments dated March, 2008, April, 2008, and May, 2008 (the “2008 Amendments”);

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C. WHEREAS, the purpose of this Agreement is to amend and restate the February 2008 Purchase Agreement in its entirety in order to: (i) incorporate all of the 2008 Amendments; (ii) extend the maturity date of the Notes (as defined herein) from December 31, 2008 to December 31, 2009; (iii) provide the Purchaser with a 20% increase in the outstanding balance (principal and interest) of the Note previously purchased and issued to Purchase, provide the Purchaser with the right to call for the redemption of the Note prior to December 31, 2009 under certain conditions, modify the conversion rights of Purchaser on the Note, and provide certain registrations rights on the converted shares as consideration for the extension of the maturity date of the Notes.

NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, by affixing their signature below, Purchaser and the Company are agreeing to amend and restate the February 2008 Purchase Agreement, the 2008 Amendments and all representations and warranties made in connection with or in relation to the February 2008 Agreement as set forth in this Agreement.  All Exhibits and Schedules attached to the February 2008 Purchase Agreement shall remain in full force and effect and are incorporated herein by this reference.  Based upon the foregoing the Purchaser and the Company hereby agree to be legally bound as follows:

SECTION 1.          AUTHORIZATION OF NOTE.

The Company has authorized the offering and sale (the “Offering”) of Convertible Notes in the aggregate principal amount of up to $45 million, with such terms as set forth below (the “Notes”).  Certain capitalized terms used in this Agreement are defined below in Section 22; references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit to the February 2008 Purchase Agreement.

SECTION 2.          SALE AND PURCHASE OF NOTE.

Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, the Note at the purchase price of 100% of the principal amount of the Note (the “Purchase Price”).  Purchaser previously received a Note at the time of the investment by Purchaser in the Company.  All of the terms of the Note provided to Purchaser remain in full force and effect except as amended and modified as follows: (a) the Note shall now mature (become due) on December 31, 2009, (the “Maturity Date”) rather than December 31, 2008 as set forth in the Note issued to Purchaser; and (b) in outstanding balance of the Note (principal and accrued interest) shall be increased by 20% (”Increased Outstanding Balance”), and the Note shall accrue interest on the Increased Outstanding Balance of the Note as set forth in Section 8 of this Agreement as of the date of Purchaser’s execution of this Agreement.

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SECTION 3.          CLOSING.

The Purchaser and the Company acknowledge that the Closing of the investment in the Notes has occurred prior to the date of this Agreement (the “Closing”).  The date of delivery of the Note to the Purchaser shall be referred to herein as the “Closing Date”.

SECTION 4.          CONDITIONS TO CLOSING.

Section 4.1.  Conditions to Purchaser's Obligation to Purchase Notes.  Both parties acknowledge that all conditions precedent to the issuance of the Notes has been satisfied.

Section 4.2  Additional Conditions.  The Purchaser acknowledges and agrees that the Company’s obligation to sell the Note to the Purchaser is further subject to the following conditions:

(a)           that the issue, sale and delivery of the Note is exempt from all registration requirements and the requirements to file a prospectus or registration statement, or deliver an offering memorandum under applicable securities legislation relating to the sale of the Note or that the Company has received such orders, consents, or approvals as may be required to permit such sale without the requirement of filing a prospectus or registration statement, or delivering an offering memorandum;

SECTION 5.          REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to you as of the Closing Date that:

Section 5.1.  Organization; Power and Authority.  The Company is a corporation validly existing and in good standing under the laws of the State of California and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Company has the legal power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts, to execute and deliver the Loan Documents to which it is a party and to perform the provisions hereof and thereof.

Section 5.2. Authorization, etc.  Each of the Loan Documents have been duly authorized by all necessary corporate action on the part of the Company, and each such Loan Document constitutes, and upon execution and delivery thereof each such Loan Document will constitute (assuming due execution and delivery by the Purchaser to the extent provided for therein), a legal, valid and binding obligation of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 5.3. Disclosure.  This Agreement, the Loan Documents, the certificates or Schedules delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby taken as a whole, do not contain any untrue statement of a Material fact or omit to state any Material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made.

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Section 5.4. Compliance with Laws, Other Instruments, etc.  The execution, delivery and performance by the Company of the Loan Documents will not: (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien, except as contemplated in the Loan Documents, in respect of any property of the Company under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, Charter Document, or any other agreement or instrument to which the Company is bound or by which the Company or any of its properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or (iii) violate any provision of any current statute or other rule or regulation of any Governmental Authority applicable to the Company, in each case the effect of which could have a Material Adverse Effect.

Section 5.5. Governmental Authorizations, etc.  No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes that will not have been obtained prior to the Closing.

Section 5.6. Litigation; Observance of Agreements, Statutes and Orders.

(a)           There are no actions, suits or proceedings pending or, to the Knowledge of the Company, threatened against or affecting the Company or any property of the Company in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected, if adversely determined, to have a Material Adverse Effect.

(b)           The Company is not in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

Section 5.7. Licenses, Permits, etc.

(a)           The Company owns or possesses all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material to the conduct of its business as currently being conducted, without, to the Knowledge of the Company, conflict with the rights of others;

(b)           To the Knowledge of the Company, no product of the Company infringes in any Material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and

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(c)           To the Knowledge of the Company, there is no Material violation by any Person of any right of any the Company with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company.

Section 5.8. Private Offering by the Company.  Neither the Company nor to the Knowledge of the Company anyone authorized to act on its behalf has offered the Note or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you and not more than thirty-five (35) other investors, each of which has been offered the Note at a private sale for investment and not with a view to the distribution thereof or any interest therein.  Neither the Company nor to the Knowledge of the Company anyone authorized to act on its behalf has taken, or will take, any action that would subject the issuance or sale of the Note to the registration requirements of Section 5 of the Securities Act; provided, however, the availability of an exemption from the registration requirements of Section 5 is based upon the accuracy and completeness of the representations and warranties of each Purchaser (and each other Person acquiring the Note from such Purchaser) set forth in Section 6 on which the Company will rely. In connection with the offer and sale of the Note, the Company has not conducted any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, the Internet or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

Section 5.9. Capitalization.  As of the date of this Agreement, the authorized capital of the Company consists of two classes of common stock: Series A common shares of which there are 85,525,595 shares issued and outstanding and Class B common shares of which there are 66,909,088 shares issued and outstanding.

SECTION 6.          REPRESENTATIONS OF THE PURCHASER.

Section 6.1. Due Authorization; Absence of Conflicts; Enforceability; Purchase for Investment, etc.

(a)           You represent and warrant to Company that you have the full legal capacity, power and authority to execute, deliver and perform the Loan Documents to which you are a party; the execution, delivery and performance by you of each Loan Document to which you are a party has been duly authorized by all necessary legal action on your part; your execution, delivery and performance of the Loan Documents to which you are a party and the consummation of the transactions contemplated hereby and thereby will not: (a) conflict with, (i) any provision of any governing instrument applicable to you, or (ii) any Material permit, franchise, judgment, decree, law, rule or regulation applicable to you or your assets; or (b) result in any Material breach of any terms or provisions of, or constitute a Material default under, any Material contract, agreement or instrument to which you are a party or by which you are bound; and such Loan Document constitutes a legal, valid and binding obligation enforceable against you in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

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(b)           You represent and warrant to the Company that you are purchasing for your own account or for one or more separate accounts maintained by you and not with a view to the distribution thereof or any interest therein: (i) the Note and, (ii) upon conversion of the Note, the Shares; provided that the disposition of your or their property shall at all times be within your or their control and in compliance with applicable Securities Laws.  You understand that the Note and the Shares have not been and will not be registered under any Securities Laws and may be resold only if registered pursuant to the provisions of applicable Securities Laws or if an exemption from such registration is available, except under circumstances where neither such registration nor such an exemption is required by law.  You represent and warrant to the Company that you are an “accredited investor” as defined under Rule 501(a) of the Securities Act.

(c)           You understand that you must bear the economic risk of an investment in the Securities because, among other reasons, the offering and sale of Note and the Shares have not been and will not be registered under applicable Securities Laws; the Note and the Shares are “restricted securities” as defined in Rule 144 promulgated under the Securities Act and, therefore, the Securities cannot be re-sold unless such sales are subsequently registered under applicable Securities Laws or an exemption from such registration is available.  A legend to this effect shall be set forth on the face of the Note and absent an effective registration under the Securities Act each certificate evidencing any Shares issued upon conversion of the Note.

(d)           You have sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of your investment in the Securities and you are capable of bearing the economic risks of such investment, including a complete loss of your investment.

Section 6.2 Access to Information.  Without affecting your right to rely on the Company’s representations and warranties set forth herein, you have been given the opportunity to examine all documents and to ask questions of, and to receive answers from, the Company and its representatives and to obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense concerning the Company, its business affairs, financial condition and terms and conditions of the purchase of the Note and conversion of the Note as you have requested in order to enable you to evaluate the merits and risks of an investment in the Note and upon its conversion to Common Stock.

Section 6.3 Risks, Lack of Information, Resale Restrictions.  The Purchaser is aware and represents, acknowledges and/or agrees that:

(a)           AN INVESTMENT IN THE SECURITIES INCLUDES A HIGH DEGREE OF RISK AND THE PURCHASER MAY LOSE ITS ENTIRE INVESTMENT;

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(b)           IT HAS HAD THE OPPORTUNITY TO ASK QUESTIONS AND RECEIVED ANSWERS FROM AN EXECUTIVE OFFICER OF THE COMPANY REGARDING THE OPERATIONS OF THE COMPANY, INCLUDING, BUT NOT LIMITED TO, RISK FACTORS APPLICABLE TO THE COMPANY;

(c)           The Company may complete additional financings in the future in order to develop the business of the Company and fund its ongoing development, and such future financings may have a dilutive effect on current security holders of the Company, including the Purchaser;

(d)           The Purchaser has not been provided with, nor has it requested, an offering memorandum or any similar document in connection with its subscription for the Note, and its decision to execute this Agreement and to purchase the Note has been based upon the representations and warranties of the Company made herein, the publicly available information concerning the Company and the Purchaser's own due diligence regarding the Company and not upon any verbal or other written representation as to fact or otherwise made by or on behalf of the Company or any employees, agents or affiliates thereof, and the Company assumes no responsibility or liability of any nature whatsoever for the accuracy or adequacy of the publicly available information upon which the investment decision may have been made or as to whether all information concerning the Company required to be disclosed by the Company has been disclosed;

(e)           No agency, governmental authority, regulatory body, stock exchange or other entity has made any finding or determination as to the merit for investment of, nor have any such agencies or governmental authorities made any recommendation or endorsement with respect to the Securities or the Offering;

(f)           The purchase of the Note has not been made through, or as a result of, and the distribution of the Note is not being accompanied by, and the Purchaser is not aware of, any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, internet or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

(g)           The Note is being offered for sale on a “private placement” basis only;

(h)           The issuance, sale and delivery of the Note to the Purchaser or (if applicable) to any purchaser on whose behalf it is contracting hereunder, is conditional upon such issuances and sales being exempt from the registration requirements and the prospectus requirements, or the requirement to file a registration statement, of all applicable securities legislation relating to the issuance and sale of the Note, or upon the issuance of such orders, consents or approvals as may be required to permit such sales without the requirement of filing a prospectus or complying with the registration requirements;

(i)           The Company, or its successors, may be required to disclose to applicable securities regulatory authorities the identity of the beneficial purchasers of the Note;

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(j)           The certificates representing the Securities shall bear a legend to the effect that transfer is prohibited except: (i) pursuant to registration under the U.S. Securities Act, or (ii) pursuant to an available exemption from registration; provided that an opinion of counsel is furnished to the Company, to the extent reasonably requested by the Company, in form and substance reasonably satisfactory to the Company, to the effect that an exemption from the registration requirements of the Securities Act of 1933 and/or applicable state securities law is available;

(k)           The Securities will be subject to resale restrictions under applicable securities legislation, rules, regulations and policies, and the Purchaser or (if applicable) others for whom it is contracting hereunder will comply with all relevant securities legislation, rules, regulations and policies concerning the Securities and will consult with its own legal advisers with respect to complying with all restrictions applying to any such resale and further agrees that it, or (if applicable) others for whom it is contracting, is solely responsible for compliance with all applicable resale restrictions and will only resell the Securities in compliance with all applicable securities laws;

Section 6.4.     Qualification for Offering and Purchase of Note.  The Purchaser further represents and warrants as to the following:

(a)           it is either: (i) an accredited investor at the time of the purchase of the Securities and is purchasing the Securities as principal for its own account or for the account of another accredited investor as to which it exercises sole investment discretion, and not with a view to the resale, distribution or other disposition of all or any of the Securities, and is delivering concurrently with this Agreement the Certification for U.S. Securities Law Compliance – Regulation D in the form attached to this Agreement as Schedule B; or (ii) a non-U.S. Person, is outside of the U.S. at the time of the purchase of the Securities and is purchasing the Securities as principal for its own account or for the account of another non-U.S. person as to which it exercises sole investment discretion, and not with a view to the resale, distribution or other disposition of all or any of the Securities, and is delivering concurrently with this Agreement the Certificate of Non-U.S. Person in the form attached to this Agreement as Schedule C;

(b)           it consents to the Company making a notation on its records or giving instructions to any transfer agent of the Securities in order to implement the restriction on transfer set forth and described herein;

(c)           it (and if the Purchaser is acting as agent for a disclosed principal, such disclosed principal) was offered the Note in, and does business in, the jurisdiction of the Purchaser’s place of business as referenced on Schedule A attached hereto;

(d)           it (and any beneficial purchaser for whom it is acting) has been independently advised as to, and is aware of, the restrictions with respect to trading in the Securities pursuant to the applicable securities laws and the rules of any applicable stock exchanges and further agrees that it (and any beneficial purchaser for whom it is acting) is solely responsible for compliance with all such restrictions;

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(e)           if required by applicable securities laws or order of a securities regulatory authority, stock exchange or other regulatory authority, it will execute, deliver, file and otherwise assist the Company in filing such reports, undertakings and other documents with respect to the issuance of the Note and the underlying Common Shares;

(f)           it (and if the Purchaser is acting as agent for a disclosed principal, such disclosed principal) is responsible for obtaining such legal, including tax, advice as it considers necessary or appropriate in connection with the execution, delivery and performance by it of this Agreement and the transactions contemplated herein;

(g)           it is solely responsible for its own due diligence investigation of the Company, its business and financial condition, for its own analysis of the merits and risks of its investment in the Securities made pursuant to this Agreement and for its own analysis of the terms of its investment;

(h)           it is solely responsible for obtaining such advice concerning the tax consequences of its investment in the Securities and it is not relying on the Company or its respective counsel for advice concerning such tax consequences;

(i)           the purchase of the Note by the Purchaser hereunder is not a transaction in which any director or officer of the Company, or any beneficial owner of securities carrying more than ten percent (10%) of the voting rights attaching to all outstanding voting securities of the Company, has a direct or indirect beneficial interest; and

(j)           if it decides to offer, sell or otherwise transfer any of the Securities, the Purchaser will not offer, sell or otherwise transfer any of such Securities directly or indirectly, unless:

(i)           the sale is to the Company;

(ii)           the sale is made outside the United States in a transaction meeting the requirements of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations and the Purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration pursuant to Regulation S under the U.S. Securities Act;

(iii)           the sale is made in the United States pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder and in accordance with any applicable state securities or “blue sky” laws, and the Purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration pursuant to Rule 144 under the U.S. Securities Act;

(iv)           the Securities are sold in the United States in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities, and the Purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration; or

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(v)           the sale is made in the United States pursuant to an effective registration statement filed under the U.S. Securities Act.

The Purchaser acknowledges and agrees that the Company will refuse to register any sale of Securities made in breach of the provisions hereof; andall of the acknowledgements, representations, warranties and covenants set out in Schedule B or Schedule C, whichever is delivered by Purchaser pursuant to Section 6.4(a) hereto are true and correct as of the day hereof and are incorporated by reference herein.

Section 6.5.   Source of Funds.  You represent and warrant to the Company that the source of funds to be used by you to pay the purchase price of the Note to be purchased by you hereunder is from your own personal assets and is not: an “insurance company general account” within the meaning of Department of Labor Prohibited Transaction Exemption (“PTE”) 95-60 (issued July 12, 1995); an employee benefit plan or group of plans maintained by the same employer or employee organization or a separate account or trust fund comprised of one or more employee benefit plans; an insurance company pooled separate account, within the meaning of PTE 90-1 (issued February 29, 1990); a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991); an “investment fund” (within the meaning of Part V of the QPAM Exemption) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption); or a governmental plan.

As used in this Section 6.5, the terms “employee benefit plan”, “governmental plan”, “party in interest” and “separate account” shall have the respective meanings assigned to such terms in Section 3 of Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

Section 6.6  Payment of Commissions.  You hereby represent and warrant that you are aware of and agree that the Company shall pay a commission equal to six percent (6%) of the principal amount of the Note to Westmoore Securities Inc. and upon the sale of all other convertible notes sold by the Company under the Offering.

SECTION 7.          INFORMATION AS TO THE COMPANY.

Section 7.1.  Inspection.  Subject to the provisions of Section 20, the Company shall permit the representatives of each holder of Notes to meet with an executive officer of the Company, to discuss the affairs, finances and accounts of the Company with such executive officer.

SECTION 8.          PRINCIPAL AND INTEREST; MATURITY.

Section 8.1  Principal and Interest.

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(a)           The Company shall repay in full the Note on the Maturity Date in an amount equal to the aggregate principal amount of the Note outstanding on the Maturity Date taking into affect the Increased Outstanding Balance, plus accrued and unpaid interest thereon, unless and to the extent that the Note is earlier redeemed, repurchased, repaid or converted in accordance with the terms of the Note.

(b)           Interest shall accrue on the  Increased Outstanding Balance of the Note at the rate of ten percent (10%) per annum from the Closing Date, until and to the extent that the principal amount of the Note is paid or the principal amount of the Note has been converted as provided in Section 9 hereof.  Interest on the Note shall be computed on the basis of a 360-day year comprised of twelve (12) 30-day months.

(c)           If a date for payment of principal is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and interest shall accrue for the intervening period.

(d)           Except as provided in the following sentence, the Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts in immediately available funds by wire transfer to a U.S. dollar account maintained by the holder with a bank in the United States designated in writing by the holder.

Section 8.2. Redemption of Note.  Notwithstanding Section 8.1 of this Agreement, after March 31, 2009, Purchaser shall have the right to irrevocably call on the Company to redeem the Note through the payment of all outstanding principal and interest (calculated on the Increased Outstanding Balance) upon Ninety (90) days written notice to the Company.  In the event that the Purchaser desires to irrevocably call for the redemption of the Note by the Company, the Purchaser shall deliver to the Company: (1)  a Notice of Election to Redeem in the form attached hereto as Exhibit B; and (2) the original, signed copy of the Note.

SECTION 9.          CONVERSION OF NOTES.

Section 9.1. Conversion by Purchaser.

(a)           The Purchaser shall have the option to convert the Note, and all accrued interest on the principal amount of the Note at anytime following the date of this Agreement into shares of Series A common stock of the Company (the “Shares”).  In the event that the Purchaser wishes to convert the Note, the Purchaser shall deliver to the Company a Notice of Election to Convert in the form attached hereto as Exhibit C and the other items described in subsection (b) of this Section 9.1.

(b)           The principal balance and all accrued and unpaid interest thereon (for purposes of this Section 9, such amount is referred to as the “Amount Owing”), shall be converted into Shares at the Conversion Price as defined in Section 9.2 below on the date that the Company receives the following items from the Purchaser (such shall be deemed to be the “Conversion Date”): (1) the Purchaser’s signed Notice of Election to Convert; and (2) the original, signed copy of the Note.

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(c)           Purchaser shall also provide to the Company, if required and instructed to do so by the Company: (1) appropriate endorsements and transfer documents; and (2) payment of transfer or similar tax.

(d)           Nothing in this Section 9.1 shall be deemed to require the Purchaser to elect to convert the Note.

(e)           Purchaser acknowledges and agrees the Shares have not been registered by the Company.

Section 9.2 Conversion Price.  The Amount Owing shall be converted into Shares (as such term is defined in Section 22 below) at a conversion price (the “Conversion Price”) per Share equal to the lesser of: (1) $0.95 (ninety five cents); or (2) eighty percent (80%) of the volume weighted average of the closing bid price for the Shares on the Over The Counter Bulletin Board Exchange for the ten (10) day period prior to Purchaser’s election to convert under Section 9.1.

Section 9.3.  Registration of Shares.  The Company agrees to use its best efforts to file a Form S-1 or similar registration statement with the Securities and Exchange Commission after completion of the Company’s 2008 fiscal year audit to register the Shares to be issued to Purchaser under this Section 9.

Section 9.4. Taxes on Conversion.

(a)           If the Purchaser converts the Note, the Purchaser shall pay any documentary, stamp or similar issue or transfer tax due on the issue of Common Shares upon the conversion.  The Company may refuse to deliver the certificates representing the Common Shares being issued in a name other than the Purchaser’s name until the Company receives a sum sufficient to pay any tax which shall be due.

(b)           The Company may refuse to deliver the certificates representing the Common Shares being issued in a name other than the Purchaser’s name unless the Company receives documentation pursuant to Section 14.2(b) hereof with respect to the transfer of such Note in respect of the transfer of Common Shares.

SECTION 10. AFFIRMATIVE COVENANTS.

The Company covenants that so long as any principal amount of the Note issued by the Company pursuant to this Agreement or any similar Notes are outstanding:

Section 10.1.  Insurance.  The Company will maintain with insurers which on the date the policy commences are financially sound and reputable, insurance with respect to its Material properties and business against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

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Section 10.2. Maintenance of Properties.  The Company will maintain and keep, or cause to be maintained and kept, its interests in all of its assets constituting Material tangible personal property in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be conducted in the ordinary course at all times, provided that this Section shall not prevent the Company from discontinuing the operation and the maintenance of any of its assets if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 10.4.  Corporate Existence, etc.  The Company will at all times preserve and keep in full force and effect its corporate existence.

SECTION 11.          NEGATIVE COVENANTS.

Except with the prior written consent of the Purchaser, so long as any principal amount of any of the Notes issued in this Offering is outstanding, the Company covenants with the Purchaser as follows in this Section 11:

Section 11.1.  Transactions with Affiliates.  The Company will not enter into directly or indirectly any transaction or group of related transactions (including, without limitation, the purchase, lease, sale or exchange of Material properties of any kind or the rendering of any service) with any Affiliate (other than another Material Subsidiary or the Asset Acquisition), except in the ordinary course and pursuant to the reasonable requirements of the Company’s business and upon fair and reasonable terms no less favorable to the Company than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.

Section 11.2.  Restricted Payments.  The Company will not make any Restricted Payments, except: (a) the Company may declare and pay: (i) dividends with respect to its Equity Interests payable solely in additional shares of its Equity Interests or Indebtedness and (ii) interest and principal on Indebtedness owed by the Company to a Subsidiary, and (b) the Company may make distributions pursuant to and in accordance with stock incentive plans or other compensation plans for management or employees of the Company and its Subsidiaries.

Section 11.3.   Sale of Assets, etc.  The Company will not make any Transfer of assets, other than to a wholly owned subsidiary.

Section 12.  Events of Default.

An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing:

(a)           the Company defaults in the payment of any principal at the applicable Redemption Price, if any, on the Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

(b)           the Company defaults in the payment of any interest on the Note for more than five (5) Business Days after the same becomes due and payable; or

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(c)           the Company defaults in the performance of or compliance with any term contained in Section 8.6 or Section 11 and remains in default after the expiration of a thirty (30) day cure period; or

(d)           the Company defaults in the performance or compliance in any Material respect with any other material term herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 12) and such default is not remedied within thirty (30) days after the earlier of (i) a Senior Financial Officer obtaining actual and not constructive knowledge of such default and (ii) the Company receiving written notice of such default from any holder of the Note (any such written notice to be identified as a “notice of default” and to refer specifically to this paragraph (d) of Section 12); or

(e)           any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement, in any Loan Document or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any Material respect on the date as of which made; or

(f)           the Company (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

(g)           a court or governmental authority of competent jurisdiction enters an order appointing a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company, or any such petition shall be filed against the Company and such petition shall not be dismissed or stayed pending appeal within ninety (90) days, or are not discharged within sixty (60) days after the expiration of such stay; or

(h)           a final judgment or judgments for the payment of money aggregating in excess of US$7,500,000 (to the extent not covered by insurance) are rendered against the Company and which judgments are not, within ninety (90) days after entry thereof, bonded, discharged, finally settled or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; or

(i)           (i) this Agreement, the Note, or any other Loan Document ceases to be in full force and effect (except in accordance with its terms) or is declared null and void or the validity or enforceability is contested or challenged by Company, any Affiliate of Company or any of its respective partners or shareholders; or (ii) Company denies that it has any further liability or obligation under any of the Loan Documents prior to the indefeasible satisfaction in full of all Obligations under the Loan Documents.

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SECTION 13.          REMEDIES ON DEFAULT, ETC.

Section 13.1.  Acceleration.

(a)           If an Event of Default with respect to the Company described in paragraph (f) or (g) of Section 12 (other than an Event of Default described in clause (i) of paragraph (f) or described in clause (vi) of paragraph (f) by virtue of the fact that such clause encompasses clause (i) of paragraph (f)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

(b)           If any other Event of Default has occurred and is continuing, the Purchaser may at any time at its option, by notice to the Company, declare the Note then outstanding to be immediately due and payable.

Upon the Note becoming due and payable under this Section 13.1, whether automatically or by declaration, it will forthwith mature and the entire unpaid principal amount thereof at the applicable Redemption Price, if any, plus all accrued and unpaid interest thereon (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.

Section 13.2.  Other Remedies.  If any Default or Event of Default has occurred and is continuing, and irrespective of whether the Note has become or has been declared immediately due and payable under Section 13.1, the holder thereof may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in the Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

Section 13.3.   Costs and Expenses.  The Company shall pay all costs and expenses of amending, administering, implementing, collecting, defending, declaring and enforcing holder rights under this Agreement, the Note or other instrument or agreement delivered in connection with any of the Loan Documents, including searches and filings at all times, and holder’s reasonable attorneys’ fees (actually incurred, regardless of whether any litigation is commenced or default is declared and regardless of tribunal or jurisdiction).

Section 13.4.   Rescission.  At any time after the Note has been declared due and payable pursuant to clause (b) or (c) of Section 13.1, the Purchaser, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Note and all principal at the applicable Redemption Price, if any, on the Note that is due and payable and is unpaid other than by reason of such declaration, and all interest on such overdue principal at the applicable Redemption Price, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Note, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Note.  No rescission and annulment under this Section 13.4 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

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Section 13.5.  No Waivers or Election of Remedies, Expenses, etc.  No course of dealing and no delay on the part of the Purchaser in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice the Purchaser’s rights, powers or remedies.  No right, power or remedy conferred by this Agreement or by any Note thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. The Company will pay to the holder of the Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 13, including, without limitation, reasonable attorneys’ fees, expenses and disbursements actually incurred.

SECTION 14.          REGISTRATION AND TRANSFER.

The Company and, by acceptance of the Note, the Purchaser hereby agree that the following provisions shall govern the registration, sale, assignment, pledge, transfer, encumbrance or other disposition of the Note.

Section 14.1  Note Registration.  The Company shall keep at its principal office a register (the “Register”) in which the Company shall enter the name and address of the registered holder of the Note.  References to the “Purchaser” or “Purchasers” of the Note shall mean the person listed in the Register as the payee of the Note unless the payee shall have presented the Note to the Company for transfer and the transferee shall have been entered in the Register as a subsequent holder, in which case the term shall mean such subsequent holder.  The registered Purchaser of the Note may be treated as the owner of it for all purposes.

Section 14.2  Disposition.

(a)           The Purchaser may not Transfer the Note, in whole or in part, directly or indirectly, except in accordance with Section 14.2(b).  Any purported Transfer other than in accordance with the terms hereof and thereof shall be void and without force or effect.

(b)           A Transfer of the Note shall only be effected by the Purchaser hereof by delivery of the Note to the Company (with the instrument of assignment provided on the Note properly completed in accordance with the terms and conditions of the Note), accompanied by an opinion of counsel, in form and substance, and from counsel, reasonably satisfactory to the Company to the effect that such Transfer does not violate the Securities Act or any applicable state or foreign securities laws, and by such other evidence as the Company may reasonably require of compliance with the Securities Act and applicable state or foreign securities laws and with the provisions of the Note, at the Company’s principal office orat such other location as the Company shall designate in writing to the Purchaser; provided, however, that such transfer of the Note shall become effective only upon, and shall not be effective for any purpose until, the Company has received the Note.

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Section 14.3.  Replacement of Note.  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of the Note (which evidence shall be notice from the Purchaser of such loss, theft, destruction or mutilation), and upon surrender and cancellation thereof, the Company, at its own expense, shall execute and deliver in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon, as the case may be.

SECTION 15.          PAYMENTS ON NOTE.

Section 15.1.  Place of Payment.  Subject to Section 15.2, payments of principal and interest becoming due and payable on the Note shall be made at the principal office of the Purchaser of the Note. The Purchaser of the Note may at any time, by notice to the Company, change the place of payment of the Note so long as such place of payment shall be either the principal office of the Purchaser of such Note in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

Section 15.2.  Home Office Payment.  So long as you or your nominee shall be the Purchaser of the Note, and notwithstanding anything contained in Section 15.1 or in the Note to the contrary, the Company will pay all sums becoming due on such Note for principal and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of the Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of the Note, you shall surrender the Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 15.1.

SECTION 16          SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained in the Loan Documents shall survive the execution and delivery of the Loan Documents and the Note, the purchase by you of the Note and any partial payment on the Note and shall expire and be of no further force and effect when all principal, interest and other amounts payable on the Note shall have been indefeasibly paid in full in accordance with the provisions thereof. The Loan Documents embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

SECTION 17.          AMENDMENT AND WAIVER.

Section 17.1.  Requirements.  This Agreement and the Note may be amended, and the observance of the Note may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Purchaser.

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Section 17.2.  Binding Effect, etc.  Any amendment or waiver consented to as provided in this Section 17 is binding upon the Purchaser of the Note and upon each future Purchaser of the Note and upon the Company without regard to whether the Note has been marked to indicate such amendment or waiver.  No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon.  No course of dealing between the Company and the Purchaser of the Note or any delay in exercising any rights hereunder or under the Note shall operate as a waiver of any rights of the Purchaser.  As used herein, the term “this Agreement” and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

SECTION 18.          NOTICES.

All notices and communications provided for hereunder shall be in writing and sent:

(a)           by facsimile transmission if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or

(b)           by registered or certified mail with return receipt requested (postage prepaid), or

(c)           by a recognized overnight delivery service (with charges prepaid).  Any such notice must be sent:

(i)           if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing,

(ii)           if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Executive Officer, or at such other address as the Company shall have specified to the Purchaser of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19.          REPRODUCTION OF DOCUMENTS.

This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) subject to the provisions of Section 20, financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced.  The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.  This Section 19 shall not prohibit the Company or the Purchaser of Note from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

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SECTION 20.          CONFIDENTIAL INFORMATION.

For the purposes of this Section 20, “Confidential Information” means information delivered to you or any holder by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to the Loan Documents that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you or such Purchaser as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you or such Purchaser prior to the time of such disclosure through no act or omission by you or any Person authorized to act on your behalf in breach of any duty of confidentiality, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary from any Person who has not breached any duty of confidentiality owed to the Company or any Subsidiary, or (d) concerns or relates to the U.S. federal income tax treatment or U.S. federal income tax structure of the transactions contemplated hereby (and you may disclose to any and all persons, without limitation of any kind, any such information with respect to such U.S. federal income tax treatment and U.S. federal income tax structure). You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you and you may only use the Confidential Information in connection with the transactions contemplated by the Loan Documents, including, without limitation, the administration, preservation, or enforcement of your rights relating to your investment represented by your Notes, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and Affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes) who are subject to a duty of confidentiality or otherwise agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other Purchaser of any Note who agrees to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement; provided, however, prior to disclosing any Confidential Information pursuant to clauses (vi), (vii) or (viii) (other than in connection with clause (z) of clause (viii)) you shall (if reasonably practicable under the circumstances and provided that you are not legally prohibited from doing so) notify the Company of the proposed disclosure and afford it a reasonable opportunity to seek an injunction or other protective order against the public release of all or any portion of such Confidential Information.  Each Purchaser of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement.  On reasonable request by the Company in connection with the delivery to any Purchaser of a Note of information required to be delivered to such Purchaser under this Agreement or requested by such Purchaser (other than a Purchaser that is a party to this Agreement or its nominee), such Purchaser will enter into an agreement with the Company embodying the provisions of this Section 20.

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SECTION 21.          MISCELLANEOUS.

Section 21.1.  Successors and Assigns.  All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent Purchaser of a Note) whether so expressed or not.

Section 21.2.  Payments Due on Non-Business Days.  Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day.

Section 21.3. Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

Section 21.4. Construction and Interpretation.  Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant.  Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.  All references to immediately available funds or dollar amounts contained in this Agreement shall mean United States dollars.  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 acknowledge and agree that: (i) each party and its counsel have reviewed the terms and provisions of this Agreement and have contributed to its revision, (ii) the normal rule of construction, to the effect that any ambiguities are resolved against the drafting party, shall not be employed in the interpretation of it, and (iii) the terms and provisions of this Agreement shall be constructed fairly as to all parties hereto and not in favor or against any party, regardless of which party was generally responsible for the preparation of this Agreement.  The terms “herein”, "hereof"" or “hereunder” shall refer to the entire Agreement; all references to Sections shall refer to sections of this Agreement; “including” means “and including without limitation.”  Words importing the singular also include the plural and vice versa.

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Section 21.5.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument.  Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

Section 21.6.  Governing Law.  This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California, excluding choice of law principles of the law of such locale that would require the application of the laws of a jurisdiction other than such locale.

Section 21.7   Submission to Jurisdiction.  For the purposes of any action or proceeding involving this Agreement, the Notes or any other agreement or document referred to herein or therein, the Company hereby expressly submits to the nonexclusive jurisdiction of all courts sitting in the State of California and consents that any order, process, notice of motion or other application to or by any of said courts or a judge thereof may be served within or without such court’s jurisdiction by registered mail or by personal service, provided that a reasonable time for appearance is allowed.  The Company hereby waives, and shall cause its Subsidiaries to irrevocably waive any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, the Notes or any other agreement or document referred to herein or therein brought in any court sitting in the State of New York and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

SECTION 22.          DEFINED TERMS

As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:

“Affiliate” means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests.  As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.  Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company.

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“This Agreement” means this Amended and Restated Convertible Note Purchase Agreement.

“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed.

“Closing” is defined in Section 3.

“Closing Date” is defined in Section 3.

“Code” means the US Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.

“Common Stock” or “Common Shares” means the common stock, par value $0.001 per share, of the Company.

“Company” means China Tel Group Inc., a Nevada corporation.

“Confidential Information” is defined in Section 20.

“Consolidated Assets” means the total assets of the Company and its Subsidiaries which would be shown as assets on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with applicable GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries.

"Conversion Price" has the meaning set forth in Section 9.2.

“Default” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.

“Distribution” means, in respect of any corporation, association or other business entity:

(a)           dividends or other distributions or payments on capital stock or other Equity Interests of such corporation, association or other business entity (except distributions in such stock or other Equity Interests or Indebtedness as permitted by the Agreement); and

(b)           the redemption or acquisition of such stock or other Equity Interests or of warrants, rights or other options to purchase such stock or other Equity Interests (except when solely in exchange for such stock or other Equity Interests or Indebtedness as permitted by the Agreement) unless made, contemporaneously, from the net proceeds of a sale of such stock or other Equity Interests.

“Dollar” or “$” means lawful money of the United States of America.

“Environmental Laws” means any and all federal, state, provincial, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

Page 22 of 29

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code.

“Event of Default” is defined in Section 13.

“Exchange Act” means the US Securities Exchange Act of 1934.

Page 23 of 29

“Fair Market Value” means, at any time and with respect to any property, the sale value of such property that would be realized in an arm’s-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell).

“Foreign Pension Plan” means any plan, fund (including, without limitation, any superannuation fund but excluding any governmental plan or program requiring the mandatory payment of social insurance taxes or similar contributions to a governmental fund with respect to the wages of an employee) or other similar program established or maintained outside the United States of America by the Company or any ERISA Affiliate for the benefit of employees of the Company or any ERISA Affiliate residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment excluding contractual notice payments, and which plan is not subject to ERISA or the Code.

“Fundamental Change” means, with respect to the Company, the occurrence of any transaction to which the Company is a party (including without limitation any recapitalization or reclassification of the Common Shares (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Ordinary), any consolidation of the Company with, or merger of the Company into, any other person, any merger of another person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding Common Shares of the Company) or any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange) pursuant to which all Common Shares are converted into or exchangeable for the right to receive other securities, cash or other property.

“GAAP” means generally accepted accounting principles as in effect from time to time in the stated jurisdiction.

“Governmental Authority” means

Page 24 of 29

(a)           the governments of

(i)           the United States of America, or the United Kingdom or any State, province or other political subdivision thereof, or

(ii)           any jurisdiction in which the Company conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company, or

(b)           any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government, including any stock exchange.

“Purchaser” is defined in Section 14.1.

“Indebtedness” with respect to any Person means, at any time, without duplication,

(a)           its liabilities for the deferred purchase price of property acquired by such Person (excluding: (i) accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property, and (ii) where such deferred purchase price is in the form of equity);

(b)           all liabilities appearing on its balance sheet in accordance with GAAP in respect of capital leases;

(c)           all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);

(d)           all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money) other than with respect to letters of credit which are 100% cash collateralized;

(e)           interest rate, currency or commodity (including crude oil and natural gas) swaps, caps, collars, forwards, futures or derivatives transactions or similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency of such Person; and

(f)           any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof.

Indebtedness of any Person shall include all obligations of such Person of the character described in clauses: (a) through (f) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.

Page 25 of 29

“Institutional Investor” means (a) any Purchaser (including beneficial owners of the Notes), or (b) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form.

“Knowledge” means, either:

(i)           in respect of the Company, the actual and not constructive knowledge of any officers of the Company or any Subsidiary or any employees of the Company that report directly to any officers of the Company or any Material Subsidiary; or

(ii)           in respect of the Purchaser, the actual and not constructive knowledge of the officer of the Purchaser with responsibility for making or administering of the investment in the Notes.

“Legal Holiday” means any day on which commercial banks in New York City, NY are required or authorized to be closed.

“Loan Documents” means this Agreement, the Note, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith, all as amended, modified, restated or reassigned from time to time.

“Material” means material in relation to the business, operations, financial condition, assets or properties of the Company taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, financial condition, assets or properties of the Company taken as a whole, (b) the ability of the Company to perform its obligations under the Loan Documents to which it is a party or (c) the validity or enforceability of any of the Loan Documents.

“Note” is defined in Section 1.

“Obligations” means and include all Indebtedness, liabilities, obligations, covenants, duties and amounts owing or to be owing by Company to Purchasers of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising directly or indirectly, under any Loan Documents, and all renewals, extensions and/or rearrangements of any of the foregoing.  The term includes, but is not limited to, all interest, reasonable charges, expenses, consultants’ and attorneys’ fees and any other sum chargeable to Company under any of the Loan Documents.

“Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.

Page 26 of 29

“Payment Default” means an event of default which occurs and is continuing pursuant to Sections 12(a) or 12(b).

“Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof.

“Register” is defined in Section 14.1.

“Restricted Payments” means any Distribution in respect of the Company, including, without limitation, any Distribution resulting in the acquisition by the Company of securities which would constitute treasury stock.

“SEC” means the United States Securities and Exchange Commission or any other successor Governmental Authority.

“Securities” means the Note and the Shares.

“Securities Act” means the Securities Act of 1933.

“Securities Laws” means the Securities Act and all other federal, provincial or state securities or “blue sky” laws or foreign securities laws and all rules or regulations promulgated thereunder by any Governmental Authority, each as amended from time to time.

“Shares” means shares of the Company’s Series A Common Stock.

“Senior Financial Officer” means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company.

“Subsidiary” means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership of which the Company or a Subsidiary is the general partner.

“Transfer” or “Transferred” means, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property having a Fair Market Value of greater than US $5 million.

The Company will be entitled to rely on delivery by facsimile of an executed copy of this Agreement, including the completed attachments hereto, and acceptance by the Company of such facsimile copy will be legally effective to create a valid and binding agreement between the Company and the Purchaser in accordance with the terms hereof.

Page 27 of 29

Signature of Purchaser (on its own behalf and, if applicable, on behalf of each principal for whom it is contracting hereunder).

_______________________________________________________

(Signature of Purchaser)

_______________________________________________________

(Full Name of Purchaser - please print)

_______________________________________________________

(Authorized Signature)

_______________________________________________________

(Name and Official Capacity - please print)

CONFIRMATION AND ACCEPTANCE

This Amended and Restated Convertible Note Purchase Agreement is confirmed and accepted by the CHINA TEL GROUP, INC.

DATED as of the _____________ day of   , 2008.

Page 28 of 29

SCHEDULE A

INFORMATION RELATING TO PURCHASER

NAME AND ADDRESS OF PURCHASER	PRINCIPAL AMOUNT OF NOTES TO BE PURCHASED
_____________________________________________ _____________________________________________ _____________________________________________ Attn: Telephone No.:  Facsimile No.:	US$ U
(1)      All payments by wire transfer of immediately available funds to: _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________
(2)      All communications and notices of payments and written confirmations of such wire transfers to: _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________
(3)      Details of Nominee (if applicable): _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________

  SCHEDULE A

Page 1 of 1

SCHEDULE B

U.S.-Accredited Investor Certificate

Defined terms used but not defined herein hall have the meaning ascribed to such terms in the Amended and Restated Convertible Note Purchase Agreement (for U.S. Purchasers) (the "Note Purchase Agreement"), dated November 17, 2008, between China Tel Group Inc. (the "Company") and each Purchaser of Notes of the Company outside of Canada and the United States (the "Offering").

In connection with the execution of the Note Purchase Agreement to which this Schedule B is attached, the Purchaser represents and warrants to the Company that:

(a) It has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Securities and it is able to bear the economic risk of loss of its entire investment;

(b) The Company has provided to it the opportunity to ask questions and receive answers concerning the terms and conditions of the Offering and it has had access to such information concerning the Company as it has considered necessary or appropriate in connection with its investment decision to acquire the Shares;

(c) It is acquiring the Securities for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Securities in violation of the United States securities laws;

(d) It understands the Securities have not been and will not be registered under the U.S. Securities Act of 1933 (the “U.S. Securities Act”) or the securities laws of any state of the United States and that the sale contemplated hereby is being made in reliance on an exemption from such registration requirement provided by Rule 506 of Regulation D.  It also understands that it will be required to furnish certain information about it and its holdings of the Company’s securities as part of the information that will be included in any registration statement with respect to the Securities;

(e) The Purchaser acknowledges and agrees with the Company that the Company shall refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation D, pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration under the U.S. Securities Act;

(f) It has not purchased the Securities as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, or television, or other form of telecommunications, including electronic display, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

SCHEDULE B

Page 1 of 5

(g) If it decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such Securities directly or indirectly, unless:

(i) the sale is to the Company;

(ii) the sale is made pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder and in accordance with any applicable state securities or “blue sky” laws;

(iii) the Securities are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities, and it has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration; or

(iv) the sale is made pursuant to an effective registration statement filed under the U.S. Securities Act.

(h) The Securities are “restricted securities” as that term is defined in Rule 144 under the U.S. Securities Act, and the certificates representing the Shares, as well as all certificates issued in exchange for or in substitution of the foregoing, until such time as is no longer required under the applicable requirements of the U.S. Securities Act or applicable state securities laws, will be subject to the terms of and bear, on the face of such certificate, a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE “U.S. SECURITIES ACT”) AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT FOUND IN REGULATION D PROMULGATED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION.  THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED THEREUNDER, OR PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.  HEDGING TRANSACTIONS INVOLVING THESE AND ANY UNDERLYING SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.

(i) It understands and agrees that there may be material tax consequences to the Purchaser of an acquisition or disposition of the Securities, or any portion thereof.  The Company gives no opinion and makes no representation with respect to the tax consequences to the Purchaser under United States, state, local or foreign tax law of the undersigned’s acquisition or disposition of such Securities;

(j) It understands and agrees that the unaudited financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles;

SCHEDULE B

Page 2 of 5

(k) It consents to the Company making a notation on its records or giving instructions to any transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Certification and the Note Purchase Agreement of which this Certification is a part;

(l) if an individual, it is a resident of the state or other jurisdiction listed in its address on the Note Purchase Agreement, or if the Purchaser is not an individual, the office of the Purchaser at which the Purchaser received and accepted the offer to purchase the Securities is the address listed on Schedule A to the Note Purchase Agreement;

(m) the Purchaser has properly complied with and duly executed this Certification for U.S. Securities Law Compliance and confirms the truth and accuracy of all statements made by the Purchaser in such certificate; and

(n) The Purchaser, by initialing one of the categories below, represents and warrants to the Company that it is an “accredited investor” as defined in Regulation D (please place your initials on the appropriate line(s); if no categories are applicable, please do not place your initials beside any category):

______	Category 1.	A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or
______	Category 2.	A savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or
______	Category 3.	A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; or
	Category 4.	An insurance company as defined in Section 2(13) of the U.S. Securities Act; or
______	Category 5.	An investment company registered under the Investment Issuer Act of 1940; or

______ Category 6. A business development company as defined in Section 2(a)(48) of the Investment Issuer Act of 1940; or

SCHEDULE B

Page 3 of 5

______	Category 7.	A small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; or
______	Category 8.	A plan established and maintained by a state, its political subdivision or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with assets in excess of US$5,000,000; or
______	Category 9.	An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment advisor, or an employee benefit plan with total assets in excess of US$5,000,000 or, if a self-directed plan, the investment decisions are made solely by persons who are accredited investors; or
______	Category 10.	A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940; or
	Category 11.	An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of US$5,000,000; or
______	Category 12.	A director, executive officer or general partner of the company; or

______ Category 13. A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of this purchase exceeds US$1,000,000; or

SCHEDULE B

Page 4 of 5

______	Category 14.	A natural person who had an individual income in excess of US$200,000 in each year of the two most recent years or joint income with that person’s spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
______	Category 15.	A trust, with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the Shares offered, whose purchase is directed by a sophisticated person as described in SEC Rule 506(b)(2)(ii); or
______	Category 16.	An entity in which each of the equity owners meets the requirements of one of the above ca

_________________________________

Date

_________________________________

Duly authorized signatory for Purchaser

_________________________________

(Print name of Purchaser)

SCHEDULE B

Page 5 of 5

SCHEDULE C

Non-U.S. Person Certificate

Dated __________________, 2008

China Tel Group, Inc.

c/o Horwitz, Cron & Jasper, PLC

Four Venture Plaza Suite 390

Irvine, Ca. 92618

Defined terms used but not defined herein hall have the meaning ascribed to such terms in the Convertible Note Purchase Agreement (for Purchasers outside of the United States) (the "Amended and Restated Convertible Note Purchase Agreement"), dated November 17, 2008, between China Tel Group, Inc., a Nevada corporation (the "Company") and each Purchaser of Notes of the Company outside of the United States (the "Shares").

1.           The undersigned hereby represents, warrants and certifies that:

(a) it is not a "U.S. person" (as such term is defined by Rule 902 of Regulation S under the U.S. Securities Act) and is not acquiring the Shares, directly or indirectly, for the account or benefit of any U.S. person.

Rule 902 under the U.S. Securities Act, defines a "U.S. person" as:

(A) Any natural person resident in the United States;

(B) Any partnership or corporation organized or incorporated under the laws of the United States;

(C) Any estate of which any executor or administrator is a U.S. person;

(D) Any trust of which any trustee is a U.S. person;

(E) Any agency or branch of a foreign entity located in the United States;

(F) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;

(G) Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and

SCHEDULE C

Page 1 of 5

(H) Any partnership or corporation if:

(1) organized or incorporated under the laws of any foreign jurisdiction; and

(2) formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts.

The following are not "U.S. persons":

(A) Any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States;

(B) Any estate of which any professional fiduciary acting as executor or administrator is a U.S. person if:

(1) An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and

(2) The estate is governed by foreign law;

(C) Any trust of which any professional fiduciary acting as trustee is a U.S. person, if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person;

(D) An employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country;

(E) Any agency or branch of a U.S. person located outside the United States if:

(1) The agency or branch operates for valid business reasons; and

(2) The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located; and

SCHEDULE C

Page 2 of 5

(F) The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans.

(b) the offer and sale of the Shares was made in an "offshore transaction" (as defined under Regulation S under the U.S. Securities Act), in that:

(i) the undersigned was outside the United States at the time the buy order for such Shares was originated; and

(ii) the offer to sell the Shares was not made to the undersigned in the United States.

(c) the transaction (i) has not been pre-arranged with a purchaser located inside of the United States or who is a U.S. person, and (ii) is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act.

2.The undersigned hereby covenants that:

(a) during the period prior to one year after the Closing (the "Restricted Period") it will not engage in hedging transactions with regard to the Shares unless such transactions are made in compliance with the U.S. Securities Act;

(b) if it decides to offer, sell or otherwise transfer any of the Shares, it will not offer, sell or otherwise transfer any of such Shares directly or indirectly, unless:

(i) the sale is to the Company;

(ii) the sale is made outside the United States in a transaction meeting the requirements of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations; provided, however, that during the period prior to the expiration of the Restrictive Period no sale may be made to any U.S. person or for the account or benefit of a U.S. person (other than a distributor) and all purchasers of such Shares will be required to execute and deliver to the Company a certificate substantially in the form hereof;

(iii) the sale is made in the United States pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder and in accordance with any applicable state securities or "blue sky" laws and the purchaser has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration pursuant to Rule 144 under the U.S. Securities Act;

(iv) the Shares are sold in the United States in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and

SCHEDULE C

Page 3 of 5

(v) regulations governing the offer and sale of securities, and it has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company to the effect that such transaction does not require registration; or

(vi) the sale is made in the United States pursuant to an effective registration statement filed under the U.S. Securities Act.

3.The undersigned acknowledges and agrees that:

(a) the Shares are and will be "restricted securities" as that term is defined in Rule 144 under the U.S. Securities Act, and the certificates representing the Shares, as well as all certificates issued in exchange for or in substitution of the foregoing, until such time as is no longer required under the applicable requirements of the U.S. Securities Act or applicable state securities laws, will be subject to the terms of and bear, on the face of such certificate, a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "U.S. SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT. THESE SECURITIES ARE RESTRICTED SECURITIES (AS DEFINED UNDER RULE 144 UNDER THE U.S. SECURITIES ACT) AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION THEREUNDER.

DURING THE ONE YEAR PERIOD OF TIME FOLLOWING THE COSING  (THE "RESTRICTED PERIOD"), THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY WITHIN THE UNITED STATES, TO A U.S. PERSON (AS DEFINIED IN REGULATION S UNDER THE U.S. SECURITIES ACT), OR FOR THE ACOUNT OR BENEFIT OF A U.S. PERSON, EXCEPT PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION THEREUNDER. DURING THE RESTRICTED PERIOD HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS SUCH TRANSACTIONS ARE MADE IN COMPLIANCE WITH THE U.S. SECURITES ACT.  THIS PARAGRAPH SHALL HAVE NO FURTHER EFFECT SUBSEQUENT TO THE EXPIRATION OF THE RESTRICTED PERIOD AND THEREAFTER MAY BE REMOVED.

(b) the Company will refuse to register any sale of Shares made in breach of the provisions hereof.

SCHEDULE C

Page 4 of 5

(c) the Company may make a notation on its records or give instructions to its registrar(s) and transfer agent(s) in order to implement the restrictions on transfer set forth and described herein.

(d) the addressees of this certificate and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations, warranties and agreements, and irrevocably authorizes the addressees of this certificate to produce the same or a copy thereof to any interested party in any administrative or legal proceeding or official enquiry with respect to the matters set forth herein. The undersigned further agrees that if any of the acknowledgements, representations, warranties or agreements made herein is no longer accurate, it shall promptly notify the Company.

_____________________________________

Print name of Purchaser

By:

      Signature

    _____________________________

      Title

_____________________________________

(please print name of individual whose signature

 appears above, if different from name of

 purchaser printed above)

SCHEDULE C

Page 5 of 5

EXHIBIT A

FORM OF CONVERTIBLE NOTE

EXHIBIT A

EXHIBIT B

NOTICE OF ELECTION TO REDEEM

PURSUANT TO SECTION 8.2 OF

AMENDED AND RESTATED CONVERTIBLE NOTE PURCAHSE AGREEMENT

TO CHINA TEL GROUP, INC.:

The undersigned Purchaser of this Note hereby irrevocably exercises the option to call for the redemption of this Note in accordance with the terms of the Amended and Restated Convertible Note Purchase Agreement, and directs that China Tel Group, Inc. to pay to the Purchaser all outstanding principal and interest (calculated on the Increased Outstanding Balance) due as of the date of payment within Ninety (90) days of the delivery of this Notice to the Company.

_______________________________________

Signature

(Use exact name of Purchaser as shown on this Note)

Dated:  , 2___

Signature Guaranteed

EXHIBIT B

EXHIBIT C

NOTICE OF ELECTION TO CONVERT

PURSUANT TO SECTION 9.1 OF

AMENDED AND RESTATED CONVERTIBLE NOTE PURCAHSE AGREEMENT

TO CHINA TEL GROUP, INC.:

The undersigned Purchaser of this Note hereby irrevocably exercises the option to convert this Note into Common Shares of CHINA TEL GROUP, INC. in accordance with the terms of this Note, and directs that the shares and the Common Shares issuable and deliverable upon the conversion be issued and delivered to the Purchaser hereof unless a different name has been indicated below.  If shares are to be issued in the name of a person other than the Purchaser, the Purchaser will pay all transfer taxes payable with respect thereto.

_______________________________________

Signature

(Use exact name of Purchaser as shown on this Note)

Dated:  , 2___

Signature Guaranteed

Fill in for name in which Shares are to be issued:

(Please print name and address, including zip code)

Social Security or other Taxpayer Identification Number

EXHIBIT C

EX-10.16

EXHIBIT 10.16

STOCK PURCHASE AGREEMENT

Dated as of February 22, 2009

between

 Mario Octavio Navarro Alvarez and Rafael Isaías Samanez Zacarías

 (“Sellers”)

and

Gulfstream Capital Partners, Ltd.

(“Buyer”)

relating to the purchase and sale

of

95% of the Outstanding Common Stock

of

Perusat S.A.

Dated February 22, 2009

TABLE OF CONTENTS

		Page
ARTICLE I	DEFINITIONS	2-6
1.1	Definitions	2-6
1.2	OTHER DEFINITIONS	6
1.3	Langauge	6
ARTICLE II	PURCHASE AND SALE	6-7
2.1	Purchase and Sale of the Shares	6
2.2	Purchase Price	7
2.3	Closing Date	7
2.4	Transactions to be Effected at the Closing	7
ARTICLE III	REPRESENTATIONS AND WARRANTIES OF SELLERS	8-23
3.1	Organization and Good Standing	8
3.2	Capitalization	8-9
3.3	Subsidiaries and Affiliates of the Company.	9
3.4	Authority and Enforceability	9
3.5	No Conflicts; Authorizations	9
3.6	Financial Statements	9
3.7	No Undisclosed Liabilities	10
3.8	Accounts Receivable	10
3.9	Taxes	10
3.10	Compliance with Law	11
3.11	Authorizations	11
3.12	Title to Personal Properties; Leases	12
3.13	Condition of Tangible Assets	12
3.14	Real Property	12-13
3.15	Intellectual Property.	13-16
3.16	Absence of Certain Changes or Events	16-17
3.17	Contracts	17-19
3.18	Litigation.	19

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TABLE OF CONTENTS

(CONTINUED)

		Page
3.19	Employee Benefits	20
3.20	Labor and Employment Matters	20
3.21	Environmental	21
3.22	Insurance	21-22
3.23	Books and Records	22
3.24	Suppliers and Customers	22
3.25	Brokers or Finders	22
3.26	Bank Accounts	23
3.27	Powers of Attorney	23
3.28	Support Services	23
3.29	Completeness of Disclosure	23
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF BUYER	23-24
4.1	Organization and Good Standing	23
4.2	Authority and Enforceability	23
4.3	Brokers or Finders	24
ARTICLE V	COVENANTS OF SELLERS	24-29
5.1	Conduct of Business	24
5.2	Negative Covenants	24-26
5.3	Access to Information	26
5.4	Resignations	26
5.5	Indebtedness; Release of Liens	26
5.6	Confidentiality	26
5.7	Records Retention	27
5.8	Consents	27
5.9	Notification of Certain Matters	27
5.10	Restrictive Covenants	28
5.11	Insurance	29
5.12	Security Interest	29

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TABLE OF CONTENTS

(CONTINUED)

		Page
ARTICLE VI	COVENANTS OF BUYER AND SELLERS	30-32
6.1	Regulatory Approvals.	30
6.2	Public Announcements	30
6.3	Tax Matters.	30-31
6.4	Employee Matters.	31-32
6.5	Further Assurances	32
6.6	Payment of Debt to Telefónica del Perú S.A.A	32
ARTICLE VII	CONDITIONS TO CLOSING	32-34
7.1	Conditions to Obligations of Buyer and Sellers	32
7.2	Conditions to Obligation of Buyer	32-34
7.3	Conditions to Obligation of Sellers	34
ARTICLE VIII	TERMINATION	34-35
8.1	Termination	34-35
8.2	Effect of Termination	35
8.3	Remedies.	35
ARTICLE IX	INDEMNIFICATION	36-42
9.1	Survival.	36
9.2	Indemnification by Sellers	36-37
9.3	Indemnification by Buyer	37
9.4	Indemnification Procedure for Third Party Claims	38-40
9.5	Indemnification Procedures for Non-Third Party Claims.	40
9.6	Contingent Claims	40
9.7	Effect of Investigation; Waiver.	40
9.8	Tax Indemnification	40-41
9.9	Procedures Relating to Indemnification of Tax Claims	41
9.10	Tax Treatment of Indemnification Payments	41
9.11	Other Rights and Remedies Not Affected	41

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TABLE OF CONTENTS

(CONTINUED)

		Page
ARTICLE X	MISCELLANEOUS	42-45
10.1	Notices	42
10.2	Amendments and Waivers	42
10.3	Expenses	43
10.4	Successors and Assigns	43
10.5	Governing Law	43
10.6	Consent to Jurisdiction	43
10.7	Counterparts	43
10.8	Third Party Beneficiaries	44
10.9	Entire Agreement	44
10.10	Captions	44
10.11	Severability	44
10.12	Specific Performance	44
10.13	Interpretation	44-45

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STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT, dated as of February 22, 2009 (the "Agreement"), between:

·             Gulfstream Capital Partners Ltd., a Republic of Seychelles corporation with offices at Hong Kong, Peoples Republic of China ("Buyer"), and

·             Mario Octavio Navarro Alvarez, identified with Foreign Identity Card No. 000280774 (together with his spouse Gisella Tsuchikame Nakamoto, identified with Peruvian Identity Card No. 09387084)(jointly “Navarro”), and Rafael Isaías Samanez Zacarías, identified with Peruvian Identity Card No. 07967650, (together with his spouse Jesus Margot Magan Guiterrez, identified with Peruvian Identity Card No. 07554742) (jointly “Samanez”), all of them domiciled for these purposes at Av. Camino Real 493, Piso 11,San Isidro, Lima, Peru, (each, individually, is a “Seller” and they are collectively the “Sellers”).

WHEREAS, Perusat S.A. is a corporation (‘sociedad anónima’) organized and existing under the laws of the Republic Peru, registered in the Electronic File No. 00380911 of the Companies’ Registry of Lima, with head office at Av. Camino Real 493, Piso 11,San Isidro, Lima, Peru ( “Perusat” or the “Company”), which has issued 13,190,800 (thirteen million one hundred ninety thousand eight hundred) shares of common stock S/.1.00 (one and 00/100 Peruvian Nuevos Soles) each; and

WHEREAS, Perusat is engaged in the business of providing all type of telecommunication services. It can also carry out activities of local or long distance telephones services, land line telephony, mobile phones, IP telephony, internet, cable television, rental of networks and equipments, data transmission, commercialization of telecommunication equipments, among others;

WHEREAS, Navarro is theholder of record of 12,941,839 shares issued by Perusat, and Samanez is the holder of record of 248,961 shares issued by Perusat, who together are the sole beneficial and registered owners of all the outstanding shares of the common stock of Perusat; and

WHEREAS, Navarro desires to sell 12,414,207 of his shares to Buyer, and Samanez desires to sell 117,053 of his shares to Buyer; and Buyer desires to buy 12,531,260 outstanding shares of common stock of Perusat from Sellers (the “Shares”), such that the respective ownership of the outstanding shares of Perusat following the transaction will be Buyer 95%, Navarro 4% and Samanez 1%, upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained herein and the sufficiency of which is hereby acknowledged by the parties, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1Definitions. When used in this Agreement, the following terms shall have the meanings assigned to them in this Section 1.1, or in the applicable Section of this Agreement to which reference is made in this Section 1.1.

"Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

“Agreement” means this Stock Purchase Agreement and all schedules, exhibits and instruments in amendment or confirmation of it.

"Authorization" means, with respect to any Person, any order, authorization, concession, approval, waiver, consent, certificate, license, permit or franchise or similar authorization of or from any Governmental Entity or similar entity having jurisdiction over the Person or pursuant to any Law. This term includes the two telecommunications concessions granted by the Peruvian Government to Perusat for providing long distance bearer services and local fixed telephony services.

"Benefit Plan" means any "employee benefit plan" as defined in ERISA Section 3(3), including any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)), (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan (as defined in ERISA Section 3(37)), (d) Employee Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material fringe benefit plan or program, or (e) stock purchase, stock option, severance pay, employment, change-in-control, vacation pay, company awards, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, life insurance, or other employee benefit plan, contract, program, policy or other arrangement, whether or not subject to ERISA.

“Business Day” means any day of the year, other than a Saturday, Sunday or any day on which banks are required or authorized to close in Lima, Peru.

“Buyer” has the meaning set forth in the preamble to this Agreement.

"Common Stock" means the shares of the stock of a corporation, and any other interest that confers on a Person the right to receive a share of the profits and losses, or distribution of assets, of the issuing entity.

"Charter Documents" means, with respect to any entity, the certificate of incorporation, the articles of incorporation, by-laws, articles of organization, limited liability company agreement, partnership agreement, formation agreement, joint venture agreement or other similar organizational documents of such entity (in each case, as amended).

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"Contract" means any agreement, contract, lease, commitment, arrangement or understanding, written or oral, including any sales order or purchase order.

"Equity Securities" means (a) shares of Common Stock, and (b) options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other Contracts that, directly or indirectly, could require the issuer thereof to issue, sell or otherwise cause to become outstanding shares of Common Stock.

“Environmental Laws” means all applicable Laws and agreements or arrangement with Governmental Entities and all other statutory requirements relating to public health or the protection of environment, prevention of pollution, remediation of contamination or restoration of environmental quality, protection of human health or the environment (including natural resources), or workplace health and safety, including all applicable Laws relating to the management, containment, manufacture, possession, presence, use, processing, generation, transportation, treatment, storage, disposal, Release, abatement, removal, remediation or handling of or exposure to any Hazardous Materials, and all Authorizations issued pursuant to such Laws, agreements, arrangements or statutory requirements.

"ERISA" means the Employee Retirement Income Security Act of 1974 as enacted in the United States of America.

"Final Determination" means a decision, resolution, judgment, decree, award or other order by any judge, Governmental Entity, arbitrator, arbitration panel or court of competent jurisdiction, which decision, resolution, judgment, decree, award or other order has become final after all allowable appeals by either party to the action have been exhausted or the time for filing such appeals has expired and is not subject to further review or modification.

"Governmental Entity" means any executive, judicial, legislative, political, regulatory, governmental, public or administrative entity, institution or organization, autonomous institution, central, regional, provincial, municipal or local government or authority, municipality, central bank, tax agency, court, commission, board, bureau, agency or instrumentality of the country, state, department, province or similar geographic or political circumscription having jurisdiction over any Person referred to in the context in which such word is used, including any (i) subdivision or authority of any of the foregoing, (ii) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the above; and (iii) other entities and agencies that perform administrative duties, which are authorized under any applicable Law, to issue or construe rules, decisions, general regulations or private administrative acts, with binding effect on the parties subject to the scope thereof.

"Grossed-Up Basis" means, when used to describe the basis on which the payment of a specified sum is to be made, a basis such that the amount of such payment, after being reduced by the amount of all Taxes imposed on the recipient of such payment as a result of the receipt or accrual of such payment, will equal the specified sum.

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"Hazardous Substances" means all explosive materials, radioactive materials, hazardous materials, toxic materials, wastes, chemicals, substances, petroleum, petroleum by-products and petroleum products (including crude oil or any fraction thereof), asbestos and asbestos containing materials, pollutant, contaminant, or product that, because of its hazardous, toxic or other harmful characteristic, presents a risk or threat to human health, safety, natural resources or the indoor or outdoor environment, and all other materials, chemicals and substances that are regulated by, form the basis of liability or are defined as hazardous, extremely hazardous, toxic or words of similar import, under any Environmental Law.

"Indebtedness" means any of the following: (a) any indebtedness for borrowed money, (b) any obligations evidenced by bonds, debentures, notes or other similar instruments, (c) any obligations to pay the deferred purchase price of property or services, except trade accounts payable and other current Liabilities arising in the ordinary course of business, (d) any obligations as lessee under capitalized leases, (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property, (f) any obligations, contingent or otherwise, under acceptance credit, letters of credit or similar facilities, and (g) any guaranty of any of the foregoing.

"Indemnitee" means any Person that is seeking indemnification from an Indemnitor pursuant to the provisions of this Agreement.

"Indemnitor" means any Party hereto from which any Indemnitee is seeking indemnification pursuant to the provisions of this Agreement.

"Knowledge" of Sellers or any similar phrase means, with respect to any fact or matter, the actual knowledge of the Sellers, together with such knowledge that the Sellers could be expected to discover after due investigation concerning the existence of the fact or matter in question.

"Law” or “Laws" means any statute, law (including common law), constitution, treaty, ordinance, code, order, decree, case law, judgment, resolution, decision, rule, regulation, supreme decree, legislative decree, provision or principle of any kind that is a part a legal system in force, and any other binding requirement or determination of any Governmental Entity.

"Lien" means any attachment, mortgage, charge, pledge, guaranty, security interest, garantía mobiliaria, adverse claim, assignment, trust, lien (statutory or otherwise), title retention agreement or arrangement, restrictive covenant or other encumbrance of any kind and nature or any other arrangement or condition which, in substance, secures payment or performance of an obligation.

“Material”or“Materially” or “Adversely” or “Material Adverse Change” or“Material Adverse Effect”means any action, omission or change with a significant impact or essential to any Person or to the business, operations, assets, financials, performance of the activities, or fulfillment of the purpose of any such Person. Any such action, omission or change shall only be considered to produce a significant impact or to be essential to any such Person if its effects, consequences or results are likely to imply or involve more than US$10,000 (Ten Thousand and 00/100 U.S. Dollars). The effects, consequences or results derived from or arising out of (i) any act or omission by such Person taken with the prior consent or at the direction of the other Parties hereto; or (ii) any Act of God or Force Majeure impacting Buyer or Seller, provided that the effects of the Act of God or Force Majeure event prevent performance of an obligation under this Agreement, were not foreseeable and could not have been prevented or diminished by the Party affected by the Act of God or Force Majeure, shall not be considered within this definition. It also means, when used in this Agreement with respect to any representation or warranty in this Agreement, which the breach of said representation results in Damages of more than US$10,000 (Ten Thousand and 00/100 U.S. Dollars).

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"Order" means any award, injunction, judgment, resolution, decision, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction.

“Ordinary Course” an action taken by a Person will be deemed to have been taken in the “Ordinary Course” only if such action is consistent with the usual customs and practices of the Person and is taken in the ordinary course of the normal day-to-day operations of the Person.

“Parties” means the Sellers and Buyer, collectively.

“Party” means any of the Sellers and Buyer, individually.

"Person" means any individual, corporation, a partnership, a limited liability company, a trust, association, legal entity (whether public or private), joint venture, consortium, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body, and pronouns that have a similarly extended meaning.

“PGAAP” means the accounting principles and practices generally accepted in Peru, consistently applied.

"Pre-Closing Environmental Liabilities" means Liabilities based upon or arising out of (a) the ownership or operation of the businesses of the Company at any time on or prior to the Closing, or (b) the ownership, operation or condition of any real property currently or formerly owned, operated or leased by the Company at any time on or prior to the Closing, in each case to the extent based upon or arising out of (i) Environmental Laws, (ii) a failure to obtain, maintain or comply with any Order or Authorization, (iii) the presence or Release of any Hazardous Substance at, on or under any real property currently or formerly owned, operated or leased by the Company at any time on or prior to the Closing or (iv) the use, generation, storage, transportation, treatment, sale or other off-site disposal of Hazardous Substances generated by or otherwise used in the businesses of the Company.

"Release" means any depositing, spilling, leaking, pumping, pouring, emitting, placing, emptying, discharging, injecting, escaping, migrating, abandoning, leaching, dumping, or disposing of Hazardous Substances into the environment.

"Tax" or "Taxes" means any and all taxes, charges and levies of any kind (including any and all interest, penalties, additions to tax and additional amounts thereon), or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, transaction, license, lease, service, service use, occupation, severance, energy, unemployment, social security, workers' compensation, capital, premium, and other taxes, assessments, customs, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax, or additional amounts with respect thereto.

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"Tax Claim" means any claim with respect to Taxes made by any Taxing Authority or other Person that, if pursued successfully, could serve as the basis for a claim for indemnification of a Tax Indemnitee or Sellers under this Agreement.

"Tax Indemnitee" means Buyer (including, upon Closing, the Company).

"Tax Returns" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

"Taxing Authority" means any Governmental Entity having jurisdiction with respect to any Tax.

"Transfer Taxes" means sales, use, transfer, real property transfer, recording, documentary, stamp, registration and stock transfer taxes and fees.

"$" or “US$” means dollars of the United Sates of America.

1.2 Other Definitions. Other terms defined in this Agreement and indicated as such by quotation marks shall have the meaning ascribed thereto next to the definition, throughout the text hereof.

1.3 Language. This Agreement has been entered into in English language and, notwithstanding any translation thereof, the English language version shall control the construction and interpretation of this Agreement. All material communications between the Parties with respect to this Agreement shall be in English language.

ARTICLE II

PURCHASE AND SALE

2.1 Purchase and Sale of the Shares.

(a) Upon the terms and subject to the conditions of this Agreement, at the Closing, Sellers shall sell to Buyer, and Buyer shall purchase from Sellers, the Shares free and clear of all Liens except those created pursuant to this Agreement.

(b) The sale of the Shares by Sellers to Buyer includes any other interest related to the Shares that confers on a Person the right to receive a share of the profits and losses, or distribution of assets or of other shares of Perusat and any other interest or right related to the Shares.

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2.2 Purchase Price.

(a) The Purchase Price of the Shares is US$2,775,000 (two million seven hundred seventy-five thousand and 00/100 U.S. dollars (the "Purchase Price").

(b) The Parties agree that the Purchase Price will be paid as follows:

(i) At the Closing Date, Sellers will shall receive from Buyer 1,000,000 (one million) shares issued by China Tel Group Inc. free and clear of all Liens except those created pursuant to this Agreement, valued at $2.50 per share, equivalent to US$2,500,000.00 (two million five hundred thousand and 00/100 U.S. dollars).

(ii) US$275,000 (two hundred seventy-five thousand and 00/100 U.S. dollars) in cash, paid as follows: (x) US$50,000.00 (fifty thousand and 00/100 U.S. Dollars) on the Closing Date; (y) US$50,000.00 (fifty thousand and 00/100 U.S. Dollars) each following quarter commencing June 30, 2009, and (z) a final installment of $25,000.

 (iii) Both the stock portion and the cash portion of the Purchase Price shall be paid to each Seller in the same ratio representing the percentage holdings of each Seller in the outstanding stock of Perusat, which is: Navarro 98.11% and Samanez 1.89%, with all shares of China Tel Group Inc. rounded to the nearest whole share, and all cash rounded to the nearest dollar.

(c) The purchase and sale of the Shares is referred to in this Agreement as the "Acquisition".

2.3 Closing Date. The closing of the Acquisition (the "Closing") shall take place at the offices of Estudio Oleachea on a date to be specified by the Parties which shall be no later than Three Business Days after satisfaction (or waiver as provided herein) of the conditions set forth in Article VII (other than those conditions that by their nature will be satisfied at the Closing), unless another time, date and/or place is agreed to by the parties. The date upon which the Closing occurs is herein referred to as the "Closing Date."

2.4 Transactions to be Effected at the Closing.

(a) At the Closing, Buyer shall (i) deliver to Sellers stock certificates representing the ownership of 1,000,000 (one million) shares issued by China Tel Group Inc. free and clear of all Liens and all documents, instruments or certificates required to be delivered by Buyer at or prior to the Closing pursuant to this Agreement, and (ii) pay to Sellers US$50,000 applicable to the Purchase Price.

(b) At the Closing, Sellers shall each deliver to Buyer (i)  stock certificates for the 12,531,260 shares of Perusat that they own, duly endorsed, (ii) the Company’s shares registry book in which the entry evidencing the transfer of the Shares from Sellers to Buyer is included and signed by the general manager of the Company, (iii) all other documents and instruments necessary to vest in Buyer all of Sellers' rights, title and interest in and to the Shares, free and clear of all Liens, and (iv) all other documents, instruments or certificates required to be delivered by Sellers at or prior to the Closing pursuant to this Agreement.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

Sellers represents and warrants to Buyer as of the date hereof that the statements contained in this Article III are true and correct.

3.1 Organization and Good Standing.

(a) The Company is a corporation (‘sociedad anónima’) duly organized, validly existing and in good standing under the Laws of the Republic of Peru, has all requisite power to own, lease and operate its properties and to carry on its business as currently conducted and as proposed to be conducted, and is duly qualified, licensed or registered to do business.

(b) The Company is not in default under its Charter Documents or applicable Laws.

3.2 Capitalization.

(a) The Stock of the Company consists of 13,190,800 shares of common stock, S/.1.00 (one and 00/100 Peruvian Nuevos Soles) par value each. All of the these shares are duly authorized, validly issued, fully paid and are non-assessable, and are owned of record and beneficially by Sellers free and clear of all Liens. Upon transfer of the Shares to Buyer in accordance with the terms of Article II, Buyer will receive valid title to the Shares, free and clear of all Liens.

(b) All of said 13,190,800 shares were issued in compliance with applicable Laws. None of the 13,190,800 shares was issued in violation of any Law or Contract to which any Seller or the Company is a party or is subject or in violation of any preemptive or similar rights of any Person other than the rights of first refusal set out in article 9 of the bylaws of Perusat to which the Sellers hereby expressly waive to exercise.

(c) Other than the 13,190,800 shares, the Company does not have outstanding any Equity Securities or any other securities. The Company is not a party or subject to any Contract obligating the Company to issue any Equity Securities or any other securities and there is no circumstance or condition that may give rise to a claim by any Person that such Person is entitled to acquire any securities of the Company. The Company does not have outstanding any bonds, debentures, notes or other obligations or debt securities the holders of which have the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matter.

(d) The Company does not have outstanding or authorized any stock appreciation, phantom stock, profit participation, or similar rights.

(e) Neither Sellers nor the Company is a party or subject to any stockholder agreement, voting agreement, voting trust or any other similar arrangement which has the effect of restricting or limiting the transfer, voting or other rights associated with the Shares.

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(f) There are no obligations, contingent or otherwise, of the Company to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any Person.

(g) Each Seller is a holder of record in the shares registry book of the Company and holds valid title to its respective Shares, as set forth in the WHEREAS to this Agreement, all of which shares are free and clear of Liens.

(h) There is no agreement, arrangement, option, security, right, or commitment of any kind whatsoever currently in force pertaining to the issue, sale, purchase, or redemption of the Shares or otherwise affecting the Shares.

3.3 Subsidiaries and Affiliates of the Company. The Company does not have any subsidiary or affiliated companies, and is not a partner in any partnership.

3.4 Authority and Enforceability. Sellers have the requisite power and authority to enter into this Agreement and to consummate the Acquisition. This Agreement has been duly executed and delivered by Sellers and, assuming due authorization, execution and delivery by Buyer, constitutes a valid and binding obligation of Sellers, enforceable against them in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors' rights generally, and (b) the availability of injunctive relief and other equitable remedies.  

3.5 No Conflicts; Authorizations

(a) The execution and delivery of this Agreement by Sellers do not, and the performance by Sellers of its obligations hereunder and the consummation by Sellers of the transactions contemplated hereby (in each case, with or without the giving of notice or lapse of time, or both), will not, directly or indirectly, (i) violate the provisions of any of the Charter Documents of the Company, (ii) violate or constitute a default, an event of default or an event creating rights of acceleration, termination, cancellation, imposition of additional obligations or loss of rights, or require a consent to assignment, under any Contract (A) to which the Company is a party, (B) of which the Company is a beneficiary or (C) by which the Company or any of its assets is bound, (iii) violate or conflict with any Law, Authorization or Order applicable to the Company or give any Governmental Entity or other Person the right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy, obtain any relief under or revoke or otherwise modify any rights held under, any such Law, Authorization or Order, or (iv) result in the creation of any Liens upon any of the assets owned or used by the Company.

(b) No Authorization or Order of, registration, declaration or filing with, or notice to, any Governmental Entity or other Person is required by or with respect to the Company in connection with the execution and delivery of this Agreement and the consummation of the Acquisition; except for the fillings or notifications that relates solely to the identity of the Buyer or the nature of the business carried on by the Buyer that need to be made to any Governmental Entity under the applicable Laws.

3.6 Financial Statements. Sellers have delivered to Buyer during due diligence true and complete copies of the Company's audited financial statements and tax returns for each of the year 2007, along with other financial records of the Company. The financial statements and other financial records are true, complete and correct, are based on the books and records of the Company, fairly present the financial condition and operations of the Company as of the respective dates they were prepared for the periods indicated and have been prepared in accordance with PGAAP.  At the Closing Date, a copy of the 2007 audited financial statement and the 2007 tax return of the Company shall be attached as Schedule A to this Agreement.

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3.7 No Undisclosed Liabilities. The Company has no liabilities, debts, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured, determined or determinable or otherwise arising under the applicable Laws, an Order, Authorization or under any undertaking, arrangement, act or Contract ("Liabilities").

3.8 Accounts Receivable. All accounts receivable of the Company, to the extent not paid in full by the account debtor prior to the date hereof, are (a) valid and genuine and have arisen solely out of bona fide sales and deliveries of goods, performance of services and other business transactions in the Ordinary Course of business consistent with past practice, (b) not subject to valid defenses, set-offs or counterclaims, and (c) collectible within 90 days after billing at the full recorded amount thereof.  

3.9 Taxes.

(a) The Company has filed or caused to be filed, within the times and within the manner prescribed by applicable Law, all tax returns and tax reports which are required to be filed by or with respect to the Company.

(b) All taxes, imposts, social securities and other mandatory contributions and assessments (including interest and penalties) that are required to be paid by the Company, have been paid or fully provided for in the books and records of Perusat.

(c) The income tax liability of the Company has been reported to the taxing authorities for all fiscal years to and including its fiscal year ended on December 31, 2008. No examination of any tax return of the Company is currently in progress, threatened or pending, there are no outstanding agreements or waivers extending the statutory period providing for an extension of time with respect to the assessment or reassessment of Tax or the filing of any tax return by, or any payment of any Tax by the Company, and there are no actions, audits or claims now threatened or pending against the Company in respect of Taxes or any matters under discussion with any Governmental Entity relating to Taxes.

(d) The Company has withheld from each payment made by it the amount of all Taxes and other deductions required to be withheld therefrom, has paid the same to the proper taxing or other authority within the time prescribed under any applicable Law and filed all required documents to support the amounts withheld and/or paid.

(e) There is no dispute or claim concerning any liability for Taxes with respect to the Company for which notice has been provided, or which is asserted or threatened, or which is otherwise known to the Company or any of the Sellers. No issues have been raised in any Taxes examination with respect to the Company which, by application of similar principles, could be expected to result in liability for Taxes for any other period not so examined. The Company has delivered to Buyer correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company. The Company has not waived (or is subject to a waiver of) any statute of limitations in respect of Taxes or has agreed to (or is subject to) any extension of time with respect to a Tax assessment or deficiency.

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3.10 Compliance with Law.

(a) The Company has complied in all respects with each, and is not in violation in any respect of, any applicable Law to which the Company or its business, operations, assets or properties is or has been subject.

(b) No event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with or failure on the part of the Company to comply with, any Law. The Company has not received notice regarding any violation of, conflict with, or failure to comply with, any Law.

3.11 Authorizations.

(a) The Company owns, holds or lawfully uses in the operation of its business all Authorizations which are necessary for it to conduct its business as currently conducted or as proposed to be conducted or for the ownership and use of the assets owned or used by the Company in the conduct of its business free and clear of all Liens.Such Authorizations are valid and in full force and effect and none of such Authorizations will be terminated or impaired or become terminable as a result of the transactions contemplated by this Agreement.

(b) No event has occurred and no circumstances exist that (with or without the passage of time or the giving of notice) may result in a violation of, conflict with, failure on the part of the Company to comply with the terms of, or the revocation, withdrawal, termination, cancellation, suspension or modification of any Authorization. The Company has not received notice regarding any violation of, conflict with, failure to comply with the terms of, or any revocation, withdrawal, termination, cancellation, suspension or modification of, any Authorization. The Company is not in default, nor has the Company received notice of any claim of default, with respect to any Authorization.

(c) No Person other than the Company owns or has any proprietary, financial or other interest (direct or indirect) in any Authorization which the Company owns or uses in the operation of its business as currently conducted or as proposed to be conducted.

(d) All dues, fees, rates, Taxes, rights, duties or similar payments to any Person or Governmental Entity necessary for maintaining the Authorizations as to carry out the business of the Company have been paid on due time.

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3.12 Title to Personal Properties; Leases.

(a) During due diligence, the Company has produced to the Buyer a complete and accurate list of all the personal properties and assets owned, leased or used by the Company as of the date of this Agreement, specifying whether and by whom each such asset is owned or leased and, in the case of leased assets, indicating the parties to, execution dates of and annual payments under, the lease.  At the Closing Date, the list of personal properties and assets owned will be attached as Schedule B to this Agreement.

(b) With respect to such personal properties and assets, the Company has good and valid title to all of such properties and assets, free and clear of all Liens.

3.13 Condition of Tangible Assets. All such personal properties and assets are in good operating condition and repair (subject to normal wear and tear given the use and age of such assets), are usable in the Ordinary Course of business and conform to all Laws and Authorizations relating to their construction, use and operation.

3.14 Real Property.

(a) The Company does not own any real property, right or interest therein, except for the rights obtained under the Leases pursuant to which the Company uses the Leased Real Property.

(b) During due diligence, the Seller has produced to the Buyer a complete list of all real property, rights and interests in real property leased by the Company (the "Leased Real Property"). The Leased Real Property includes all rights and interests in real property used in or necessary for the conduct of the businesses and operations of the Company as currently conducted and as proposed to be conducted.  At the Closing Date, the list of Leased Real Property will be attached as Schedule C to this Agreement.

(c) With respect to Leased Real Property, the Sellers have delivered to Buyer a true and complete copy of every lease and sublease pursuant to which the Company is a party or by which it is bound (each, a "Lease"). The Company has peaceful, undisturbed and exclusive possession of the Leased Real Property.

(d) The uses for which the buildings, facilities and other improvements located on the Leased Real Property are zoned do not restrict, or impair, the use of the Leased Real Property for purposes of the businesses of the Company.

(e) No Governmental Entity having the power of expropriation or eminent domain over the Leased Real Property has commenced or, to the Sellers’ Knowledge, intends to exercise the power of expropriation, eminent domain or a similar power with respect to all or any part of the Leased Real Property. There are no pending or, to the Sellers’ Knowledge, threatened condemnation, fire, health, safety, building, zoning or other land use regulatory proceedings, lawsuits or administrative actions relating to any portion of the Leased Real Property or any other matters which do or may adversely affect the current use, occupancy or value thereof. The Company has not received notice of any pending or threatened proceedings affecting any portion of the Leased Real Property.

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(f) The Leased Real Property and all present uses and operations of the Leased Real Property comply with all Laws, covenants, conditions, restrictions, easements, disposition agreements and similar matters affecting the Leased Real Property. The Leased Real Property and its continued use, occupancy and operation as used, occupied and operated in the conduct of the businesses of the Company do not constitute a nonconforming use and is not the subject of a special use permit under any Law.

(g) The Leased Real Property is in suitable condition for the Company's business as currently conducted and as proposed to be conducted. The Company has good and valid rights of ingress and egress to and from all Leased Real Property from and to the public street systems for all usual street, road and utility purposes.

(h) No Person other than the Company is in possession of any of the Leased Real Property or any portion thereof, and there are no leases, subleases, licenses, concessions or other agreements, written or oral, granting to any Person other than the Company the right of use or occupancy of the Leased Real Property or any portion thereof. No easement, utility transmission line or water main located on the Leased Real Property adversely affects the use of the Leased Real Property or any improvement on the Leased Real Property.

(i) All water, sewer, gas, electric, telephone and drainage facilities, and all other utilities required by any Law or by the use and operation of the Leased Real Property in the conduct of the businesses of the Company are installed to the property lines of the Leased Real Property, are connected pursuant to valid permits to municipal or public utility services or proper drainage facilities, are fully operable and are adequate to service the Leased Real Property in the operation of the businesses of the Company  and to permit compliance with the requirements of all Laws in the operation thereof. No fact or condition exists which could result in the termination or material reduction of the current access from the Leased Real Property to existing roads or to sewer or other utility services presently serving the Leased Real Property.

3.15 Intellectual Property.

(a) As used in this Agreement, "Intellectual Property" means: (i) inventions (whether or not patentable), trade secrets, technical data, databases, customer lists, designs, tools, methods, processes, technology, ideas, know-how, source code, product road maps and other proprietary information and materials ("Proprietary Information"); (ii) trademarks and service marks (whether or not registered), trade names, logos, trade dress, slogans, domain names and other proprietary indicia and all goodwill associated therewith; (iii) documentation, advertising copy, marketing materials, web-sites, specifications, mask works, drawings, graphics, databases, recordings and other works of authorship, whether or not protected by Copyright; (iv) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, design documents, flow-charts, user manuals and training materials relating thereto and any translations thereof (collectively, "Software"); and (v) all forms of legal rights and protections that may be obtained for, or may pertain to, the Intellectual Property set forth in clauses (i) through (iv) in any country of the world ("Intellectual Property Rights"), including all letters patent, patent applications, provisional patents, design patents, PCT filings, invention disclosures and other rights to inventions or designs ("Patents"), all registered and unregistered copyrights in both published and unpublished works ("Copyrights"), all trademarks, service marks, trade names, logos, slogans, domain names and other proprietary indicia (whether or not registered) ("Marks"), trade secret rights, mask works, moral rights or other literary property or authors rights, and all applications, registrations, issuances, divisions, continuations, renewals, reissuances and extensions of the foregoing.

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(b) At the Closing Date, there shall be attached to this Agreement as Schedule D a list (by name, owner and, where applicable, registration number and jurisdiction of registration, application, certification or filing) of all Intellectual Property that is owned by the Company (whether exclusively, jointly with another Person or otherwise) ("Owned Intellectual Property"). The Company owns the entire right, title and interest to all Owned Intellectual Property free and clear of all Liens.

(c) There are no licenses, sublicenses and other agreements ("In-Bound Licenses") pursuant to which a third party authorizes the Company to use, practice any rights under, or grant sublicenses with respect to, any Intellectual Property owned by such third party including the incorporation of any such Intellectual Property into the Company's products and, with respect to each In-Bound License, whether the In-Bound License is exclusive or non-exclusive.

(d) There are no licenses, sublicenses and other agreements ("Out-Bound Licenses") pursuant to which the Company authorizes a third party to use, practice any rights under, or grant sublicenses with respect to, any Owned Intellectual Property or pursuant to which the Company grants rights to use or practice any rights under any Intellectual Property owned by a third party and, with respect to each Out-Bound License, whether the Out-Bound License is exclusive or non-exclusive.

(e) The Company exclusively owns the entire right, interest and title to all Intellectual Property that is used in or necessary for the businesses of the Company as they are currently conducted or proposed to be conducted free and clear of Liens (including the design, manufacture, license and sale of all products currently under development or in production) ( the " Company Intellectual Property"), Company Intellectual Property constitutes all the Intellectual Property used in or necessary for the operation of the Company's businesses as they are currently conducted and as proposed to be conducted.

(f) All registration, maintenance and renewal fees related to Patents, Marks, Copyrights and any other certifications, filings or registrations that are owned by the Company ("Company Registered Items") that are currently due have been paid and all documents and certificates related to such Company Registered Items have been filed with the relevant Governmental Entity or other authorities in the Republic of Peru or foreign jurisdictions, as the case may be, for the purposes of maintaining such Company Registered Items. All Company Registered Items are in good standing, held in compliance with all applicable Law and enforceable by the Company. All Patents that have been issued to the Company are valid.

(g) There are no challenges (or any basis therefore) with respect to the validity or enforceability of any Company Intellectual Property The Company has not taken any action or failed to take any action that could reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation, waiver or unenforceability of any Company Intellectual Property. There are no Registered Items that the Company has abandoned, cancelled, forfeited or relinquished during the 12 months prior to the date of this Agreement.

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(h) None of the products or services currently or formerly developed manufactured, sold, distributed, provided, shipped or licensed, by the Company, or which are currently under development, has infringed or infringes upon, or otherwise unlawfully used or uses, the Intellectual Property Rights of any third party.  The Company, by conducting its business as currently conducted or as proposed to be conducted, has not infringed or infringes upon, or otherwise unlawfully used or uses, any Intellectual Property Rights of a third party. The Company has not received any communication alleging that the Company or any of its respective products, services, activities or operations infringe upon or otherwise unlawfully use any Intellectual Property Rights of a third party nor, to the Sellers’ Knowledge, is there any basis therefore. No opposition or Action has been instituted, or, to the Sellers’ Knowledge, threatened, relating to any Intellectual Property formerly or currently used by the Company and none of the Company Intellectual Property is subject to any outstanding Order. To the Company’s Knowledge, no Person has infringed or is infringing any Intellectual Property Rights of the Company or has otherwise misappropriated or is otherwise misappropriating any Company Intellectual Property.

(i) With respect to the Company's Proprietary Information, the documentation relating thereto is current, accurate and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the special knowledge or memory of others. The Company has taken commercially reasonable steps to protect and preserve the confidentiality of all Proprietary Information owned by the Company that is not covered by an issued Patent. Without limiting the generality of the foregoing, the Proprietary Information of the Company (other than Proprietary Information that is covered by an issued Patent) is not part of the public knowledge and has not been used or divulged for the benefit of any Person other than the Company. Any receipt or use by, or disclosure to, a third party of Proprietary Information owned by the Company has been pursuant to the terms of binding written confidentiality agreement between the Company and such third party ("Nondisclosure Agreements"). True and complete copies of the Nondisclosure Agreements and any amendments thereto, have been provided to Buyer. The Company is, and to the Sellers’ Knowledge, all other parties thereto are, in compliance with the provisions of the Nondisclosure Agreements. The Company is in compliance with the terms of all Contracts pursuant to which a third party has disclosed to, or authorized the Company to use, Proprietary Information owned by such third party.

(j) All current and former employees, consultants, advisors and contractors of the Company have executed and delivered, and are in compliance with, enforceable agreements regarding the protection of Proprietary Information and providing valid written assignments of all Intellectual Property conceived or developed by such employees, consultants, advisors or contractors in connection with their services for the Company ("Work Product Agreements"). No current or former employee, consultant, advisor or contractor or any other Person has any right, claim or interest to any of the Company Intellectual Property.

(k) No employee, consultant, advisor or contractor of the Company has been, is or will be, by performing services for the Company, in violation of any term of any employment, invention disclosure or assignment, confidentiality, non-competition agreement or other restrictive covenant or any Order as a result of such employee's, consultant's, advisor’s or independent contractor's employment by the Company or any services rendered by such employee, consultant, advisor or independent contractor.

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(l) All Intellectual Property that has been distributed, sold or licensed to a third party by the Company that is covered by a warranty conformed to or conforms to, and performed or performs in accordance with, the representations and warranties provided with respect to such Intellectual Property by or on behalf of the Company for the time period during which such representations and warranties apply.

(m) The execution and delivery of this Agreement by the Company does not, and the consummation of the Acquisition (in each case, with or without the giving of notice or lapse of time, or both), will not, directly or indirectly, result in the loss or impairment of any Company Intellectual Property, or give rise to any right of any third party to terminate or reprice or otherwise renegotiate any of the Company’s rights to own any of its Intellectual Property or its respective rights under any Out-Bound License or In-Bound License, nor require the consent of any Governmental Entity or other third party in respect of any such Intellectual Property.

3.16 Absence of Certain Changes or Events. Since the date of this Agreement (with respect to the representation and warranty made as of the date of this Agreement) and to the Closing Date (with respect to the representation and warranty made as of the Closing Date):

(a) there has not been any Material Adverse Change in the condition (financial or otherwise), operations, prospects or results of operations of the Company taken as a whole;

(b) the Company has not amended or changed its Charter Documents;

(c) the Company has not declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any Equity Security or any other security;

(d) the Company has not split, combined or reclassified any Equity Security or other security, or issued, or authorized for issuance, any Equity Security or other security;

(e) the Company has not altered any term of any outstanding Equity Security or other security;

(f) the Company has not (i) increased or modified the compensation or benefits payable or to become payable by the Company to any of its current or former directors, employees, contractors, advisors or consultants, (ii) increased or modified any bonus, severance, termination, pension, insurance or other employee benefit plan, payment or arrangement made to, for or with any current or former directors, employees, contractors, advisors or consultants of the Company, or (iii) entered into any employment, severance or termination agreement;

(g) the Company has not sold, leased, transferred or assigned any property or assets of the Company;

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(h) the Company has not incurred, assumed or guaranteed any Indebtedness;

(i) the Company has not created or assumed any Lien on any asset;

(j) the Company has not made any loan, advance or capital contribution to, or investment in, any Person other than advances in the Ordinary Course of business consistent with past practice;

(k) the Company has not entered into any Material Contract;

(l) no Material Contract has been modified, (ii) no rights under any Contract have been waived or accelerated and (iii) no Contract that would be required to be listed as a Material Contract pursuant to Section 3.17 hereof if such Contract were in effect on the date hereof has been terminated or cancelled;

(m) the Company has not sold, transferred, pledged or assigned, and there has been no Material reduction in the value of, any Company Intellectual Property;

(n) there has not been any labor dispute or proceeding by a labor union or representative thereof to organize any employees of the Company;

(o) there has not been any violation of or conflict with any Law to which the business, operations, assets or properties of the Company are subject;

(p) The Company has not agreed or entered into any arrangement to take any action which, if taken prior to the date hereof, would have made any representation or warranty set forth in this Article III untrue or incorrect;

(q) there has not been any Material damage, destruction or loss with respect to the property and assets of the Company, whether or not covered by insurance;

 (r) the Company has not made any change in accounting practices;

(s) the Company has made not any Tax election, changed its method of Tax accounting or settled any claim for Taxes; or

(t) the Company has not agreed, whether in writing or otherwise, to do any of the foregoing.

3.17 Contracts.

(a) At the Closing Date, there shall be attached to this Agreement as Schedule E a complete and accurate list of each Contract or series of related Contracts to which the Company is a party or is subject, or by which any of their respective assets are bound:

(i) for the purchase of materials, supplies, goods, services, equipment or other assets and that involves or would reasonably be expected to involve payments by the Company of ten thousand and 00/100 dollars ($10,000) or more;

(ii) (A) for the sale by the Company of materials, supplies, goods, services, equipment or other assets, and that involves a specified annual minimum dollar sales amount by the Company of ten thousand and 00/100 dollars ($10,000) or more, or (B) pursuant to which the Company has received or expects to receive payments of more than ten thousand and 00/100 dollars ($10,000) in the year ended December 31, 2008;

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(iii) that requires the Company to purchase its total requirements of any product or service from a third party or that contains "take or pay" provisions;

(iv) that (A) continues over a period of more than six months from the date hereof or (B) involves payments to or by the Company exceeding ten thousand and 00/100 dollars ($10,000), other than arrangements disclosed pursuant to the preceding subsections (i) and (ii);

(v) that is an employment, consulting, termination or severance Contract, other than any such Contract that is terminable at-will by the Company without liability to the Company;

(vi) that is a partnership, joint venture, consortium or similar Contract;

(vii) that is a distribution, dealer, representative or sales agency Contract;

(viii) that is a (A) Lease or (B) Contract for the lease of personal or real property, and which in either case provides for payments to or by the Company in any one case of ten thousand and 00/100 dollars ($10,000) or more or more over the term of the lease;

(ix) that provides for the indemnification by the Company of any Person, the undertaking by the Company to be responsible for damages, or the assumption by the Company of any Tax, environmental or other Liability;

(x) with any Governmental Entity;

(xi) that is a note, debenture, bond, equipment trust, letter of credit, loan or other Contract for Indebtedness or lending of money (other than to employees for travel expenses in the Ordinary Course of business) or Contract for a line of credit or guarantee, pledge or undertaking of the Indebtedness of any other Person;

(xii) for a charitable or political contribution in any one case;

(xiii) for any capital expenditure or leasehold improvement in any one case in excess of ten thousand and 00/100 dollars ($10,000);

(xiv) that restricts or purports to restrict the right of the Company to engage in any line of business, acquire any property, develop or distribute any product or provide any service (including geographic restrictions) or to compete with any Person or granting any exclusive distribution rights, in any market, field or territory;

(xv) that is an Out-Bound License or an In-Bound License;

(xvi) that relates to the acquisition or disposition of any Material business (whether by merger, sale of stock, sale of assets or otherwise);

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(xvii) that is a collective bargaining Contract or other Contract with any labor organization, union or association;

(xviii) that is related to telecommunications services, interconnection or similar.

(xix) that is otherwise Material to the Company as a whole and not previously disclosed pursuant to this Section 3.17.

(b) Each Contract required to be listed in Schedule E (collectively, the "Material Contracts") is in full force and effect and valid and enforceable in accordance with its terms.

(c) The Company is, and no other party thereto is, in default in the performance, observance or fulfillment of any obligation, covenant, condition or other term contained in any Material Contract, and neither the Company has given or received notice to or from any Person relating to any such alleged or potential default that has not been cured. No event has occurred which, with or without the giving of notice or lapse of time, or both, may conflict with or result in a violation or breach of, or give any Person the right to exercise any remedy under or accelerate the maturity or performance of, or cancel, terminate or modify, any Material Contract.

(d) The Company has delivered accurate and complete copies of each Material Contract to Buyer.

(e) All Contracts other than Material Contracts to which the Company is a party or is subject, or by which any of their respective assets are bound (collectively, the "Minor Contracts"), are in all Material respects valid and enforceable in accordance with their terms. The Company is not, and no other party thereto is not, in default in the performance, observance or fulfillment of any obligation, covenant or condition contained therein, and no event has occurred which with or without the giving of notice or lapse of time, or both, would constitute a default thereunder by the Company or any other Person.

3.18 Litigation.

(a) There is no action, suit or proceeding, claim, arbitration, litigation or investigation (each, an "Action") (i) pending or, to the Sellers’ Knowledge, threatened against or which may affect the Company, or (ii) that challenges or seeks to prevent, enjoin, or otherwise delay the transactions contemplated by this Agreement or affect the validity, effectiveness or enforceability of this Agreement or the consummation of the transactions contemplated hereby. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action. There is no Action against any current or former director, employee, consultant, advisor or independent contractor of the Company with respect to which the Company has or is reasonably likely to have an indemnification obligation.

(b) There is no unsatisfied judgment, penalty or award against or which may affect the Company or any of its respective properties or assets. There is no Order to which the Company or any of their respective properties or assets is subject.

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3.19 Employee Benefits. The Company does not have any Benefit Plans sponsored, maintained or contributed to or required to be contributed to by the Company for the benefit of any present or former directors, employees, contractors, advisors or consultants of the Company.

3.20 Labor and Employment Matters.

(a) The Company is not a party or subject to any labor union or collective bargaining agreement.

(b) The Company has complied with each, and is not, and has not been, in violationof any, Law relating to anti-discrimination and equal employment opportunities and there are, and have been, no violations of any other Law respecting the hiring, hours, wages, occupational safety and health, employment, promotion, termination or benefits of any employee or other Person.

(c) The Company has paid or properly accrued in the Ordinary Course of business all wages and compensation due to employees, including all vacations or vacation pay, holidays or holiday pay, sick days or sick pay, overtime, bonuses and labor benefits.

(d) The Company is not a party to any Contract which restricts the Company from relocating, closing or terminating any of its operations or facilities or any portion thereof.

(e) The Company has made all payments and met all legal and conventional obligations to be performed with, for the benefit of, on behalf of, as a result of the hiring of, and as a result of the dismissal or resignation and final payment of its employees or any other employee who has worked in the Company in the past, whether under non-fixed term, part-time, fixed-term of another form of contract, as well as to such persons subject to the provisions on pre-professional practices and youth occupational training, on any account, including but not limited to: remuneration, allocation, bonuses, overtime, vacation break at such times established by law, life insurance, hazardous work insurance, contributions to the Private Pension System, contributions to EsSalud (the Peruvian Social Security), severance payments, profit sharing, withholdings and/or payment of taxes, final payment and indemnification for dismissal, and penalties and compensation for termination of contract, and interest, as applicable.

(f) The Company has no outsourcing or labor intermediation contracts or similar agreement or arrangements currently in force.

(g) The Company has no strikes, disputes, stoppages or any other form of collective suspension of labor of the Company and Sellers reasonably do not expect that any strike, dispute, stoppage or any other form of collective suspension will arise.

(h) The Company is not and reasonably does not expect to be a party to any judicial, arbitration or administrative proceedings related to, in connection with or arising out of, labor matters, and no Order has been issued or Sellers reasonably expect to be issued against the Company related to, in connection with or arising out of, labor matters.

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3.21 Environmental.

(a) none of the real properties currently or formerly owned, leased or used by the Company or over which the Company has or had charge, management or control (i) has ever been used by any Person as a licensed landfill or waste disposal site; or (ii) has ever had asbestos, asbestos-containing materials, polychlorinated biphenyls ("PCBs"), radioactive substances or aboveground or underground storage systems, active or abandoned, located on, at or under them;

(b) the Company has not sent any Hazardous Substances for recycling, disposal, treatment or other waste processing outside of any of its facilities;

(c) the Company has not been required by any Governmental Entity to (i) alter any of the real or leased properties of/by the Company in order to be in compliance with Environmental Laws; or (ii) perform any environmental closure, decommissioning, rehabilitation, restoration or post-remedial investigations, on, about, or in connection with any real property currently or formerly owned, leased or used by the Company;

(d) the assets of the Company are capable of, and are not restricted by any Authorization or Order from, being operated at maximum daily and annual production levels while remaining in compliance with Environmental Laws;

(e) the Company is conducting and has always conducted its business and any past business in compliance with all applicable Laws (including Environmental Laws) and, in particular, the Company has not discharged any substances in a manner that is not in compliance with any applicable laws (including Environmental Laws);

(f) the Company holds or possesses all governmental permits and Authorizations that are necessary under Environmental Laws to carry on and conduct the business and operations of the Company as currently conducted;

(g) the buildings and fixtures that the Company operate, use or has operated or used have received proper maintenance and are currently in good operation conditions, in fulfillment of the Environmental Laws;

(h) the Company is not currently in breach of, in default under, or in violation of any Environmental Law, and is not aware of any circumstances which, with the passage of time, will cause the Company to be in breach of, in default under, or in violation of any Environmental Law; and

(i) no suit, claim, action, arbitration, legal, administrative or other proceeding is pending or threatened against the Company with respect to any environmental matter and no Governmental Entity has imposed fines and/or sanctions to, and/or has initiated any inspection process on the Company for any default under, or violation of, any applicable Environmental Law.

3.22 Insurance.

(a) At the Closing Date, there shall be attached to this Agreement as Schedule F an accurate and complete list of each insurance policy and fidelity bond which covers the Company or its respective businesses, properties, assets, directors or employees (the "Policies"). There are no pending claims under any of such Policies as to which coverage has been questioned, denied or disputed by the insurer or in respect of which the insurer has reserved its rights.

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(b) There is no self-insurance arrangement by or affecting the Company.

(c) All Policies are issued by an insurer that is financially sound and reputable, are in full force and effect and are enforceable in accordance with their terms and will continue in full force and effect with respect to the Company following the Acquisition. Such Policies provide adequate insurance coverage for the Company and its respective businesses, properties, assets and employees, and are sufficient for compliance with all Laws and Contracts to which the Company is a party or by which it is bound.

(d) All premiums due under the Policies have been paid in full or, with respect to premiums not yet due, accrued. The Company has not received a notice of cancellation of any Policy or of any Material changes that are required in the conduct of the businesses of the Company as a condition to the continuation of coverage under, or renewal of, any such Policy. There is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a default under any Policy or entitle any insurer to terminate or cancel any Policy. The Sellers have no Knowledge of any threatened termination of, or Material premium increase with respect to, any Policy and none of such Policies provides for retroactive premium adjustments.

3.23 Books and Records. The minute books (containing the records of the meetings, or written consents in lieu of such meetings, of the stockholders and the board of directors), the stock certificate books, and the stock record books of the Company are correct and complete, and have been maintained in accordance with sound business practices. The minute books of the Company contain accurate and complete records of all meetings, or actions taken by written consent, of the stockholders and the board of directors of the Company, and no meeting, or action by written consent in lieu of such meeting, of any such stockholders or board of directors, has been held for which minutes have not been prepared and not contained in the minute books. At the Closing, all of the books and records of the Company will be in the possession of the Company. At the Closing, Sellers will deliver, or cause to be delivered, to Buyer or its designee all of the minute books of the Company.

3.24 Suppliers and Customers. The relationships of each of the Company with each such supplier and customer are good commercial working relationships: (a) each supplier from whom purchases exceeded ten thousand and 00/100 dollars ($10,000) in the year ended December 31, 2008, (b) each supplier who constitutes a sole source of supply to the Company, and (c) with respect to the three-year period ended on the date of this Agreement, each customer that has contributed in excess of 10% percent of the Company’s revenues on a consolidated basis for such period. No such supplier or customer has canceled or otherwise terminated, or threatened to cancel or otherwise terminate, its relationship with the Company. The Company has not received notice that any such supplier or customer may cancel or otherwise Materially and Adversely modify its relationship with the Company or limit its services, supplies or materials to the Company, either as a result of the Acquisition or otherwise.

3.25 Brokers or Finders. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Sellers or the Company.

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3.26 Bank Accounts. At the Closing Date, there shall be attached to this Agreement as Schedule G a list containing the name of each bank, safe deposit company or other financial institution in which the Company has an account, lock box or safe deposit box and the names of all persons authorized to draw thereon or have access thereto.

3.27 Powers of Attorney. At the Closing Date, there shall be attached to this Agreement as Schedule H a list of all outstanding powers of attorney executed by or on behalf of the Company in favor of any Person.

3.28 Support Services. Sellers provide no support or other services to the Company.

3.29 Completeness of Disclosure. No representation or warranty by Sellers in this Agreement, and no statement made in the Schedules, or any certificate or other document furnished or to be furnished to Buyer pursuant hereto, or in connection with the negotiation, execution or performance of this Agreement, contains or will at the Closing contain any untrue statement of a Material fact or omits or will omit to state a Material fact required to be stated herein or therein or necessary to make any statement herein or therein not misleading. There are no facts or circumstances that could be expected to have, individually or in the aggregate, a Material Adverse Effect on the condition (financial or otherwise), operations, prospects or results of operations of the Company taken as a whole.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers that each statement contained in this Article IV is true and correct as of the date hereof.

4.1 Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the Republic of Seychelles, and has all requisite corporate power to own, lease and operate its properties and to carry on its business as now being conducted.

4.2 Authority and Enforceability. Buyer has the requisite power and authority to enter into this Agreement and to consummate the Acquisition. The execution and delivery of this Agreement and the consummation of the Acquisition have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer and, assuming due authorization, execution and delivery by Sellers, constitutes the valid and binding obligation of Buyer, enforceable against it in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to creditors' rights generally, and (b) the availability of injunctive relief and other equitable remedies.  

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4.3 Brokers or Finders.  No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer or any Affiliate of Buyer.

ARTICLE V

COVENANTS OF SELLERS

5.1 Conduct of Business. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Closing, except with the prior written consent of Buyer, Sellers shall cause the Company to:

(a) maintain its corporate existence, pay its debts and Taxes when due, pay or perform other obligations when due, and carry on its business in the usual, regular and ordinary course in a manner consistent with past practice and in accordance with the provisions of this Agreement and in compliance with all Laws, Authorizations, Orders and Contracts;

(b) use its reasonable best efforts consistent with applicable Laws, past practices and policies to preserve intact its present business organization, keep available the services of its present employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that its goodwill and ongoing business be substantially unimpaired on the Closing Date;

(c) maintain the facilities and assets owned, operated or used by it in the same state of repair, order and conditions as they are on the date hereof, reasonable wear and tear excepted;

(d) maintain its books and records in accordance with the applicable Law and past practice, and use its reasonable best efforts to maintain in full force and effect all Authorizations and Policies;

(e) promptly notify Buyer of any event or occurrence not in the Ordinary Course of business;

(f) provide Buyer with a list of actions that must be taken by the Company within 60 days immediately following the Closing for the purposes of obtaining, maintaining, perfecting, preserving or renewing any Company Registered Items; and

(g) use its reasonable best efforts to conduct its business in such a manner that on the Closing Date the representations and warranties of Sellers contained in this Agreement shall be true and correct, as though such representations and warranties were made on and as of such date, and Sellers shall use its reasonable best efforts to cause all of the conditions to the obligations of Buyer under this Agreement to be satisfied as soon as practicable following the date hereof.

5.2 Negative Covenants. Except as expressly provided in this Agreement, Sellers shall not permit the Company, without the prior written consent of Buyer, to:

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(a) adopt or propose any amendment to the Charter Documents of the Company;

(b) declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property) with respect to any Equity Security or other security;

(c) issue or authorize for issuance any Equity Security or other security, or make any change in any issued and outstanding Equity Security or other security, or redeem, purchase or otherwise acquire any Equity Security or other security;

(d) (i) modify (A) the compensation or benefits payable or to become payable by the Company to any of its current or former directors, employees, contractors, advisors or consultants, or (B) any bonus, severance, termination, pension, insurance or other employee Benefit Plan, payment or arrangement made to, for or with any current or former directors, employees, contractors, advisors or consultants of the Company, or (ii) enter into any employment, severance or termination agreement;

(e) sell, lease, transfer or assign any property or assets of the Company;

(f) assume, incur or guarantee any Indebtedness, except for endorsements for collection in the Ordinary Course of business, or modify the terms of any existing Indebtedness;

(g) mortgage, pledge or permit to become subject to Liens any properties or assets of the Company;

(h) make any loans, advances or capital contributions to, or investments in, any Person;

(i) not cancel any debts or waive any claims or rights of substantial value;

(j) (i) amend, modify or terminate, or waive, release or assign any rights under, any Material Contract, (ii) enter into any Contract which, if in effect on the date hereof, would have been required to be set forth in the Schedules as a Material Contract, or (iii) otherwise take any action or engage in any transaction that is Material to the Company taken as a whole;

(k) (i) make any capital expenditure, or commit to make any capital expenditure which in any one case exceeds one hundred dollars ($100), or (ii) except as permitted by clause (i), acquire any assets, properties or rights;

(l) make any filings or registrations, with any Governmental Entity, except routine filings and registrations made in the Ordinary Course of business;

(m) be party to (i) any merger, acquisition, consolidation, recapitalization, reorganization, liquidation, dissolution or similar transaction or (ii) any purchase of all or any substantial portion of the assets or Equity Securities or other securities of the Company;

(n) take any actions outside the Ordinary Course of business;

(o) make any changes in its accounting methods, principles or practices;

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(p) change its method of Tax accounting or settle any claim relating to Taxes;

(q) take any action or omit to do any act which action or omission will cause it to breach any obligation contained in this Agreement or cause any representation or warranty of Sellers not to be true and correct as of the Closing Date; or

(r) agree or otherwise commit, whether in writing or otherwise, to do any of the foregoing.

5.3 Access to Information. Sellers shall, and shall cause the Company to, afford to Buyer's officers, directors, employees, accountants, counsel, consultants, advisors and agents ("Representatives") free and full access to and the right to inspect, during normal business hours, all of the Leased Real Property, properties, assets, records, Contracts and other documents related to the Company, and shall permit them to consult with the officers, employees, accountants, advisors, counsels and agents of the Sellers for the purpose of making such investigation of the Company as Buyer shall desire to make. Sellers shall furnish to Buyer all such documents and copies of documents and records and information with respect to the Company and copies of any working papers relating thereto as Buyer may request. Without limiting the foregoing, Sellers shall permit Buyer and its Representatives to conduct environmental due diligence of the Company and the Leased Real Property, including the collecting and analysis of samples of indoor or outdoor air, surface water, groundwater or surface or subsurface land on, at, in, under or from the Company and the Leased Real Property.

5.4 Resignations. On the Closing Date, Sellers shall cause to be delivered to Buyer duly signed resignations of all members of the Board of Directors of their positions as directors of the Company and of all officers of their positions as officers of the Company. For this purpose, on the Closing Date the Company must hold a Shareholders’ Meeting in which all the resignations presented by all of the members of the Board of Directors and officers of the Company will be accepted.

5.5 Indebtedness; Release of Liens.

(a) Prior to the Closing Date, all Indebtedness of the Company and any guarantees of such Indebtedness shall be extinguished.

(b) Prior to the Closing Date, the Company shall have caused to be released all Liens in and upon any of the properties and assets of the Company.

5.6 Confidentiality.  

(a) From and after the Closing, Sellers will hold, and will use its reasonable best efforts to cause its respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Company, except to the extent that Sellers can show that such information (a) is in the public domain through no fault of Sellers or (b) is lawfully acquired by Sellers after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Sellers or any of its Representatives are compelled to disclose any such information by judicial or administrative process or by other requirements of Law, Sellers shall promptly notify Buyer in writing and shall disclose only that portion of such information which Sellers is advised by its counsel in writing is legally required to be disclosed, provided that Sellers shall exercise its reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.

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5.7 Record Retention Sellers will retain any of its books and records that relate to the Company in accordance with the Company record retention policies as presently in effect. During the period commencing on the Closing Date and ending on the seventh anniversary of the Closing Date, Sellers shall not dispose of or permit the disposal of any such books and records not required to be retained under such policies without first giving 60 days' prior written notice to Buyer offering to surrender the same to Buyer at Buyer's expense.

5.8 Consents. Sellers shall cause the Company toobtain all Consents; provided that no Indebtedness shall be repaid, and no Contract shall be amended nor any right thereunder be waived, and no money or other consideration shall be expended, to obtain any such Consent.

5.9 Notification of Certain Matters.  

(a) Sellers shall give prompt notice to Buyer of (i) any fact, event or circumstance known to any of them that individually or taken together with all other facts, events and circumstances known to any of them, has had or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the condition (financial or otherwise), operations, prospects or results of operations of the Company taken as a whole, or that would cause or constitute a breach of any of its representations, warranties, covenants or agreements contained herein, (ii) any fact, event or circumstance known to any of them that individually or taken together with all other facts, events and circumstances known to any of them, has had or is reasonably likely to result in the failure of any condition precedent to Buyer's obligations, (iii) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the Acquisition, (iv) any notice or other communication from any Governmental Entity in connection with the Acquisition, or (v) any Actions commenced relating to Sellers, the Company that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.18;  provided however, that (A) the delivery of any notice pursuant to this Section 5.9 shall not limit or otherwise affect any remedies available to Buyer or prevent or cure any misrepresentations, breach of warranty or breach of covenant, and (B) disclosure by Sellers shall not be deemed to amend or supplement the Schedules or constitute an exception to any representation or warranty.

(b) From the date hereof to and including the Closing Date, the Company shall provide Buyer with regular management reports on its operations.

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5.10 Restrictive Covenants.

(a) Sellers covenant that, commencing on the Closing Date and ending on the fifth anniversary of the Closing Date (the "Noncompetition Period"), they shall not engage in, directly or indirectly, in any capacity, or have any direct or indirect ownership interest in, or permit the Company's name to be used in connection with, any business anywhere in any South American country, which is engaged, either directly or indirectly, in the business of providing all type of telecommunication services or carrying out activities of local or long distance telephones services, fixed telephony, mobile phones, IP telephony, internet, cable television, rental of networks and equipments, data transmission, commercialization of telecommunication equipments, among others; or providing services which are competitive with products or equipment leased, marketed, sold or under development by, or services provided by, the Company (the "Restricted Business"). It is recognized that the Restricted Business is expected to be conducted throughout at least the Republic of Peru and that more narrow geographical limitations of any nature on this non-competition covenant (and the non-solicitation covenants set forth in Sections 5.10(b) and (c)) are therefore not appropriate.

(b) Sellers covenant that, during the Noncompetition Period, they shall not directly or indirectly, solicit or entice, or attempt to solicit or entice, any clients or customers of the Company or potential clients or customers of the Company for purposes of diverting their business or services from the Company.

(c) Sellers covenant that, during the Noncompetition Period, Sellers shall not solicit the employment or engagement of services of any person who is or was employed as an employee, contractor, advisor or consultant by the Company during such period on a full or part-time basis.

(d) Sellers acknowledge that the restrictions contained in this Section 5.10 are reasonable and necessary to protect the legitimate interests of Buyer and constitute a Material inducement to Buyer to enter into this Agreement and consummate the Acquisition. Sellers acknowledges that any violation of this Section 5.10 will result in irreparable injury to Buyer and agrees that Buyer shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 5.10, which rights shall be cumulative and in addition to any other rights or remedies to which Buyer may be entitled. Without limiting the generality of the foregoing, the Noncompetition Period shall be extended for an additional period equal to any period during which either of the Sellers are in breach of their obligations under this Section 5.10.

(e) In the event that any covenant contained in this Section 5.10 should ever be adjudicated to exceed the time, geographic, product or service, or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service, or other limitations permitted by applicable Law. The covenants contained in this Section 5.10 and each provision thereof is severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

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5.11 Insurance.

(a) To the extent that Sellers shall be entitled under the terms and conditions of "occurrence" based Policies in effect on the date hereof to coverage for losses suffered by the Company after the Closing arising out of any occurrences covered by such Policies occurring prior to the Closing, Sellers shall use such efforts and take such actions to recover such losses on behalf of the Company pursuant to such Policies as it would use or take in conducting its own business in the Ordinary Course if such losses were suffered by Sellers, and shall deliver the proceeds thereby recovered to the Company. In the event of any dispute regarding the date of any loss or occurrence, the terms of the applicable Policy shall govern. Sellers shall continue to maintain such Policies, to the extent they apply on the date hereof to the Company, in full force and effect (and without any amendment that would be adverse, in any Material respect, to the Company) with respect to occurrences prior to and including the Closing. Sellers shall continue to have the Company as a named insured party under each such Policy with respect to occurrences prior to and including the Closing.

(b) Following the Closing, Buyer shall provide, and shall cause the Company to provide, Sellers with all records and other information necessary for the reporting, investigation, negotiation and, if applicable, prosecution of any claim made by Sellers pursuant to this Section 5.11.

5.12 Security Interest.

(a) Sellers hereby grant Buyer a security interest on fifty percent (50%) of the 1,000,000 (one million) shares of China Tel Group Inc. (the “Pledged Shares”) they will receive as consideration for the sale of the Shares in accordance with Section 2.2 of this Agreement.

(b) The pledge on the Pledged Shares will secure each and all of the representations, warranties, statements, agreements, covenants and obligations of the Sellers under this Agreement, for which each Seller will be jointly and severally liable.

(c) The Pledged Shares are pledged to the Buyer up to the amount of One Million One Hundred Twenty-Five Thousand and 00/100 Dollars (US$1,125,000) for a term of thirty-six (36) months following the Closing Date.

(d) Buyer may enforce the security interest and sell all of the Pledged Shares, or any part thereof, upon breach by any of the Sellers of any of the representations, warranties, statements, agreements, covenants or obligations of the Sellers under this Agreement.

(e) The Pledged Shares will be released from their security interest immediately upon expiration of the term set forth in subparagraph (c) hereinabove, provided that all of the Pledged Shares or any part thereof have not been sold by Buyer as set out in subparagraph (d) hereinabove.

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ARTICLE VI

COVENANTS OF BUYER AND SELLERS

6.1 Regulatory Approvals. Each of Buyer and Sellers shall promptly apply for, and take all reasonably necessary actions to obtain or make, as applicable, all Authorizations, Orders, declarations and filings with, and notices to, any Governmental Entity or other Person required to be obtained or made by it for the consummation of the Acquisition and the transactions contemplated by this Agreement.  Each Party shall cooperate with and promptly furnish information to the other Party necessary in connection with any requirements imposed upon such other Party in connection with the consummation of the Acquisition. Parties shall be equally responsible for all filings and other similar fees payable in connection with such filings, and for any local counsel fees.

6.2 Public Announcements. Neither Buyer nor Sellers shall, and Sellers shall cause the Company not to, issue any press releases or otherwise make any public statements with respect to the transactions contemplated by this Agreement; provided that Buyer or Sellers may, without such approval, make such press releases or other public announcement as it believes are required pursuant to any listing agreement with any national securities exchange or stock market or applicable securities Laws, in which case the Party required to make the release or announcement shall allow the other Party reasonable time to comment on such release or announcement in advance of such issuance; provided, further, that each of the parties may make internal announcements to their respective employees that are consistent with the parties' prior public disclosures regarding the Acquisition.

6.3 Tax Matters.

(a) Preparation and Filing of Pre-Closing and Post-Closing Period Tax Returns.

(i) Tax Periods Ending on or Before the Closing Date. Buyer shall prepare, or cause to be prepared, and file, or cause to be filed, all Tax Returns of the Company for all periods ending on or prior to the Closing Date which are filed after the Closing Date. Buyer shall permit Sellers to review and comment on each such Tax Return described in the preceding sentence prior to filing. Sellers shall pay to Buyer the amount of the Taxes with respect to such Tax Returns within five days following any demand by Buyer for such payment.

(ii) Tax Periods Beginning Before and Ending After the Closing Date.Buyer shall prepare, or cause to be prepared, and file, or cause to be filed, all Tax Returns of the Company for Tax periods which begin before the Closing Date and end after the Closing Date. Sellers shall pay to Buyer, within five days following any demand by Buyer, with respect to such Tax Returns, an amount equal to the portion of such Taxes which relates to the portion of such taxable period ending on the Closing Date (as determined pursuant to Section 6.3(c) hereof). Buyer shall permit Sellers to review and comment upon such Tax Returns.

(b) Cooperation in Filing Tax Returns. Buyer and Sellers shall provide to the other such cooperation and information, as and to the extent reasonably requested, in connection with the filing of any Tax Return, amended Tax Return or claim for refund, determining liability for Taxes or a right to refund of Taxes, or in conducting any audit, litigation or other proceeding with respect to Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings and other determinations by Taxing Authorities, and relevant records concerning the ownership and Tax basis of property, which any such party may possess.  Each party will retain all Tax Returns, schedules, work papers, and all Material records and other documents relating to Tax matters, of the Company for the Tax period first ending after the Closing Date and for all prior Tax periods until the expiration of the applicable statute of limitations for the Tax periods to which the Tax Returns and other documents relate. Thereafter, the Party holding such Tax Returns or other documents may dispose of them. Each Party shall make its employees, contractors, consultants and advisors reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided.

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(c) Carryovers, Refunds, and Related Matters.

(i) Any refund of Taxes (including any interest thereon) that relates to the Company and that is attributable to a post-Closing period shall be the property of the Company, as applicable, and shall be retained by the Company (or promptly paid by Sellers to the Company if any such refund (or interest thereon) is received by any of the Sellers). Without limiting the generality of the preceding sentence, any such refund or other benefit realized by the Company in a post-Closing period that results from the carry forward of any Tax attribute from a pre-Closing period shall be the property of the Company and shall be retained by the Company.

(ii) In the event that the Company (or successor thereto) realizes any item of loss or credit for Tax purposes for any post-Closing period, the Company may, in its sole discretion, carry forward such loss or credit.

(d) Payment of Taxes and Fees. Sellers shall pay all Transfer Taxes and any other Taxes arising out of or in connection with the transactions effected pursuant to this Agreement, and shall indemnify, defend, and hold harmless Buyer with respect to such Taxes. Sellers shall file all necessary documentation and Tax Returns with respect to such Taxes.

6.4 Employee Matters.

(a) Severance. Sellers shall be jointly liable for any severance, separation, deferred compensation or similar benefits that are payable to any employee of the Company as a result of the Acquisition. Sellers shall indemnify Buyer for any claim by any such employees that they are entitled to any such benefits as a result of the Acquisition.

(b) Certain Welfare Benefits Matters. Sellers shall retain joint responsibility for and continue to pay all medical, life insurance, disability and other welfare plan expenses and benefits with respect to claims incurred by such employees or their covered dependents on or prior to the Closing Date. Expenses and benefits with respect to claims incurred by such employees or their covered dependents after the Closing Date shall be the responsibility of Buyer, except if they are the result of, or arise out of, the Company’s breach of the applicable Laws. For purposes of this paragraph, a claim is deemed incurred when the services that are the subject of the claim are performed; in the case of life insurance, when the death occurs; in the case of long-term disability benefits, when the disability occurs; and, in the case of a hospital stay, when the employee first enters the hospital.

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(c) Workers' Compensation. Sellers shall be jointly responsible for all claims for workers' compensation benefits which are incurred on or prior to the Closing Date by such employees that are payable under the terms and conditions of the Company  workers' compensation programs. Buyer's workers compensation programs shall be responsible for all claims for benefits which are incurred after the Closing Date by such employees that are payable under the terms and conditions of Buyer's workers' compensation programs. For purposes of this Section 6.4(c), a claim for workers' compensation benefits shall be deemed to be incurred when the event giving rise to the claim occurs (each, a "Workers' Compensation Event"). If a Workers' Compensation Event occurs over a period both preceding and following the Closing, the claim shall be the joint responsibility and liability of Sellers and Buyer and shall be equitably apportioned between Sellers, on the one hand, and Buyer, on the other hand, based upon the relevant periods of time that such Workers' Compensation Event transpired preceding and following the Closing.

6.5 Further Assurances. Subject to the terms of this Agreement, each of Buyer and Sellers shall execute such documents and other instruments and take such further actions as may be reasonably required to carry out the provisions hereof and consummate the Acquisition.

6.6 Payment of Debt to Telefónica del Perú S.A.A. Within 10 (ten) Business Days as of the Closing Date, Buyer will pay to Telefónica del Perú S.A.A. US$100,000.00 (one hundred thousand and 00/100 U.S. dollars) of the current debt that Perusat has with Telefónica del Perú S.A.A.  Sellers shall use best efforts to negotiate with Telefónica del Perú S.A.A to defer payment of the remaining balance due by the Company to Telefónica del Perú S.A.A. a minimum of 90 (ninety) days following the Closing Date without penalty or interests.

ARTICLE VII

CONDITIONS TO CLOSING

7.1 Conditions to Obligations of Buyer and Sellers. The obligations of Buyer and Sellers to consummate the Acquisition are subject to the satisfaction on or prior to the Closing Date of the following conditions:

(a) No temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the Acquisition shall be in effect. No Law shall have been enacted or shall be deemed applicable to the Acquisition which makes the consummation of the Acquisition illegal.

7.2 Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Acquisition is subject to the satisfaction (or waiver by Buyer in its sole discretion) of the following further conditions, which are for the exclusive benefit of Buyer:

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(a) The representations and warranties of Sellers set forth in this Agreementshall have been true and correct at and as of the date hereof and shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date, and the Sellers shall have executed and delivered or cause to be delivered a certificate to Buyer to that effect. The receipt of such certificate at the Closing Date shall not constitute a waiver by Buyer of any of the representation and warranties of the Sellers which are contained in this Agreement.

(b) Sellers shall have performed or compliedwith all obligations and covenants required by this Agreement to be performed or complied by Sellers with at or prior to the Closing Date, and the Sellers shall have executed and delivered or cause to be delivered a certificate to Buyer to that effect. The receipt of such certificate at the Closing Date shall not constitute a waiver by Buyer of any of the covenants of the Sellers which are contained in this Agreement.

(c) There shall have been no Material Adverse Change in the condition (financial or otherwise), operations, prospects or results of operations of the Company taken as a whole.

(d) No Action shall be pending or threatened before any court, judge, arbitrator, arbitration panel or other Governmental Entity or other Person (i) seeking to prevent consummation of any of the transactions contemplated by this Agreement, (ii) seeking to impose any Material limitation on the right of Buyer to own the Shares and to control the Company or (iii) seeking to restrain or prohibit Buyer's ownership or operation of all or any Material portion of the business or assets of the Company, taken as a whole, or compel Buyer to dispose of or hold separate all or any Material portion of the business or assets of the Company, taken as a whole. No such Order shall be in effect.

(e) No Law shall have been enacted or shall be deemed applicable to the Acquisition which has any of the effects set forth in clauses (i) through (iii) in Section 7.2(d).

(f) Sellers shall have obtained the Consent of each Person whose Consent is required under the Contracts set forth in Section 7.2(g) and shall have provided evidence of each such Consent in form and substance satisfactory to Buyer.

(g) Sellers shall have delivered to Buyer evidence of (i) the release of all Liens with respect to the property and assets of the Company, (ii) the repayment of all outstanding Indebtedness of the Company, (iii) the repayment or other cancellation of all intercompany accounts between Sellers (other than the Company), on the one hand, and the Company, on the other hand, and (iv) the release of all guarantees by the Company of any Indebtedness or other obligation of any third party, including Sellers, in each case in form and substance satisfactory to Buyer.

(h) Sellers shall have delivered to Buyer true and complete copies of all resolutions adopted by the Board of Directorsand/or the Shareholders’ Meetingof the Company in connection with the Acquisition.

(i) Sellers shall have delivered to Buyer (i) copies of the Charter Documents of the Company currently in force, (ii) original stock certificates representing the ownership of the Shares, duly endorsed, as set forth in Section 2.4(b) of this Agreement, (iii) all other documents and instruments necessary to vest in Buyer all of Sellers' rights, title and interest in and to the Shares, free and clear of all Liens, as set forth in Section 2.4(b) of this Agreement, (iv) duly signed resignations of all members of the Board of Directors to their positions as directors of the Company and of all officers to their positions as officers of the Company, as set fort in Section 5.4 of this Agreement, and (v) all other documents, instruments or certificates required to be delivered by Sellers at or prior to the Closing pursuant to this Agreement.

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(j) Each Seller shall have delivered to Buyer, or cause to be delivered to Buyer, an original signed receipt evidencing payment of the Purchase Price.

7.3 Conditions to Obligation of Sellers. The obligation of Sellers to consummate the Acquisition is subject to the satisfaction (or waiver by Sellers in its sole discretion), of the following further conditions, which are for their exclusive benefit:

(a) The representations and warranties of Buyer set forth in this Agreementshall have been true and correct at and as of the date hereof and shall be true and correct at and as of the Closing Date as if made at and as of the Closing Date, and Buyer shall have executed and delivered or cause to be delivered a certificate to Sellers to that effect. The receipt of such certificate at the Closing Date shall not constitute a waiver by the Sellers of any of the representation and warranties of the Buyer which are contained in this Agreement.

(b) Buyer shall have performed or compliedin all Material respects with all obligations and covenants required by this Agreement to be performed or complied with by Buyer at or prior to the Closing Date, and Buyer shall have executed and delivered or cause to be delivered a certificate to Sellers to that effect. The receipt of such certificate at the Closing Date shall not constitute a waiver by the Sellers of any of the covenants of the Buyer which are contained in this Agreement.

(c) No Action shall be pending or threatened before any court, judge, arbitrator or arbitration panel or other Governmental Entity or other Person wherein an unfavorable Order would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation. No such Order shall be in effect.

ARTICLE VIII

TERMINATION

8.1 Termination.

(a) This Agreement may be terminated and the Acquisition abandoned at any time prior to the Closing:

(i) by mutual written consent of Buyer and Sellers;

(ii) by Buyer or Sellers if:

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(A) the Closing does not occur on or before March 6, 2009 provided that the right to terminate this Agreement under this clause (ii)(A) shall not be available to any Party whose breach of a representation, warranty, covenant or agreement under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such date; or

(B) a Governmental Entity shall have issued an Order or taken any other action, in any case having the effect of restraining, enjoining or otherwise prohibiting the Acquisition, which Order or other action is final and non-appealable;

(iii) by Buyer if:

(A) any condition to the obligations of Buyer hereunder becomes incapable of fulfillment other than as a result of a breach by Buyer of any covenant or agreement contained in this Agreement, and such condition is not waived by Buyer; or

(B) there has been a breach by Sellers of any representation, warranty, covenant or agreement contained in this Agreement or Schedules, or if any representation or warranty of Sellers shall have become untrue, in either case such that the conditions set forth in Section 7.2(a) or Section 7.2(b) would not be satisfied; or

(iv) by Sellers if:

(A) any condition to the obligations of Sellers hereunder becomes incapable of fulfillment other than as a result of a breach by Sellers of any covenant or agreement contained in this Agreement, and such condition is not waived by Sellers; or

(B) there has been a breach by Buyer of any representation, warranty, covenant or agreement contained in this Agreement, or if any representation or warranty of Buyer shall have become untrue, in either case such that the conditions set forth in Section 7.3(a) or Section 7.3(b) would not be satisfied.

(b) The Party desiring to terminate this Agreement pursuant to Section 8.1(a) (ii), (iii) or (iv)  shall give written notice of such termination to the other Party hereto.

8.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall immediately become null and void and there shall be no liability or obligation on the part of Buyer or Sellers, except as set forth in Section 8.3; provided that the provisions of Section 6.2 (Public Announcements) and Section 8.3 (Remedies) and Article X of this Agreement shall remain in full force and effect and survive any termination of this Agreement.

8.3 Remedies. Any Party terminating this Agreement pursuant to Section 8.1 shall have the right to recover damages sustained by such Party as a result of any breach by the other Party of any representation, warranty, covenant or agreement contained in this Agreement or fraud or willful misrepresentation; provided, however, that the Party seeking relief is not in breach of any representation, warranty, covenant or agreement contained in this Agreement under circumstances which would have permitted the other Party to terminate the Agreement under Section 8.1.

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ARTICLE IX

INDEMNIFICATION

9.1 Survival.

(a) Except as set forth in Section 9.1(b), all representations and warranties contained in this Agreement, or in any Schedule, certificate or other document delivered pursuant to this Agreement, shall survive the Closing for a period of two years.

(b) The representations and warranties of Sellers contained in Sections 3.1 (Organization and Good Standing), 3.2 (Capitalization), 3.4 (Authority and Enforceability), 3.25 (Brokers or Finders), and the representation and warranties of Buyer contained in Sections 4.1 (Organization and Good Standing), 4.2 (Authority and Enforceability) and 4.3 (Brokers or Finders) shall survive the Closing indefinitely. The representations and warranties of Sellers contained in Sections 3.9 (Taxes), 3.19 (Employee Benefits), 3.20 (Labor and Employment Matters) and 3.21 (Environmental) shall survive the Closing until 90 Business Days after the expira­tion of the applicable statute of limitations period (after giving effect to any waivers and extensions thereof).

(c) The period for which a representation or warranty, covenant or agreement survives the Closing is referred to herein as the "Applicable Survival Period". In the event a Notice of Claim for indemnification under Section 9.2 or 9.3 is given within the Applicable Survival Period, the representation or warranty, covenant or agreement that is the subject of such indemnification claim (whether or not formal legal action shall have been commenced based upon such claim) shall survive with respect to such claim until such claim is finally resolved. The Indemnitor shall indemnify the Indemnitee for all Losses (subject to the limitations set forth herein, if applicable) that the Indemnitee may incur in respect of such claim, regardless of when incurred.

9.2 Indemnification by Sellers.

(a) Sellers shall jointly and severally indemnify and defend Buyer and its Affiliates (including, following the Closing, the Company) and their respective stockholders, members, managers, officers, directors, employees, agents, successors and assigns (the "Buyer Indemnitees") against, and shall hold them harmless from, any and all losses, damages, claims (including third party claims), charges, interest, penalties, Taxes, diminution in value, costs and expenses (including legal, consultant, accounting and other professional fees, costs of sampling, testing, investigation, removal, treatment and remediation of contamination and fees and costs incurred in enforcing rights under this Section 9.2) (collectively, "Losses") resulting from, arising out of, or incurred by any Buyer Indemnitee in connection with, or otherwise with respect to:

(i) the failure of any representation and warranty or other statement by Sellers contained in this Agreement, the Schedules, or any other document furnished or to be furnished to Buyer in connection with the transactions contemplated by this Agreement, to be true and correct in all respects as of the date of this Agreement or as of the Closing Date;

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(ii) any breach of any covenant or agreement of Sellers contained in this Agreement, the Schedules, or any other document furnished or to be furnished to Buyer in connection with the transactions contemplated by this Agreement;

(iii) any fees, expenses or other payments incurred or owed by Sellers or the Company to any agent, broker, investment banker or other firm or person retained or employed by it in connection with the transactions contemplated by this Agreement;

(iv) any Pre-Closing Environmental Liabilities and any Action arising out of or in connection therewith; provided that (A) this Section 9.2 shall not apply with respect to any Loss relating to Taxes to the extent that indemnification payments for such Loss have been made pursuant to Section 9.8, and (B) for purposes of this Section 9.2, the representations and warranties herein shall be deemed to have been made without any qualifications as to Knowledge or materiality and, accordingly, all references herein and therein to "Knowledge," "material," "in all material respects" and similar qualifications as to Knowledge and materiality shall be deemed to be deleted therefrom (except where any such provision requires disclosure of lists of items of a material nature or above a specified threshold). Any and all Losses hereunder shall bear interest from the date incurred until paid at the rate of 8% per annum.

(b) Sellers shall not be liable for any Loss or Losses pursuant to Section 9.2(a)(i) ("Buyer Warranty Losses") (i) unless and until the aggregate amount of all Buyer Warranty Losses incurred by the Buyer Indemnitees exceeds Fifty Thousand and 00/100 dollars ($50,000), in which event Sellers shall be jointly liable for all Buyer Warranty Losses from the first dollar; provided that nothing contained in this Section 9.2(b) shall be deemed to limit or restrict in any manner any rights or remedies which Buyer has, or might have, at Law, in equity or otherwise, based on fraud or a willful misrepresentation or willful breach of warranty hereunder.

9.3 Indemnification by Buyer.

(a) Buyer shall indemnify and defend Sellers (the "Sellers Indemnitees") against, and shall hold them harmless from, any and all Losses resulting from, arising out of, or incurred by any Sellers Indemnitee in connection with, or otherwise with respect to:

(i) the failure of any representation and warranty or other statement by Buyer contained in this Agreement or any other document furnished or to be furnished by Buyer to Sellers in connection with the transactions contemplated by this Agreement, to be true and correct in all respects as of the date of this Agreement or as of the Closing Date; and

(ii) any breach of any covenant or agreement of Buyer contained in this Agreement or any other document furnished or to be furnished by Buyer to Sellers in connection with the transactions contemplated by this Agreement.

(b) Buyer shall not be liable for any Loss or Losses pursuant to 9.3(a)(i) ("Sellers Warranty Losses") (i) unless and until the aggregate amount of all Sellers Warranty Losses incurred by the Sellers Indemnitees exceeds Fifty Thousand and 00/100 dollars ($50,000), in which event Buyer shall be liable for all Sellers Warranty Losses from the first dollar.

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9.4 Indemnification Procedures for Third Party Claims.

(a) In the event that an Indemnitee receives notice of the assertion of any claim or the commencement of any Action by a third party in respect of which indemnity may be sought under the provisions of this Article IX ("Third Party Claim"), the Indemnitee shall promptly notify the Indemnitor in writing ("Notice of Claim") of such Third Party Claim. Failure or delay in notifying the Indemnitor will not relieve the Indemnitor of any liability it may have to the Indemnitee, except and only to the extent that such failure or delay causes actual harm to the Indemnitor with respect to such Third Party Claim. The Notice of Claim shall set forth the amount, if known, or, if not known, an estimate of the foreseeable maximum amount of claimed Losses (which estimate shall not be conclusive of the final amount of such Losses) and a description of the basis for such Third Party Claim.

(b) Subject to the further provisions of this Section 9.4, the Indemnitor will have 10 (ten) days (or less if the nature of the Third Party Claim requires) from the date on which the Indemnitor received the Notice of Claim to notify the Indemnitee that the Indemnitor will assume the defense or prosecution of such Third Party Claim and any litigation resulting therefrom with counsel of its choice (reasonably satisfactory to the Indemnitee) and at its sole cost and expense (a "Third Party Defense"). If the Indemnitor assumes the Third Party Defense in accordance with the preceding sentence, the Indemnitor shall be conclusively deemed to have acknowledged that the Third Party Claim is within the scope of its indemnity obligation hereunder and shall hold the Indemnitee harmless from and against the full amount of any Losses resulting therefrom (subject to the terms and conditions of this Agreement). Any Indemnitee shall have the right to employ separate counsel in any such Third Party Defense and to participate therein, but the fees and expenses of such counsel shall not be at the expense of the Indemnitor unless (A) the Indemnitor shall have failed, within the time after having been notified by the Indemnitee of the exist­ence of the Third Party Claim as provided in the first sentence of this paragraph (b), to assume the defense of such Third Party Claim, or (B) the employment of such counsel has been specifically authorized in writing by the Indemnitor, which authorization shall not be unreasonably withheld.

(c) The Indemnitor will not be entitled to assume the Third Party Defense if:

(i) the Third Party Claim seeks, in addition to or in lieu of monetary damages, any injunctive or other equitable relief (except where non-monetary relief is merely incidental to a primary claim or claims for monetary damages);

(ii) the Third Party Claim relates to or arises in connection with any criminal proceed­ing, action, indictment, allegation or investigation;

(iii) the Third Party Claim relates to or arises in connection with any Action related to Environmental Laws;

(iv) under applicable standards of professional conduct, a conflict on any significant issue exists between the Indemnitee and the Indemnitor in respect of the Third Party Claim;

(v) the Third Party Claim involves a Material customer or supplier of the Company;

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(vi) the Indemnitee reasonably believes an adverse determination with respect to the Third Party Claim would be detrimental to or injure the Indemnitee's reputation or future business prospects;

(vii) the Indemnitor has failed or is failing to vigorously prosecute or defend such Third Party Claim; or

(viii) the Indemnitor fails to provide reasonable assurance to the Indemnitee of its financial capacity to prosecute the Third Party Defense and provide indemnification in accordance with the provisions of this Agreement.

(d) If by reason of the Third Party Claim a Lien, attachment, garnishment or execution is placed upon any of the property or assets of the Indemnitee, the Indemnitor, if it desires to exercise its right to assume such Third Party Defense, must furnish a satisfactory indemnity bond to obtain the prompt release of such Lien, attachment, garnishment or execution.

(e) If the Indemnitor assumes a Third Party Defense, it will take all steps necessary in the defense, prosecution, or settlement of such claim or litigation and will hold all Indemnitees harmless from and against all Losses caused by or arising out of such Third Party Claim. The Indemnitor will not consent to the entry of any judgment or enter into any settlement except with the written consent of the Indemnitee; provided that the consent of the Indemnitee shall not be required if all of the following conditions are met: (i) the terms of the judgment or proposed settlement include as an unconditional term thereof the giving to the Indemnitees by the third party of a release of the Indemnitees from all liability in respect of such Third Party Claim, (ii) there is no finding or admission of (A) any violation of Law by the Indemnitees (or any Affiliate thereof), (B) any violation of the rights of any Person and (C) no effect on any other Action or claims of a similar nature that may be made against the Indemnitees (or any Affiliate thereof), and (iii) the sole form of relief is monetary damages which are paid in full by the Indemnitor. The Indemnitor shall conduct the defense of the Third Party Claim actively and diligently, and the Indemnitee will provide reasonable cooperation in the defense of the Third Party Claim. So long as the Indemnitor is reasonably conducting the Third Party Defense in good faith, the Indemnitee will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnitor (not to be unreasonably withheld or delayed). Notwithstanding the foregoing, the Indemnitee shall have the right to pay or settle any such Third Party Claim, provided that in such event it shall waive any right to indemnity therefore by the Indemnitor for such claim unless the Indemnitor shall have consented to such payment or settlement (such consent not to be unreasonably withheld or delayed). If the Indemnitor is not reasonably conducting the Third Party Defense in good faith, the Indemnitee shall have the right to consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnitor and the Indemnitor shall reimburse the Indemnitee promptly for all Losses incurred in connection with such judgment or settlement.

(f) In the event that (i) an Indemnitee gives Notice of Claim to the Indemnitor and the Indemnitor fails or elects not to assume a Third Party Defense which the Indemnitor had the right to assume under this Section 9.4 or (ii) the Indemnitor is not entitled to assume the Third Party Defense pursuant to this Section 9.4, the Indemnitee shall have the right, with counsel of its choice, to defend, conduct and control the Third Party Defense, at the sole cost and expense of the Indemnitor. In each case, the Indemnitee shall conduct the Third Party Defense actively and diligently, and the Indemnitor will provide reasonable cooperation in the Third Party Defense. The Indemnitee shall have the right to consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim on such terms as it may deem appropriate; provided, however, that the amount of any settlement made or entry of any judgment consented to by the Indemnitee without the consent of the Indemnitor shall not be determinative of the validity of the claim, except with the consent of the Indemnitor (not to be unreasonably withheld or delayed). Notwithstanding Section 10.6 hereof, in connection with any Third Party Claim, the Indemnitor hereby consents to the nonexclusive jurisdiction of any court in which an Action in respect of a Third-Party Claim is brought against any Indemnitee for purposes of any claim that the Indemnitee may have under this Article IX with respect to such Action or the matters alleged therein and agrees that process may be served on the Indemnitor with respect to such a claim anywhere in the world. If the Indemnitor does not elect to assume a Third Party Defense which it has the right to assume hereunder, the Indemnitee shall have no obligation to do so.

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(g) Each Party to this Agreement shall use its commercially reasonable efforts to cooperate and to cause its employees, contractors, advisors and consultants to cooperate with and assist the Indemnitee or the Indemnitor, as the case may be, in connection with any Third Party Defense, including attending conferences, discovery proceedings, hearings, trials and appeals and furnishing records, information and testimony, as may reasonably be requested; provided that each Party shall use its best efforts, in respect of any Third Party Claim of which it has assumed the defense, to preserve the confidentiality of all confidential information and the attorney-client and work-product privileges.

9.5 Indemnification Procedures for Non-Third Party Claims. In the event of a claim that does not involve a Third Party Claim being asserted against it, the Indemnitee shall send a Notice of Claim to the Indemnitor. The Notice of Claim shall set forth the amount, if known, or, if not known, an estimate of the foreseeable maximum amount of claimed Losses (which estimate shall not be conclusive of the final amount of such Losses) and a description of the basis for such claim. The Indemnitor will have 30 days from receipt of such Notice of Claim to dispute the claim and will reasonably cooperate and assist the Indemnitee in determining the validity of the claim for indemnity. If the Indemnitor does not give notice to the Indemnitee that it disputes such claim within 30 days after its receipt of the Notice of Claim, the claim specified in such Notice of Claim will be conclusively deemed a Loss subject to indemnification hereunder.

9.6 Contingent Claims. Nothing herein shall be deemed to prevent an Indemnitee from making a claim hereunder for potential or contingent claims or demands; provided that the Notice of Claim sets forth the specific basis for any such contingent claim to the extent then feasible and the Indemnitee has reasonable grounds to believe that such a claim may be made.

9.7 Effect of Investigation; Waiver.

(a) An Indemnitee's right to execute the security interest on the Pledged Shares, indemnification or other remedies based upon the representations and warranties and covenants and agreements of the Indemnitor will not be affected by any investigation or knowledge of the Indemnitee or any waiver by the Indemnitee of any condition based on the accuracy of any representation or warranty, or compliance with any covenant or agreement. Such representations and warranties and covenants and agreements shall not be affected or deemed waived by reason of the fact that the Indemnitee knew or should have known that any representation or warranty might be inaccurate or that the Indemnitor failed to comply with any agreement or covenant. Any investigation by such Party shall be for its own protection only and shall not affect or impair any right or remedy hereunder.

(b) Sellers acknowledge and agree that, upon and following the Closing, the Company shall not have any liability or obligation to indemnify, save or hold harmless or otherwise pay, reimburse or make Sellers whole for or on account of any indemnification or other claims made by any Buyer Indemnitees hereunder. Sellers shall have no right of contribution against the Company with respect to any such indemnification or other claim.

9.8 Tax Indemnification.

(a) From and after the Closing Date, Sellers shall be jointly responsible for, shall pay or cause to be paid, and shall jointly indemnify, defend and hold harmless each Tax Indemnitee against, and reimburse such Tax Indemnitee for, on a Grossed-Up Basis, any Losses resulting from, arising out of, relating to, in the nature of, or caused by:

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(i) any Tax imposed on or relating to the Company with respect to any Pre-Closing Period;

(ii) any Tax imposed upon or relating to the Company as a transferee or successor, by contract, or otherwise; and

(iii) any Tax arising directly or indirectly from a breach or inaccuracy of a representation or warranty set forth in Section 3.9.

(b) Except as otherwise provided in Section 9.8, payment in full of any amount due under Section 9.8(a) shall be made to the Tax Indemnitee in immediately available funds at least five Business Days before the date for payment of the Taxes to which such payment relates is due. The Tax indemnities contained in Section 9.8 shall not be subject to any threshold or other limitations contained in this Agreement.

9.9 Procedures Relating to Indemnification of Tax Claims.

(a) If any Taxing Authority or other Person asserts a Tax Claim, then the Party hereto first receiving notice of such Tax Claim promptly shall provide written notice of such Tax Claim to the other Party hereto; provided that the failure of Buyer to give such prompt notice to Sellers of any such Tax Claim shall not relieve Sellers of any of its obligations under this Section 9.9. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of any relevant correspondence received from the Taxing Authority or other Person.

(b) Sellers shall have the right to defend or prosecute, at its sole cost, expense and risk, only those Tax Claims with respect to Taxes set forth in Section 9.8(a). In order to defend or prosecute any such Tax Claim, Sellers shall notify Buyer that it elects to defend or prosecute such Tax Claim ("Election Notice") within 30 days after (i) the date on which Sellers receives notice of any such Tax Claim from Buyer (with respect to Tax Claims as to which Buyer first received notice from a Taxing Authority or any other Person), or (ii) the date on which Sellers delivered to Buyer notice of any such Tax Claim (with respect to Tax Claims as to which Sellers first received notice from a Taxing Authority or any other Person). With respect to any Tax Claim as to which Sellers has provided an Election Notice to Buyer, Sellers shall defend or prosecute such Tax Claim by all appropriate proceedings, which proceedings shall be defended or prosecuted diligently by Sellers to a Final Determination; provided that Sellers shall not, without the prior written consent of Buyer, enter into any compromise or settlement of such Tax Claim that would result in any Tax detriment to any Tax Indemnitee. Sellers shall inform Buyer of all developments and events relating to such Tax Claim (including providing to Buyer copies of all written materials relating to such Tax Claim), and Buyer or its authorized representatives shall be entitled, at the expense of Buyer, to attend, but not participate in or control, all conferences, meetings and proceedings relating to such Tax Claim.

(c) If, with respect to any Tax Claim, Sellers fails to deliver an Election Notice to Buyer within the period provided in Section 9.9(b) or fails diligently to defend or prosecute such Tax Claim to a Final Determination, then Buyer shall at any time thereafter have the right (but not the obligation) to defend or prosecute such Tax Claim, at the sole cost, expense and risk of Sellers. Buyer shall have full control of such defense or prosecution and such proceedings, including any settlement or compromise thereof. Sellers shall cooperate in good faith with Buyer and its authorized representatives in order to contest effectively such Tax Claim. Sellers may attend, but not participate in or control, any defense, prosecution, settlement, or compromise of any Tax Claim controlled by Buyer pursuant to this Section 9.9(c), and shall bear its own costs and expenses with respect thereto. In the case of any Tax Claim that is defended or prosecuted by Buyer pursuant to this Section 9.9(c), Buyer shall be entitled upon demand to prompt payment from Sellers for any and all costs and expenses incurred by Buyer in connection with such defense or prosecution (including attorneys', accountants', and experts' fees and disbursements, settlement costs, court costs, and any other costs or expenses for investigating, defending or prosecuting such Tax Claim), in each case on a Grossed-Up Basis.

9.10 Tax Treatment of Indemnification Payments. Except as otherwise required by applicable Law, the Parties shall treat any indemnification payment made hereunder as an adjustment to the Purchase Price.  

9.11 Other Rights and Remedies Not Affected. The indemnification rights of the Parties under this Article IX are independent of and in addition to such rights and remedies as the Parties may have at Law or in equity or otherwise for any misrepresentation, breach of warranty or failure to fulfill any agreement or covenant hereunder on the part of any Party hereto, including the right to seek specific performance, rescission or restitution, none of which rights or remedies shall be affected or diminished hereby.

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ARTICLE X

MISCELLANEOUS

10.1 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given (a) on the date established by the sender as having been delivered personally, (b) on the date delivered by a private courier as established by the sender by evidence obtained from the courier, (c) on the date sent by facsimile, with confirmation of transmission, if sent during normal business hours of the recipient, if not, then on the next Business Day, or (d) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:

If to Buyer, to:

Gulfstream Capital Partner Ltd.

c/o China Tel Group, Inc.

8105 Irvine Center Drive, Suite 800

Irvine, CA  92618 USA

Attn: Kenneth Waggoner

If to Sellers, to:

Mario Navarro

Av. Camino Real 493

Piso 11, San Isidro

Lima, Peru

or to such other address or to the attention of such Person or Persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

10.2 Amendments and Waivers.

(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b) No failure or delay by any Party in exercising any right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(c) To the maximum extent permitted by Law, (i) no waiver that may be given by a Party shall be applicable except in the specific instance for which it was given and (ii) no notice to or demand on one party shall be deemed to be a waiver of any obligation of such Party or the right of the Party giving such notice or demand to take further action without notice or demand.

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10.3 Expenses. Each Party shall bear its own costs and expenses in connection with this Agreement and the transactions contemplated by this Agreement, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties, whether or not the Acquisition is consummated.

10.4 Successors and Assigns. This Agreement may not be assigned by either Party hereto without the prior written consent of the other Party; provided that, without such consent, Buyer may transfer or assign, in whole or in part or from time to time, to one or more of its Affiliates, the right to purchase all or a portion of the Shares, but no such transfer or assignment will relieve Buyer of its obligations hereunder.  Subject to the foregoing, all of the terms and provisions of this Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and assigns.

10.5 Governing Law. This Agreement and the Exhibits and Schedules hereto and thereto shall be governed by and interpreted and enforced in accordance with the Laws of the State of California, United States of America, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of California or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of California, United States of America.

10.6  Consent to Jurisdiction. Each Party irrevocably submits to the exclusive jurisdiction of (a) the Orange County Superior Court, State of California, United States of America, and (b) the United States District Court for Southern District of California, United States of America, for the purposes of any Action arising out of this Agreement or any transaction contemplated by this Agreement. Each Party agrees to commence any such Action either in the Orange County Superior Court, State of California, United States of America or if such Action may not be brought in such court for jurisdictional reasons, in the United States District Court for the Southern District of California, United States of America. Each Party further agrees that service of any process, summons, notice or document by registered mail to such Party's respective address set forth above shall be effective service of process with respect to any matters to which it has submitted to jurisdiction in this Section 10.6. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement or the transactions contemplated by this Agreement in (i) the Orange County Superior Court, State of California, United States of America, or (ii) the United States District Court for the Southern District of California, United States of America, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum. Each Party hereby irrevocably waives all right to trial by jury in any Action (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of such Party in the negotiation, administration, performance and enforcement hereof.

10.7  Counterparts. This Agreement may be executed in counterparts, and either Party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and both of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become effective when each Party hereto shall have received a counterpart hereof signed by the other Party hereto. The Parties agree that the delivery of this Agreement may be effected by means of an exchange of facsimile signatures with original copies to follow by mail or courier service.

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10.8  Third Party Beneficiaries. No provision of this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder; except that in the case of Article IX hereof, the other Indemnitees and their respective heirs, executors, administrators, legal representatives, successors and assigns, are intended third party beneficiaries of such sections and shall have the right to enforce such sections in their own names.

10.9  Entire Agreement. This Agreement, the Schedules and the documents, instruments and other agreements specifically referred to herein or delivered pursuant hereto set forth the entire understanding of the Parties hereto with respect to the Acquisition. All Schedules referred to herein are intended to be and hereby are specifically made a part of this Agreement. Any and all previous agreements and understandings between or among the Parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement.

10.10  Captions. All captions contained in this Agreement and on the Schedules are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement and of the Schedules.

10.11  Severability. Subject to Section 5.10(d), any provision of this Agreement which is invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

10.12  Specific Performance. Buyer and Sellers each agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof and that each Party shall be entitled to specific performance of the terms hereof, in addition to any other remedy at Law or equity.

10.13  Interpretation.

(a) The meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting either gender shall include both genders as the context requires. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.

(b) The terms "hereof", "herein" and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.

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(c) When a reference is made in this Agreement to an Article, Section, paragraph, Exhibit or Schedule, such reference is to an Article, Section, paragraph, Exhibit or Schedule to this Agreement unless otherwise specified.

(d) The word "include", "includes", and "including" when used in this Agreement shall be deemed to be followed by the words "without limitation", unless otherwise specified.

(e) The phrase “the aggregate of”, “the total of”, “the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”.

(f) In the computation of periods of time from a specified date to a later specified date , unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

(g) A reference to any Party to this Agreement or any other agreement or document shall include such Party's predecessors, successors and permitted assigns.

(h) Reference to any Law means such Law as amended, modified, codified, replaced or reenacted, and all rules and regulations promulgated thereunder.

(i) The Parties have participated jointly in the negotiation and drafting of this Agreement. Any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any Party by virtue of the authorship of this Agreement shall not apply to the construction and interpretation hereof.

(j) All accounting terms used and not defined herein shall have the respective meanings given to them under PGAAP.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

BUYER 

GULFSTREAM CAPITAL PARTNERS LTD. 

By:  /s/ Colin Tay                         

Colin Tay, its Secretary 

SELLERS 

/s/ Mario Octavio Navarro Álvarez 

Mario Octavio Navarro Álvarez 

/s/ Rafael Isaías Samanez Zacarías 

Rafael Isaías Samanez Zacarías 

/s/ Gisella Tsuchikame Nakamoto 

Gisella Tsuchikame Nakamoto 

/s/ Jesus Margot Magan Gutierrez 

Jesus Margot Magan Gutierrez 

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EX-21

EXHIBIT 21

Subsidiaries of the Registrant

Trussnet USA, Inc., incorporated under the laws of the state of Nevada

ChinaTel Argentina S.A., incorporated under the laws of the Republic of Argentina (held indirectly through Trussnet)

Gulfstream Capital Partners Ltd., incorporated under the laws of the Republic of Seychelles (held indirectly through Trussnet)

Perusat, N.A., incorporated under the laws of the Republic of Peru (95% interest held indirectly through Trussnet)

ChinaComm, Limited., incorporated under the laws of the Cayman Islands (49% interest held indirectly through Trussnet)

Smart Channel Development Co., incorporated under the laws of Hong Kong (held indirectly through ChinaComm Limited)

Trussnet Gulfstream (Dahlian) Co. Ltd., a wholly-owned foreign investment enterprise incorporated under the laws of the Peoples Republic of China (held indirectly through ChinaComm, Limited.)

Yunji Communications Technology Co. Ltd., a wholly-owned foreign investment enterprise incorporated under the laws of the Peoples Republic of China (held indirectly through ChinaComm Limited)

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

      I, George Alvarez, certify that:

       1. I have reviewed this annual report on Form 10-K of CHINA TEL GROUP, INC.;

       2. Based on my knowledge, this annual 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 annual report;

       3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

       4. The registrant's other certifying officer 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and evaluated the effectiveness of our internal control over financial reporting, and presented in this report our conclusions about the effectiveness of our internal control over financial reporting, as of the end of the period covered by this report based on such evaluation;

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

       5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

       a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information and have identified for the registrant's auditors any material weaknesses in internal controls; and

       b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Dated: May 15, 2009	By: /s/ George Alvarez
	Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

      I, Carlos Trujillo, certify that:

       1. I have reviewed this annual report on Form 10-K of CHINA TEL GROUP, INC.;

       2. Based on my knowledge, this annual 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 annual report;

       3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

       4. The registrant's other certifying officer 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 controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual 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 registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures and evaluated the effectiveness of our internal control over financial reporting, and presented in this report our conclusions about the effectiveness of our internal control over financial reporting, as of the end of the period covered by this report based on such evaluation;

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

       5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

       a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information and have identified for the registrant's auditors any material weaknesses in internal controls; and

       b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Dated: May 15, 2009	By: /s/ Carlos Trujillo
	Carlos Trujillo, Chief
	Accounting Officer & CFO

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL 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 CHINATEL GROUP, INC. AND SUBSIDIARIES (the "Company") on Form 10-K for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, George Alvarez, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

       (1) The Report 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 Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 15, 2009	/s/ George Alvarez
	George Alvarez, Chief Executive Officer, President & Director

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL 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 CHINATEL GROUP, INC. AND SUBSIDIARIES (the "Company") on Form 10-K for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Carlos Trujillo, Chief Accounting Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

       (1) The Report 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 Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  May 15, 2009	/s/ Carlos Trujillo
	Carlos Trujillo, Chief Accounting Officer & Chief Financial Officer