Document:

Exhibit 10.6

 

SCL Ventures Ltd.

(the “Purchaser”)

 

and

 

Li Shun Xing, Li Xiang Ning,

Pang Da Qing, and Xie Li

(the “Vendors”)

 

EQUITY INTEREST TRANSFER AGREEMENT

 

for the Sale and Purchase of Shares of

Weida Communications Technology Company Limited

 

Chen & Co. Law Firm

Suite 1901 North Tower

Shanghai Stock Exchange Building

528 Pudong Nan Road

Shanghai 200120

P. R. China

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS AND
  INTERPRETATION

  
	
   

  	
   

  
	
  2.

  	
  TRANSFER OF THE SHARES

  
	
   

  	
   

  
	
  3.

  	
  CONSIDERATION AND PAYMENT

  
	
   

  	
   

  
	
  4.

  	
  UNDERTAKINGS

  
	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS,
  WARRANTIES AND UNDERTAKINGS

  
	
   

  	
   

  
	
  6.

  	
  MUTUAL WARRANTIES AND UNDERTAKINGS

  
	
   

  	
   

  
	
  7.

  	
  APPROVALS

  
	
   

  	
   

  
	
  8.

  	
  TERMINATION

  
	
   

  	
   

  
	
  9.

  	
  CONFIDENTIALITY

  
	
   

  	
   

  
	
  10.

  	
  NOTICES

  
	
   

  	
   

  
	
  11.

  	
  GENERAL

  

 

 

EQUITY INTEREST
TRANSFER AGREEMENT

 

This Equity Interest Transfer Agreement (this
“Agreement”) is entered into in Shanghai, People’s Republic of China (the
“PRC”) as of this 26th day of August, 2004 (the “Execution Date”) by and
between:

 

SCL Ventures Ltd. (the
“Purchaser”), a company incorporated in the British Virgin Islands;

 

and

 

Li Shun Xing, a male PRC
citizen, holding Identity Certificate number                 ;

Li Xiang Ning, a male PRC
citizen, holding Identity Certificate number                 ;

Pang Da Qing, a male PRC
citizen, holding Identity Certificate number                 ; and

Xie Li, a male PRC
citizen, holding Identity Certificate number                 .

 

(Each of Li Shun Xing, Li Xiang Ning, Pang Da
Qing, and Xie Li is a “Vendor”, and collectively, they are the “Vendors”.)

 

(Each of the Purchaser and the Vendors is a
“Party”, and collectively, they are the “Parties”.)

 

WHEREAS:

 

1.                             Weida
Communications Technology Company Limited (the “Company”) was incorporated on
the 2nd day of April, 2001, in PRC, and its registered address is at No.92-3,
Bin Jiang West Road, Ah Zhu District, Guangzhou, Guangdong Province, PRC.  The Company business is as described in its
business license, i.e., Communication net technical service. Development of
communication net’s software and hardware technology. Sell: Equipment fitted to
communication net. Domestic VSAT communication business (the “Business”).

 

2.                             As of the
Execution Date, the Company has a registered capital of RMB 20,000,000, of
which:  Li Shun Xing contributed RMB
19,000,000, representing 95% of the registered capital; Li Xiang Ning
contributed RMB 400,000, representing 2% of the registered capital; Pang Da
Qing contributed RMB 400,000, representing 2% of the registered capital; and
Xie Li contributed RMB 200,000, representing 1% of the registered capital.

 

3.                             Each of the
Vendors agrees to sell and transfer 25% of his/her equity interest in the
Company to the Purchaser, and the Purchaser agrees to purchase the same from
each of the Vendors; and the Parties intend to convert the Company into a
Sino-foreign Equity Joint Venture (the “EJV”) under the laws of the PRC.

 

4.                             The Vendors
shall cause their authorized representatives to take all necessary actions and
sign all necessary documents to complete the Transaction contemplated herein.

 

NOW THEREFORE, after
friendly negotiations based on the principles of equality and mutual benefit,
and in consideration of the mutual covenants contained herein, the Parties
hereby agree as follows:

 

1

 

1.             DEFINITIONS AND INTERPRETATION

 

1.1                                 In this Agreement and the Attachments hereto, unless otherwise expressed
or required by the context, the following expressions shall have the following
meanings:

 

	
  “Action”

  	
   

  	
  means any action, complaint, petition, investigation, suit or other
  proceeding, whether civil or criminal, or before any arbitrator or
  governmental authority;

  
	
   

  	
   

  	
   

  
	
  “Affiliate”

  	
   

  	
  with regard to a given person, means a person that controls, is
  controlled by or is under common control with the given person;

  
	
   

  	
   

  	
   

  
	
  “Approval of the Examination and Approval Authority”

  	
   

  	
  means the approval of this Agreement and the Transaction hereunder
  given by the Examination and Approval Authority ;

  
	
   

  	
   

  	
   

  
	
  “Completion” 

  	
   

  	
  means the conditions precedent contained in
  this Agreement have been fulfilled, and the Approval of
  the Examination and Approval Authority of the Transaction has been received;

  
	
   

  	
   

  	
   

  
	
  “Completion Date”

  	
   

  	
  the day when the Approval of
  the Examination and Approval Authority for Transaction been received;

  
	
   

  	
   

  	
   

  
	
  “Consideration for Share Transfer”

  	
   

  	
  shall mean the amount to be paid by the Purchaser to the Vendors, as
  the consideration for the equity interest in the Company to be transferred
  from the Vendors to the Purchaser;

  
	
   

  	
   

  	
   

  
	
  “Effective Law”

  	
   

  	
  means the laws of the PRC which shall be effective at the time when
  the Transaction contemplated by this Agreement is conducted;

  
	
   

  	
   

  	
   

  
	
  “Examination and Approval Authority”

  	
   

  	
  the Ministry of Commerce of the PRC, or its designated subsidiary
  which is entitled to examine or approve this Agreement and the Transaction
  hereunder, according to the Effective Law;

  
	
   

  	
   

  	
   

  
	
  “Government Approvals”

  	
   

  	
  Approval of the Examination and Approval Authority of the Transaction
  hereunder, and

  

 

2

 

	
   

  	
   

  	
  all registrations, filings, and approvals from any other governmental
  authorities that may be legally necessary to consummate the Transaction
  hereunder;

  
	
   

  	
   

  	
   

  
	
  “New Business License”

  	
   

  	
  a new Business License issued to the EJV as
  one of the Government Approvals of the Transaction hereunder,
  showing the Purchaser as the owner of 25% of the registered capital of the
  EJV;

  
	
   

  	
   

  	
   

  
	
  “RMB”

  	
   

  	
  Renminbi, the lawful currency of the PRC;

  
	
   

  	
   

  	
   

  
	
  “Transaction”

  	
   

  	
  Means all of the transactions contemplated by this Agreement or its related documents, including the
  transfer of Transferred Shares from the Vendors to the Purchaser and the
  conversion of the Company into a Sino-foreign Equity Joint Venture;

  
	
   

  	
   

  	
   

  
	
  “Transferred Shares”

  	
   

  	
  25% of the registered capital of the Company, which 25% shall be
  transferred by the Vendors to the Purchaser;

  
	
   

  	
   

  	
   

  
	
  “USD”

  	
   

  	
  United States dollars, the lawful currency of
  the United Stated of America.

  

 

1.2                                 References to any laws, regulations or statutory provisions shall, where
the context so admits or requires, be construed as references to those laws,
regulations or provisions as respectively amended, consolidated, extended or
re-enacted from time to time, and shall be construed as including references to
any orders, regulations, or other subordinate legislation made under the laws,
regulations or provisions.

 

1.3                                 References herein to clauses or sections are to clauses or sections of
this Agreement unless the context requires otherwise.

 

3

 

2.                            TRANSFER OF SHARES

 

2.1          
CONDITIONS PRECEDENT

 

Unless otherwise agreed by the Vendors and the
Purchaser in writing, or waived by the Purchaser in writing, the Transaction
hereunder shall be completed upon fulfillment, to the satisfaction of the
Purchaser, of all the following preconditions:

 

2.1.1                        The due
diligence study by the financial advisors and legal counsel of the Purchaser
has been completed to the satisfaction of the Purchaser;

 

2.1.2                        The necessary
approval from the Purchaser’s Board of Directors has been obtained;

 

2.1.3                        The necessary
resolutions of the Company’s Board of Directors, duly approving the Transaction
hereunder, have been obtained;

 

2.1.4                        The
Undertakings set out in clause 4 have been fulfilled by the Vendors, the
Company and/or any other person or entity concerned;

 

2.1.5                        The agreements
necessary for the routine operations of the Company, have been duly executed by
the Vendors, the Company, the EJV, or/and any other person or entity concerned;

 

2.1.6                        The Vendors
and the Company have executed the Representations, Warranties and Undertakings,
attached hereto as Attachment 1, and all of the matters described in Attachment
1 are complete and true, to the satisfaction of the Purchasers.

 

2.2                       SHARE TRANSFER

 

2.2.1                        Twenty-five
percent (25%) of the total shares of the Company held by the Vendors shall be
transferred to the Purchasers, specifically including:  23.75% of the total shares of the Company,
which are presently held by Li Shun Xing; 0.50% of the total shares of the
Company, which are presently held by Li Xiang Ning; 0.50% of the total shares
of the Company, which are presently held by Pang Da Qing; and 0.25% of the
total shares of the Company, which are presently held by Xie Li.

 

2.2.2                        As of the
Completion Date, the Purchaser shall be the legal and beneficial owner of 25%
of the shares of the Company, and the Company shall have been converted into
the EJV.

 

2.2.3                        The
Transaction hereunder shall include the transfer of all of the rights and
obligations associated with the Transferred Shares.

 

4

 

2.2.4                        Each of the Vendors
agrees to waive his/her priority in purchasing any of the Transferred Shares.

 

2.3                                     FORMALITIES OF
TRANSFER

 

The Parties agree that immediately after the
Execution Date, the Vendors shall, at their own expense, be responsible for
complying with all necessary formalities regarding the Transaction, including
but not limited to obtaining all Governmental Approvals.

 

2.4          
EXERCISE OF RIGHTS

 

The Purchaser shall be entitled to hold the
Transferred Shares, to receive any distributions and dividends with respect to
the Transferred Shares, and to exercise all of the rights of a shareholder
under such Transferred Shares upon the signing of this Agreement.

 

3.                             CONSIDERATION AND PAYMENT

 

3.1                                 Subject to the terms and conditions of this Agreement,
the Vendors agree to sell and transfer the Transferred Shares to the Purchaser,
and the Purchaser agrees to purchase and acquire such Transferred Shares
pursuant to following: percentages and prices:

 

3.1.1                        23.75% of the
total issued shares of the Company, which are presently held by Li Shun Xing, shall be transferred to SCL at the price of USD             ;

 

3.1.2                        0.50% of the
total issued shares of the Company, which are presently held by Li Xiang Ning, shall be transferred to SCL at the price of USD             ;

 

3.1.3                        0.50% of the
total issued shares of the Company, which are presently held by Pang Da Qing, shall be transferred to SCL at the price of  USD             ;

 

3.1.4                        0.25% of the
total issued shares of the Company, which are presently held by Xie Li, shall be transferred to SCL at the price of USD             ;

 

3.2                                 Subject to the
terms and conditions of the Agreement, at the Completion Date, the Purchaser
shall pay to the Vendors the above-described funds, as the Consideration for
Share Transfer, to the bank account designated in writing by the Vendors. A
receipt certificate shall be issued to the Purchases by the Vendors upon
receipt of the payment.

 

4.                                      UNDERTAKINGS

 

4.1                                 Each Vendor
undertakes that it shall undertake and procure that, during the period from the
Execution Date through the date of issuance of the New Business License of the
Company, and continuing thereafter:

 

5

 

4.1.1                        the Company or
the Affiliate of the Vendors shall carry on its business in the ordinary course
of business and shall not allow or procure any event, conduct or act which
would cause adverse material changes to the Purchaser or the Company;

 

4.1.2                        the Vendors,
the Company or the Affiliate of the Vendors shall undertake all reasonable measures
to protect the business reputation of the Company, and shall not cause any act
which shall prejudice its business reputation in a material respect;

 

4.1.3                        neither the
Company nor the Affiliate of the Vendors shall enter into any agreement or give
any undertaking except in the ordinary course of business or agreed in written
by the Purchaser;

 

4.1.4                        the Vendors
shall inform the Purchaser as soon as possible any new material development or
changes happened to the Company or the Affiliate of the Vendors;

 

4.1.5                        the Vendors
shall take all necessary measures to perform or cause the Company to perform
all other relevant agreements it entered with concerned parties for the purpose
of completing this Agreement;

 

4.1.6                        the Vendors
shall not sell, assign, pledge or transfer their rights or obligations under
this Agreement, any of the Transferred Shares or any other shares or registered
capital of the Company held by them to any party other than Purchaser without
the prior written consent of Purchaser;

 

4.1.7                        the Vendors
shall accept and strictly enforce the proposals in respect of the the daily
business management and financial management of the Company, and employment of
Company employees, provided by Purchaser from time to time;

 

4.1.8                        the Vendors
hereby jointly agree that they shall cause the Company to only appoint the
personnel designated by Purchaser as three of the five directors of the Company
in accordance with the procedures regulated by laws and regulations and the
Article of Association of the company;

 

4.1.9                        except as
provided for under this Agreement or with the prior written consent of the
Purchaser, neither the Vendors or the Company or the Affiliate of the Vendors
shall agree or arrange the Company or the Affiliate of the Vendors to :

 

(i)                                     amend its
articles of association, or any document or agreement in connection with its
establishment or in relation to its business and operations; or

(ii)                                  change its
business scope and nature; abandon any qualification or license already
obtained and/or to be obtained by it, or cause such qualification or license
lapse; or except for any actions undertaken as required by law,

 

6

 

depart from its business or the business
procedures as disclosed to the Purchaser; or

(iii)                               permit the
Company or the Affiliate of the Vendors to invest in any other company; or

(iv)                              sell,
transfer, let, permit, donate, assign or deal with the sale of any part or all
of its business, property or assets except in the ordinary course of business;
or

(v)                                 amend any
terms of remuneration or bonus payable to any director or officer, or enter
into or amend the terms of service agreement with any director or officer; or

(vi)                              provide any
loan or any credit to any third party or provide any  indemnity, warranty or enter into any similar arrangement; or

(vii)                           devise or
issue any bonds, mortgages, pledges or other guarantees, or increase any loans
secured thereby,including but not limited to increase the sum
guaranteed or extend the duration of guarantee; or

(viii)                        purchase,
sell, mortgage or pledge any shares or bonds of any corporation or company,
including of the Company; or

(ix)                                purchase,
acquire any interests or rights in land or assets or undertake any capital
commitment; or

(x)                                   do anything
which would have a material adverse impact on businesses or assets of the
Company or the Affiliate of the Vendors; or

(xi)                                enter into any
compromise, settlement, exemption, withdrawal, termination or waiver, of any
rights in respect of any Action, arbitration or other claim, legal action,
demand or dispute of a material nature;

(xii)                             declare or pay
any dividend or distribution with respect to the Transferred Shares or any other
shares of the Company;

(xiii)                          make any
payments to any Vendor or any other related party of the Company, including any
payment of any interest or principal with respect to Vendor or other related
party loans to the Company; or

(xiv)                         let or agree
to let or give up in any other form any part or all of the rights to use or
rights of ownership of the assets of the Company or the Affiliate of the
Vendors, or enter into any agreement to acquire or rent or manage any property.

 

5.             REPRESENTATIONS,
WARRANTIES, AND UNDERTAKINGS

 

5.1                                 The Vendors
hereby jointly and severally represent, warrant and undertakings to the
Purchaser (to the intent that the provisions of this Clause shall continue to
have full force and effect notwithstanding Completion) in the terms set out in
this Agreement and the Attachment I hereto and acknowledges that the Purchaser
entering into this Agreement is relying on such representations, warranties and
undertakings.

 

5.2                               The Vendors
hereby undertake to indemnify and keep indemnified the Purchaser against any
loss or liability suffered by the Purchaser as a result of or in connection
with any breach of any of the representations, warranties and undertakings and
the terms of this

 

7

 

Agreement including, but not limited to, any
reasonable costs and expenses properly incurred as a result of such breach.

 

5.3                                 The rights
and remedies of the Purchaser in respect of any breach of the representations,
warranties and undertakings shall not be affected by any party hereto
rescinding, or failing to rescind, this Agreement or any other event or matter
whatsoever except by way of a specific and duly authorized written waiver or
release of the Purchaser.

 

5.4                                 Any loans or
credit owed by the Company to any Vendor or Affiliate of such Vendor in excess
of the amounts shown as due to such Vendor or Affiliate on the audited
financial statements of the Company as June 30, 2004 previously supplied to
Purchaser shall, upon the Completion Date, be waived by the Vendor or Affiliate
as a creditor.

 

6.             MUTUAL
WARRANTIES AND UNDERTAKINGS

 

6.1                                 Each of the
Vendors and the Purchaser hereby represents and warrants to each other that:

 

6.1.1                        it has the
power to execute, perform its obligations and enter into all Transaction contemplated
by this Agreement and all necessary corporate and other action has been taken
to authorize the execution, delivery and performance by it of this Agreement
and the documents herein contemplated;

 

6.1.2                        the
execution and performance of this Agreement and the documents herein
contemplated do not violate any applicable law, rule or regulation to which it
is subject.

 

7.                            APPROVALS

 

7.1                                 Upon the
fulfillment of the conditions precedent to the Completion as set out in this
Agreement, except for obtaining the Government Approvals, the Vendors and the
Purchaser shall submit, and shall cause the Company to submit, to the
Examination and Approval Authority this Agreement and other documents required
by the Examination and Approval Authority for approval or record or filing of
the Transaction contemplated herein.

 

7.2                                 For the
purpose of this Agreement, the Vendors shall be responsible for seeking
Government Approvals at their expense. 
During the process of obtaining the Government Approvals, each Party
hereto shall effectively cooperate with the other Party as reasonably requested
by such other Party.

 

8.                                      TERMINATION

 

8.1                                 If at any
time prior to Completion Date:

 

8

 

8.1.1                        the Vendors
commit any material breach of or omits to observe any of their obligations or
undertakings expressed to be assumed by them under this Agreement or/and the
Attachment hereto;

 

8.1.2                        any
representation or warranty made by the Vendors in this Agreement or/and the
Attachment shall be untrue, incomplete or inaccurate in any material respect;
or

 

8.1.3                        the Company
or any Affiliate of the Company shall sustain any loss or damage which
constitutes a material adverse change or effect; or

 

8.1.4                        any petition
is presented for the winding up or liquidation of the Company, or the Company
makes any composition or arrangement with its creditors or enters into a
reorganization scheme of the Company;

 

then, in any such case, the Purchaser may
before the Completion Date in its absolute discretion without any liability on
its part, by notice in writing to the Vendors, in which the ground of
termination is specified, terminate this Agreement.  The right to forthwith terminate this Agreement under each of
sub-clauses above is a separate and independent right and the exercise of any
such right shall not affect or prejudice or constitute a waiver of any other
right, remedy or claim which the Purchaser may have as at the date of such
notice (including but not limited to any other right to terminate this Agreement).

 

9.                                      CONFIDENTIALITY

 

9.1                                 CONFIDENTIAL
INFORMATION

 

For purposes of this Agreement, “Confidential
Information” shall mean all oral, written and/or tangible information
concerning the business, commerce, technology, finance, labor, tax of the
Parties, and the existence, terms and conditions or amendments of this
Agreement.

 

9.2           TREATMENT
OF CONFIDENTIAL INFORMATION

 

Unless otherwise required by the Effective
Law or this Agreement, or by United States federal securities law applicable to
Purchaser’s parent company, during the term of this Agreement, each Party and
its Affiliates, shall refrain from disclosing, divulging, discussing or
otherwise making available, any Confidential Information made available in the
course of the Transaction contemplated hereby. Each Party will not use and will
cause its Affiliates to not use such Confidential Information for any purpose
other than the performance of its obligations under this Agreement. Each Party
shall cause its employee or agent to obey the confidential requirements hereof
for Confidential Information.

 

9

 

9.3           EXCLUDED
INFORMATION

 

Notwithstanding the foregoing, information
shall not be deemed confidential and recipient shall have no obligation with
respect to any such information which:

 

9.3.1                        is shown to
be in the public domain by means other than as a consequence of a breach of
this Agreement, or

 

9.3.2                        was
disclosed by a third-party; or

 

9.3.3                        was
independently developed by recipient.

 

9.4           PROVISION
OF INFORMATION TO REGULATORY BODIES

 

Nothing in this Agreement shall be construed
to limit any Party’s ability to provide information to any applicable
regulatory body, to the extent required by law.

 

9.5   OTHER
RESTRICTIONS

 

Notwithstanding anything in this Section 9 to
the contrary, in the event that any Confidential Information is also subject to
a limitation on disclosure or use contained in another written agreement
between the Parties which is more restrictive than the limitations contained in
this Section 9, then the limitations in such agreement shall supersede this
Section 9.

 

10.                               NOTICES

 

10.1                         All notices,
claims, certificates, requests, demands and other communications under this
Agreement shall be made in writing and shall be delivered postage prepaid, by
post mail or courier services to the parties at the following addresses or
delivered to the following facsimile number:

 

To the
Purchaser: SCL Ventures Ltd.

Address:

Person:

Facsimile:

E-mail:

 

To the
Vendors: Li Shun Xing, Li Xiang Ning, Pang Da Qing, Xie Li

 

Address:

Person:

Facsimile:

E-mail:

 

or
such other address or facsimile number as may be notified by such party to the
others.

 

10

 

10.2                           Any notice
or other communication shall be deemed to have been received if sent by
facsimile, on the date of transmission; or if delivered personally, when
delivered to the address above; or if sent by post, 7 days if overseas and 24
hours if local after the date of posting.

 

11.                               GENERAL

 

11.1                           Governing
Law. This Agreement shall be governed by and construed under the laws of
the PRC, without regard to principles of conflict of laws thereunder.

 

11.2                           Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

11.3                           Headings and
Titles. Headings and titles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.

 

11.4                           Integrated
Documents. The Attachment and any amendments to this Agreement shall be deemed
to be integral parts of this Agreement.

 

11.5                           Dispute
Resolution.

 

11.5.1                  Consultations

 

In the event a dispute arises in connection
with this Agreement, the Parties shall attempt in the first instance to resolve
such dispute through friendly consultations. If the dispute cannot be resolved
in this manner within 30 days after the commencement of discussions, any Party
may submit the dispute to arbitration. The day when a notice for consultation
from any Party to the other shall be deemed the day of commencement of
discussions.

 

11.5.2                  Arbitration

 

Arbitration shall
be conducted as follows:

 

(i)                  Arbitration
shall be conducted in the Hong Kong Special Administrative Region under the
then effective rules of the Hong Kong International Arbitration Centre (the
“HKIAC”). There shall be three arbitrators. The claimants in the arbitration
shall collectively appoint one arbitrator, and the respondent shall appoint one
arbitrator. Such arbitrators shall be freely selected, and the Parties shall
not be limited in their selection to any prescribed list. The two arbitrators
shall select the third arbitrator. If either the claimants or the respondents
do not appoint an arbitrator who has consented to participate within 15 days
after receiving the arbitration notice, the HKIAC shall make the relevant
appointment.

 

11

 

(ii)               The
arbitration proceedings shall be conducted both in English and Chinese. The
arbitration tribunal shall apply the Rules of the HKIAC in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this sub-clause 11.4, including the provisions concerning the appointment of
arbitrators, the provisions of this sub-clause 11.4 shall prevail.

 

(iii)            The
arbitrators shall decide any dispute submitted by the parties to the
arbitration strictly in accordance with the substantive law of the PRC and
shall not apply any other substantive law.

 

(iv)           Each Party shall cooperate with the
other in making full disclosure of and providing complete access to all
information and documents requested by the other in connection with such
arbitration proceedings, subject only to any confidentiality obligations binding
on such Party.

 

(v)  The award of the arbitral tribunal shall be
final and binding upon the disputing Party(ies), and any prevailing Party(ies)
may apply to a court of competent jurisdiction for enforcement of such award.

 

11.6                           Binding
Effect.  This Agreement is made for
the benefit of the Purchaser and the Vendors or, if any, successors of them.
Unless otherwise set forth herein or therein, all representations and
warranties, statements, covenants and agreements made by the Parties in this
Agreement or pursuant hereto or to any other agreements, instruments or
documents delivered in connection herewith shall survive until the Completion
or the termination, dissolution of the Company.

 

11.7                           Severability. If any
provision of this Agreement is found invalid or unenforceable, the validity or
enforceability of the remaining provisions or portions hereof shall not be
affected.

 

11.8                           Further
Assurances. Each of the Parties hereto shall, from time to time and without
further consideration, execute and deliver such other documents and instrument
of transfer, conveyance and assignment and take such further action as the
other Party may reasonably require to complete more effectively any matter
provided for herein.

 

11.9   This Agreement shall be executed in both
English and Chinese versions.  If there
is any inconsistency between the two versions, the English version shall
prevail.

 

IN WITNESS WHEREOF, the
Parties have executed this Agreement as of the date first above written.

 

 

	
  SCL Ventures Ltd.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/  Mitchell Sepaniak

  	
   

  	
   

  
	
  Name:  Mitchell Sepaniak

  	
   

  
	
  Title:  President and Chief
  Executive Officer

  	
   

  
				

 

12

 

	
  Li Shun Xing

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/ Li Shun Xing

  	
   

  	
   

  
	
   

  	
   

  
	
  Li Xiang Ning

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/ Li Xiang Ning

  	
   

  	
   

  
	
   

  	
   

  
	
  Pang Da Qing

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/  Pang Da Qing

  	
   

  	
   

  
	
   

  	
   

  
	
  Xie Li

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/  Xie Li

  	
   

  	
   

  

 

13

 

Attachment I

 

REPRESENTATIONS, WARRANTIES AND
UNDERTAKINGS

BY THE VENDORS AND THE COMPANY

 

This REPRESENTATIONS, WARRANTIES AND
UNDERTAKINGS BY THE VENDORS AND THE COMPANY (hereinafter referred to as the
“Undertakings”) is signed by the Vendors and the Company as the Attachment to
the “EQUITY INTEREST TRANSFER AGREEMENT” entered into as of the 26th
day of August, 2004, by and between SCL Ventures Ltd. and Li Shun Xing, Li
Xiang Ning, Pang Da Qing and Xie Li.

 

Any terms
defined in the “EQUITY INTEREST TRANSFER AGREEMENT” shall have the same meaning when
used in this Undertakings, unless
otherwise expressed or required by the context.

 

1.             CAPACITY
AND TITLE OF THE VENDORS

 

1.1           Authority
and Capacity of the Vendors :-

 

1.1.1                        Each of the
Vendors has full and appropriate civil capacity of right and civil capacity of
conduct as required by the laws of PRC.

 

1.1.2                        The Vendors
have full power and authority to enter into and perform this Agreement and this
Agreement constitutes valid and binding obligations on the Vendors enforceable
in accordance with its terms.

 

1.1.3                        The
execution and delivery of, and the performance by the Vendors of its
obligations under this Agreement does not and will not:

 

(i)                                     result in a
breach of any provision of the memorandum or articles of association or
equivalent constitutive documents of the Vendors;

 

(ii)                                  result in a
breach of the laws or regulations of any jurisdiction to which the Vendors are
subject; or

 

(iii)                               result in a
breach of any order, judgment or decree of any court or governmental agency to
which the Vendors are a party or by which the Vendors are bound.

 

1.2           Ownership
of the Transferred Shares

 

1.2.1                        The Company
is duly incorporated and validly existing under the PRC laws of incorporation.
The Vendors are the legal holders of their respective shares in the Company
which in aggregate represent 100% of the entire share capital of the Company
and are entitled to sell and transfer to the Purchaser the full legal and

 

14

 

beneficial ownership of their respective
shares on the terms of this Agreement without the consent of any third party.

 

1.2.2                        As at
Completion there will be no claims, charges, liens, equities, security,
guaranty, pledge, mortgage, trust or encumbrances on the shares or assets of
the Company, except for the arrangement acknowledged and consented by the Purchaser.

 

1.2.3                        The
Transferred Shares are fully paid up.

 

2.             SUPPLY OF INFORMATION

 

2.1           Accuracy
and Adequacy of Information Disclosed to the Purchaser

 

All information contained in this Agreement
and all other information provided or to be provided subsequently to the
Purchaser or its agent, including but not limited to its financial and legal
counsel, is complete, true and accurate in all respects and any fact or matter
or circumstances not disclosed in writing to the Purchaser will not render any
such information untrue, inaccurate, incomplete or misleading.

 

2.2           Copies
of Accounts, and Articles of Association, etc.

 

The copies of the audited accounts and of the
articles of association or equivalent constitutive documents of the Company
have been and will be delivered to the Purchaser are complete and accurate and
in the case of the articles of association or equivalent constitutive documents
contain full details of the rights and restrictions attached to the share
capital of the Company and all resolutions passed by the board of directors or
the management members of the Company have also been delivered.

 

3.             ACCOUNTS AND RECORDS

 

3.1           Audited
Accounts

 

The audited accounts have each been prepared in
accordance with accounting standards or principles, statements and practices
generally accepted at the Execution Date in the PRC and fairly present the
financial position, results of operation and cash flow of the Company as at the
dates of the audited accounts and of the profits or losses for the periods concerned
and as at the dates of the audited accounts make:-

 

3.1.1        adequate
provision for all actual liabilities;

 

3.1.2        adequate
disclosure for all contingent liabilities; and

 

3.1.3        provision
reasonably regarded as adequate for all bad and doubtful debts.

 

15

 

3.2           Taxation

 

Proper provision or reserve has been made in
the audited accounts for all Taxation liable to be assessed on the Company or
for which it is or may become accountable.

 

3.3           Exceptional
Items

 

The results of the Company ended on the Balance
Sheet Date as shown by the audited accounts and the trend of the results
thereby shown have not (except (i) as fairly disclosed in such accounts; or
(ii) in the case of transactions between the Company and the Affiliate of the
Vendors, as fairly reflected in such accounts) been materially affected by
changes or inconsistencies in accounting practices, by the inclusion of
non-recurring items of income or expenditure, by transactions of an abnormal or
unusual nature or entered into otherwise than on normal commercial terms.

 

3.4           Debts

 

None of the debts receivable or due to the
Company which are included in the audited accounts or which have subsequently
arisen has been outstanding for more than six months from its due date for
payment or has been released on terms that the debtor has paid less than the
full value of his debt and all such debts have realized and will realize in the
normal course of collection their full value as included in the audited
accounts or in the books of the Company after taking into account the provision
for bad and doubtful debts made in the audited accounts. For the avoidance of
doubt, a debt shall not be regarded as realizing its full value to the extent
that it is paid, received or otherwise recovered in circumstances in which such
payment, receipt or recovery is or may be void, voidable or otherwise liable to
be reclaimed or set aside.

 

3.5           Accounting
and other Records

 

The statutory books, books of account and other
records of whatsoever kind of the Company are reasonably up-to-date and
contain, in all material respects, complete and accurate records of all matters
required to be dealt with in such books and all such books and records and all
other documents (including documents of title and copies of all subsisting
agreements to which the Company is a party) which are the property of the
relevant Company or ought to be in its possession are in its possession or
under its control and no notice or allegation that any is incorrect or should
be rectified has been received. All accounts, documents and returns required by
law to be delivered or made to the registrar of Company or to the equivalent
authority have been duly and correctly delivered or made.

 

3.6           Changes
since Accounts Date

 

Since the Accounts Date, i. e. the 30th day of
June, 2004:-

 

3.6.1                        there has been
no material adverse change in the financial condition of the business of the
Company or their earnings, turnover, profits, assets and liabilities

 

16

 

or cashflow and no event, fact or matter has
occurred which will or is likely to give rise to any such change;

 

3.6.2                        the Company’s
business has been carried on in the ordinary course and well operated, without
any material interruption or alteration in its nature, scope or manner;

 

3.6.3                        the Company
has not satisfied or otherwise discharged any obligation or liability
(including contingent liabilities) other than in the ordinary course of its
business;

 

3.6.4                        the Company
has not (i) sold, transferred, leased, mortgaged, pledged, or otherwise granted
any rights in respect of any of its assets or prospects, or (ii) cancelled,
waived, released or discounted in whole or in part any debts or claims, other
than in the ordinary course of its business or acknowledged and consented by
the Purchaser;

 

3.6.5                        the Company
have not entered into any commitments or contracts relating to capital
expenditures which, in the aggregate (in respect of all such commitments and
contracts), involve consideration, expenditure or liabilities in excess of RMB
100,000;

 

3.6.6                        the Company
has continued to pay its creditors in the ordinary course of business and no
trade discounts or other special terms substantially unfavorable to the Company
have been incorporated into any contract entered into by the Company;

 

3.6.7                        there has been
no changes to the accounting policies or method of presentation adopted by the
Company in presenting its financial or tax position.

 

4.             INSURANCE

 

In respect of all insurances effected or maintained
by the Company:-

 

4.1       all premiums have been duly paid to date;

 

4.2       all the policies are in force and are not
voidable on account of any act, omission or non-disclosure on the part of the
insured party; and

 

4.3       no material claim will be outstanding at
Completion.

 

5.             TRADING AND CONTRACTUAL ARRANGEMENTS

 

5.1       Contracts

 

In respect of any contracts entered into by any
Company:-

 

17

 

5.1.1                        the Company is
not a party to or bound by any agreement or commitment limiting the freedom of
the Company to engage in any line of business or to compete with any other
person;

 

5.1.2                        each of the
contracts is a valid and subsisting agreement and is in full force and effect;
and

 

5.1.3                        there exists
no default or event of default or event, occurrence, condition or act which,
with the giving of notice, the lapse of time or the happening of any other
event or condition, would become a default or event of default thereunder which
would have a material adverse effect.

 

5.2                     Debts,
Contracts and Arrangements with the Affiliate of the Vendors or other connected
persons etc.

 

Except for loans advanced to the Company there
are no existing contracts or arrangements to which any Company is a party and
in which any of the Vendors and/or any director of the Company and/or any
person connected with any of them are interested whether directly or
indirectly.

 

5.3       Effect of Transferred Shares

 

Compliance with this Agreement at Completion
will not conflict with or result in the breach of or constitute a default under
any agreement or instrument to which the Company is a party and which remains
effective immediately after Completion nor will it relieve any other party to
such a contract with its obligations under such contract or entitle such party
to terminate such contract, whether summarily or by notice.

 

5.4       Sufficiency of Assets

 

The registered capital and assets owned by the
Company and the Affiliate of the Vendors with which the Company will cooperate
afterwards are sufficient for the purpose of carrying on its respective
business after the Completion.

 

5.5       In relation to all loans or other credit
of such kind outstanding (referred to in this paragraph as “facility
credits’):-

 

5.5.1                        details of all
facility credits have been disclosed to the Purchaser before Completion;

 

5.5.2                        there has been
no contravention of, or non-compliance with, any material provision of any of
the facility credits; and

 

5.5.3                        no steps for
the early repayment of any indebtedness thereunder have been taken or threatened
and are currently outstanding.

 

5.6       The total amount borrowed by the Company
does not exceed any limitation on its borrowing powers contained in its
articles of association or any other document binding upon it.

 

18

 

6              LEGAL
MATTERS

 

6.1       Compliance with Laws

 

The Company carry on their respective
businesses in accordance with applicable laws, regulations and byelaws in PRC
in all material respects and, there is no investigation or enquiry by, or order,
decree or judgment of, any court or any governmental agency or regulatory body
outstanding or anticipated against the Company.

 

6.2       Licenses and Consents

 

All statutory, regulatory and municipal and
other licenses, concessions, consents, permits and authorities necessary for
the carrying on of the Business of the Company as now carried on in PRC have
been obtained and are valid and subsisting and all conditions applicable to any
such licenses, consent permit or authority have been complied with and none of
such licenses, consents, permits or authorities has been breached or is likely
to be suspended, cancelled, refused or revoked.

 

6.3       Litigation

 

6.3.1                        The Company or
its president or general manager is not involved whether as plaintiff or
defendant or other party in any claim, legal action, proceeding, suit,
litigation, prosecution, investigation, enquiry or arbitration of material
importance before any tribunal (other than as plaintiff in the collection of
debts arising in the ordinary course of its business) and, no such claim, legal
action, proceeding, suit, litigation, prosecution, investigation, enquiry or
arbitration is pending or threatened by or against the Company or its president
or general manager.

 

6.3.2                        No government
or governmental, supranational or state agency or regulatory body or trade
union or other person or organization has requested any information in
connection with, instituted or threatened, any action or investigation to
restrain, prohibit or otherwise challenge the operation of the Company or any
of its employees and there are no facts which are likely to give rise to such
action or investigation.

 

6.4       Insolvency etc.

 

6.4.1                        No order has
been made, petition presented, resolution passed.

 

6.4.2                        No composition
in satisfaction of the debts of the Company or scheme of arrangement of its
affairs, or arrangement between it and its creditors and/or members or any
class of its creditors and/or members, has been proposed, sanctioned or
approved.

 

19

 

6.4.3                        No distress,
distraint, charging order, garnishee order, execution or other process has been
levied or applied for in respect of the whole or any part of any of the
property, assets and/or undertaking of the Company.

 

6.5           Powers
of Attorney

 

Neither the Company nor any Vendor has given a
power of attorney which is still outstanding or effective to any person to
enter into any contract or commitment or do anything on the Company’s behalf,
other than any authority to employees or officers to enter into routine
contracts in the normal course of their duties.

 

7.             EMPLOYEES ETC.

 

7.1           Liabilities
to and for Employees

 

There are no claims exceeding RMB40,000 each
against the Company:-

 

7.1.1  by an employee or workman, in respect of an
accident or injury; or

 

7.1.2                        by an employee
or director in relation to his appointment, employment or resign, dismissal,
etc..

 

7.2           Compliance
with Statutes

 

The Company has in relation to each of its
employees complied with all obligations imposed on it by all ordinances,
regulations and codes of conduct relevant to the relations between it and its
employees.

 

8.             TAXATION MATTERS

 

8.1           Returns
and Information

 

All returns, computations and notices which are
or have been required to be made or given by the Company for any Taxation
purpose (i) have been made or given within reasonable time and on a proper
basis and are up-to-date and correct; (ii) none of them is, or is likely to be,
the subject of any dispute with the Taxation authorities.

 

8.2           Taxation
Claims and Liabilities

 

All profits tax, interest tax, salaries tax and
stamp duties, and other charges and levies assessed or imposed by any
government or governmental or statutory body which have been assessed upon the
Company and which are due have been paid.

 

20

 

9.             ASSETS

 

9.1           Subsidiaries
and Affiliates

 

The Company is not the holder or beneficial
owner of any share of any other company.

 

9.2           Title
to Assets

 

All assets of the Company and all debts due
which are included in the audited accounts or which have been used or held for
the purposes of its business were the absolute property of the Company.

 

9.3           Machinery

 

The major machinery and equipment which are
necessary for the operation of the Company’s business are in working order and
have been properly maintained.

 

9.4           Intellectual
Property

 

The Company has duly licensed to use related
software, processes or products for the purpose of its business. The Company is
not engaged in any activities which infringe any patents, copyrights, trade
marks and business names or other intellectual property rights of any third
party. There is no disputes or claims in respect of intellectual property
against or related to the Company.

 

10.          MISCELLANEOUS

 

10.1                           All
representations, warranties and undertakings contained in the foregoing
provisions of this Attachment shall survive until Completion or the dissolution
of the Company up to the respective content of the provisions hereof.

 

21

 

IN WITNESS WHEREOF, the Vendors
and the Company have executed this Undertakings as of the Execution Date.

 

 

	
  The Vendors:

  
	
   

  
	
  Li Shun Xing

  
	
   

  
	
  Signature:

  
	
   

  
	
  /s/ Li Shun Xing

  	
   

  
	
   

  
	
  Li Xiang Ning

  
	
   

  
	
  Signature:

  
	
   

  
	
  /s/ Li Xiang Ning

  	
   

  
	
   

  
	
  Pang Da Qing

  
	
   

  
	
  Signature:

  
	
   

  
	
  /s/  Pang Da Qing

  	
   

  
	
   

  
	
  Xie Li

  
	
   

  
	
  Signature:

  
	
   

  
	
  /s/  Xie Li

  	
   

  
	
   

  
	
  The Company:

  
	
   

  
	
  Weida Communications Technology Company Limited

  
	
   

  
	
  By:

  	
  /s/ Li Shunxing

  	
   

  
	
  Name:  Li Shunxing

  
	
  Title:  Legal Representative

  
			

 

22Exhibit 10.7

 

EQUITY JOINT VENTURE CONTRACT

 

BETWEEN

 

SCL VENTURES LTD.

 

AND

 

LI SHUN XING, LI 
XIANG NING,

 

PANG  DA QING, and XIE
LI

 

FOR
THE ESTABLISHMENT OF:

 

WEIDA COMMUNICATIONS TECHNOLOGY

 

COMPANY LIMITED

 

DATED AS OF AUGUST 26, 2004

 

 

JOINT VENTURE CONTRACT

 

TABLE OF CONTENTS

 

	
  PRELIMINARY STATEMENT

  
	
  1

  	
  DEFINITIONS

  
	
  2

  	
  PARTIES TO THE CONTRACT

  
	
  3

  	
  OPERATION OF THE JOINT VENTURE

  
	
  4

  	
  PURPOSE AND SCOPE OF BUSINESS

  
	
  5

  	
  TOTAL AMOUNT OF INVESTMENT AND REGISTERED
  CAPITAL

  
	
  6

  	
  RESPONSIBILITIES OF THE PARTIES

  
	
  7

  	
  LICENSING AND SALE OF JV PRODUCTS AND
  SERVICES

  
	
  8

  	
  BOARD OF DIRECTORS

  
	
  9

  	
  OPERATION AND MANAGEMENT

  
	
  10

  	
  SITE AND OFFICE/LABORATORIES BUILDING

  
	
  11

  	
  SUPPLY AND
  PURCHASE OF MATERIALS AND SERVICES

  
	
  12

  	
  LABOR MANAGEMENT

  
	
  13

  	
  FINANCIAL AFFAIRS AND ACCOUNTING

  
	
  14

  	
  TAXATION, FEES AND LEVIES, AND INSURANCE

  
	
  15

  	
  CONFIDENTIALITY

  
	
  16

  	
  THE JOINT VENTURE TERM

  
	
  17

  	
  TERMINATION AND LIQUIDATION

  
	
  18

  	
  NON-COMPETITION

  
	
  19

  	
  INDEMNIFICATION

  
	
  20

  	
  FORCE MAJEURE

  
	
  21

  	
  SETTLEMENT OF DISPUTES

  
	
  22

  	
  GOVERNING LAW

  
	
  23

  	
  BREACH OF CONTRACT

  
	
  24

  	
  MISCELLANEOUS

  
	
  25

  	
  GOVERNMENT
  APPROVALS

  
	
   

  	
   SIGNATURE PAGE

  

 

i

 

EQUITY JOINT VENTURE CONTRACT

 

BETWEEN

 

SCL VENTURES LTD.

 

AND

 

Li Shun Xing, Li Xiang Ning, Pang Da Qing, and Xie Li

 

FOR
THE ESTABLISHMENT OF:

 

WEIDA COMMUNICATIONS TECHNOLOGY COMPANY LIMITED

 

This Equity Joint Venture
Contract (this “Contract”), dated as of August 26, 2004 (the “Execution
Date”), is made by and between:

 

SCL
Ventures Ltd. (“SCL”),
a company incorporated in the British Virgin Islands, and

 

Li Shun
Xing, Li Xiang Ning, Pang Da Qing and Xie Li.  (Each of Li Shun Xing, Li Xiang Ning, Pang
Da Qing, and Xie Li is an “Existing Shareholder”, and collectively, they
are the “Existing Shareholders”.)

 

(SCL and each of the
Existing Shareholders is a “Party”, and collectively, they are the “Parties”.)

 

WHEREAS:

 

Weida
Communications Technology Company Limited (“Weida”), is a company incorporated in the
People’s Republic of China (the “PRC”), whose legal address is at No.92-3, Bin
Jiang West Road, Hai Zhu District, Guangzhou, Guangdong Province, PRC;

 

As of the Execution Date,
Weida has a registered capital of RMB20,000,000, of which Li Shun Xing has
contributed RMB19,000,000, representing 95% of the registered capital; Li Xiang
Ning has contributed RMB400,000, representing 2% of the registered capital;
Pang Da Qing has contributed RMB400,000, representing 2% of the registered
capital; and Xie Li has contributed RMB200,000, representing 1% of the
registered capital.

 

On August 27, 2004, the
Parties entered into an Equity Interest Transfer Agreement dated as of August
26, 2004 (the “Equity Interest Transfer Agreement”), wherein the Parties have
agreed that SCL shall acquire 25% of the equity ownership of Weida from the
Existing Shareholders, with Weida simultaneously converting into a Sino-foreign
Equity Joint Venture (the “EJV”) under the laws of the PRC; and

 

The Existing Shareholders
shall cause their authorized representatives to take all necessary actions and
sign all necessary documents to complete the transactions contemplated herein;

 

1

 

NOW THEREFORE, after
friendly consultations conducted in accordance with the principles of equality
and mutual benefit, the Parties have agreed to establish an equity joint
venture in Guangzhou, in accordance with the Law
of the People’s Republic of China on Sino-Foreign Equity Joint Ventures,
other relevant laws and regulations of the PRC, and the provisions of this
Contract.  The Parties hereby agree as
follows:

 

ARTICLE 1                                                                                DEFINITIONS

 

1.1                                 Unless the terms of this Contract otherwise
provide, the following terms shall have the meanings set out below:

 

	
  “Affiliate”

  	
   

  	
  shall mean any Person directly or indirectly controlled by,
  controlling or under common control with such Party.  For the purpose of this Contract, the term
  “Control” means the power to direct the management and to formulate
  the policies of an entity, whether through the ownership of voting
  securities, by agreement or otherwise.

  
	
   

  	
   

  	
   

  
	
  “Approval Authority”

  	
   

  	
  shall mean the Ministry of Commerce of
  PRC, or the authority designated by such Ministry to approve this Contract
  and the establishment of the EJV.

  
	
   

  	
   

  	
   

  
	
  “Articles of Association”

  	
   

  	
  shall mean the Articles of Association
  of the EJV.

  
	
   

  	
   

  	
   

  
	
  “Board”

  	
   

  	
  shall mean the board of directors of
  the EJV.

  
	
   

  	
   

  	
   

  
	
  “Business”

  	
   

  	
  means technology services for
  communication networks; development of software and hardware technology for
  communication networks; sale of equipment related to communication networks;
  and domestic VSAT communication business.

  
	
   

  	
   

  	
   

  
	
  “Business License”

  	
   

  	
  a business license issued to the EJV
  by the applicable administration for industry and commerce of the PRC as one
  of the Government Approvals for the establishment of the EJV.

  

 

2

 

	
  “Certificate of Approval”

  	
   

  	
  means the certificate issued by the
  Approval Authority for the approval of this Contract and the establishment of
  the EJV.

  
	
   

  	
   

  	
   

  
	
  “EJV”

  	
   

  	
  shall mean Weida Communications
  Technology Company Limited, the Sino-foreign Equity Joint Venture to be
  formed pursuant to the relevant laws and regulations of the PRC and this
  Contract.

  
	
   

  	
   

  	
   

  
	
  “EJV Products and Services”

  	
   

  	
  shall mean, collectively, EJV
  products and services directly related to the development, marketing,
  licensing, installation, and licensee support of such communication products.

  
	
   

  	
   

  	
   

  
	
  “Existing Shareholders”

  	
   

  	
  shall refer to Li Shun Xing, Li
  Xiang Ning, Pang Da Qing and Xie Li, collectively and each individually.

  
	
   

  	
   

  	
   

  
	
  “Export”

  	
   

  	
  shall mean, when referring to a sale
  or license by the EJV, a sale or license outside of the PRC Market.

  
	
  “Government Approval”

  	
   

  	
  shall mean any consent, approval,
  authorization, waiver, grant, concession, license, exemption, order,
  registration or certificate granted by any governmental or administrative
  body, department, agency, court or commission in respect of the filings,
  documents, reports or notices submitted to such governmental or
  administrative body, department, agency, court or commission.

  
	
   

  	
   

  	
   

  
	
  “Joint Venture Term”

  	
   

  	
  shall mean the duration of the EJV as
  set forth in Articles 16 and 17.

  
	
   

  	
   

  	
   

  
	
  “Lease Agreement”

  	
   

  	
  shall mean the contract signed by the
  EJV for the lease of the Office/Laboratories Building.

  

 

3

 

	
  “Person”

  	
   

  	
  shall mean any individual,
  partnership, association, company, joint venture, unincorporated organization
  or government, or agency or political subdivision thereof.

  
	
   

  	
   

  	
   

  
	
  “PRC Employees”

  	
   

  	
  shall mean all employees of the EJV
  who are PRC citizens holding PRC identity cards.

  
	
   

  	
   

  	
   

  
	
  “PRC GAAP”

  	
   

  	
  shall mean the Generally Accepted
  Accounting Principles of the PRC.

  
	
   

  	
   

  	
   

  
	
  “PRC Market”

  	
   

  	
  shall mean the mainland of the PRC,
  not including Hong Kong, Taiwan and Macau.

  
	
   

  	
   

  	
   

  
	
  “RMB”

  	
   

  	
  Renminbi, the lawful currency of the
  PRC.

  
	
   

  	
   

  	
   

  
	
  “Site”

  	
   

  	
  shall mean the office space located at
  No.92-3, Bin Jiang West Road, Hai Zhu District, Guangzhou, Guangdong
  Province, PRC

  
	
   

  	
   

  	
   

  
	
  “USA”

  	
   

  	
  the United States of America.

  
	
   

  	
   

  	
   

  
	
  “USD”, “US Dollars” or “US$”

  	
   

  	
  United States dollars, the lawful
  currency of the USA.

  
	
   

  	
   

  	
   

  
	
  “US GAAP”

  	
   

  	
  shall mean the Generally Accepted
  Accounting Principles of the USA.

  

 

1.2                                 References to any laws, regulations or statutory
provisions shall, where the context so admits or requires, be construed as
references to those laws, regulations or provisions as respectively amended,
consolidated, extended or re-enacted from time to time, and shall be construed
as including references to any orders, regulations, or other subordinate
legislation made under the laws, regulations or provisions.

 

1.3                                 Unless the context otherwise requires, words importing
the singular only shall include the plural and vice versa, words importing one
gender only shall include all other genders, and words importing natural
persons shall include corporations and un-incorporated associations.

 

1.4                                 The recitals form an integral part of this Contract and shall be
construed and have the same full force and effect as if expressly set out in
the body of this Agreement.

 

4

 

1.5                                References herein to clauses are to clauses in this
Contract unless the context requires otherwise.

 

ARTICLE 2                                                                                PARTIES TO THE CONTRACT

 

2.1                                 The Parties

 

The
Parties to this Contract are:

 

SCL Ventures Ltd., a company registered under the laws of
the British Virgin Islands, with its registered office at                             .

 

Li Shun Xing, a male PRC citizen holding Identity
Certificate number                   ;

 

Li Xiang Ning, a male PRC citizen holding Identity
Certificate number                   ;

 

Pang Da Qing, a male PRC citizen holding Identity
Certificate number                   ;
and

 

Xie Li, a female PRC citizen holding Identity
Certificate number                   .

 

2.2                                 Authority

 

Each
Party possesses full power and authority to enter into this Contract and to
perform its obligations hereunder.  The
authorized representative of each Party is fully authorized to sign this
Contract pursuant to a valid power of attorney or other valid designation of
authority.

 

2.3                                 Warranties and
Representations

 

(a)                                  The Existing
Shareholders represent and warrant to SCL that they are legal citizens of the
PRC in good standing, that they possess complete power and authority to execute
their responsibilities herein including executing this Contract, and that such
responsibilities are within the scope of their abilities.

 

(b)                                 SCL represents
and warrants to the Existing Shareholders that it is a valid legal entity in
good standing in its home jurisdiction, it operates in accordance with the laws
of the place of its registration, that it possess complete power and authority
to execute its responsibilities herein, and that such responsibilities are
within the scope of its corporate charter or other applicable organizational
documents.

 

(c)                                  Each of the
Parties further represents and warrants to the other Party that, (i) the
execution and delivery of this Contract by such Party, and the documents and
agreements provided for herein, and the consummation by such Party of all
transactions contemplated hereby, have been duly authorized by all requisite
corporate or other action; (ii) this Contract and all such other agreements and
obligations entered into and undertaken in connection with the transactions contemplated
hereby to which such Party is a party constitute or will constitute

 

5

 

legal
and binding obligations of such Party following the execution and delivery
thereof valid and legally binding obligations of such Party, enforceable
against it in accordance with their respective terms, subject as to enforcement
of remedies to applicable bankruptcy, insolvency, reorganization and other laws
affecting generally the enforcement of the rights of creditors and subject to a
court’s discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies; (iii) the execution,
delivery and performance by such Party of this Contract and the documents and
agreements provided for herein, and the consummation by such Party of the
transactions contemplated hereby, shall not, with or without the giving of
notice or the passage of time or both: 
(A) violate the provisions of any applicable law; (B) violate the
provisions of the applicable organizational and governing documents of such
Party; (C) violate any judgment, decree, order or award of any court,
governmental agency or arbitrator applicable to such Party; or (D) conflict
with or result in the breach or termination of any material term or provision
of, or constitute a default under, or cause any acceleration under, any
license, permit, concession, franchise, indenture, mortgage, lease, equipment
lease, contract, permit, deed of trust or other instrument or agreement by
which such Party is or may be bound; and (iv) such Party is not precluded by
the terms of any contract, agreement or other instrument by which it is bound
from entering into this Contract and the documents and agreements provided for
herein or the consummation by such Party of the transactions contemplated
hereby.  If any provision of this
Agreement is found invalid or unenforceable, the validity or enforceability of
the remaining provisions or portions hereof shall not be affected.

 

(d)                                 Each Party
represents and warrants to the other Party that there has been no change in the
business, financial condition or financial prospects of such Party since
September 30, 2001 that may result in a material adverse effect on either (i)
the information or assumptions previously provided to the other Party or (ii)
such Party’s ability to perform its obligations under this Contract.

 

2.4                                 Expenses

 

Each
of the Parties shall pay its own attorneys’ fees and expenses associated with
the negotiation and preparation of this Agreement and the various documents
mentioned herein.  The Existing
Shareholders shall be responsible for obtaining the necessary Governmental
Approvals.

 

6

 

ARTICLE 3                                                                                OPERATION OF THE JOINT VENTURE

 

3.1                                 Name and
Address of the EJV; Branches

 

(a)                                  The name of
the EJV shall be “                               ” in Chinese, and “ Weida
Communications Technology Company Limited” in English.

 

(b)                                 The legal
address of the EJV shall be at No.92-3, Bin Jiang West Road, Hai Zhu District,
Guangzhou, Guangdong Province, PRC.

 

(c)                                  The EJV may
establish branch offices inside or outside the PRC with the approval of the
Board and the relevant government authorities of the PRC and/or the applicable
country.

 

3.2                                 Limited
Liability Company

 

The
form of organization of the EJV is a limited liability company.  The Parties, in proportion to their
respective contribution to the registered capital of the EJV, shall share the
profits, risks and losses.  However, the
liability of each Party shall be limited to the amount of its contribution due
or made to the registered capital of the EJV.

 

3.3                                 Laws and
Decrees

 

The
EJV is a legal person established under the laws of the PRC.  The activities of the EJV are governed and
protected by the laws, decrees and relevant rules and regulations of the PRC.

 

ARTICLE 4                                                                                PURPOSE AND SCOPE OF BUSINESS

 

4.1                                 Purpose of the
EJV

 

The
purpose of the EJV shall be: Improving co-operation of the Parties, adopting
advanced and practical techniques and introducing scientific management in the
Business, increasing the quality of products and service, developing new
products, meeting competition successfully for price and quality both in
domestic and international markets, and raising economic efficiency so as to
enable the investors to gain satisfactory benefits.

 

4.2                                 Business Scope
of the EJV

 

The
business scope of the EJV shall be: 
technology services for communication networks; development of software
and hardware technology for communication networks; sale of equipment related
to communication networks; and domestic VSAT communication business.

 

7

 

ARTICLE 5                                        TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL

 

5.1                                 Total
Investment

 

Unless
otherwise agreed by the Parties and the Approval Authority, the total amount of
investment (including loans required or obtained by the EJV) of the EJV shall
be USD4,833,836.

 

5.2                                 Registered
Capital

 

The
registered capital of the EJV shall be USD 2,416,918, of which the Existing
Shareholders shall contribute seventy five percent (75%), and SCL shall
contribute twenty five percent (25%). The contribution to the Registered
Capital of the EJV shall be as follows:

 

	
  Name

  	
   

  	
  RMB

  	
   

  	
  USD

  	
   

  	
  Percentage
  of

  Equity Owned

  	
   

  
	
  SCL

  	
   

  	
  5,000,000

  	
   

  	
  604,230

  	
   

  	
  25

  	
  %

  
	
  The Existing Shareholders

  	
   

  	
  15,000,000

  	
   

  	
  1,812,689

  	
   

  	
  75

  	
  %

  
	
  Total

  	
   

  	
  20,000,000

  	
   

  	
  2,416,918

  	
   

  	
  100

  	
  %

  

 

5.3                                 Contributions
to Capital

 

SCL
shall contribute its investment to the EJV in US Dollars.  The Existing Shareholders shall contribute
their investment to the EJV in RMB. After contribution, certificates of
investment will be issued to the Parties.

 

5.4                                 Contribution
Schedule 

 

(a)                                  The Existing
Shareholders have already made their contribution to the EJV before the date of
the Execution Date.

 

(b)                                  SCL shall be
deemed as having fully paid its contribution to the EJV upon its paying to the
Existing Shareholders the consideration as described in the Equity Interest
Transfer Agreement.

 

5.5                                 Additional
Financing

 

(a)                                  Besides the
registered capital, the EJV’ s operations will be financed from the following
sources:

 

(i)                                     loans in RMB
or US$ ;

 

8

 

(ii)                                  net earnings
which are generated from sales and licenses of EJV Products and Services and
which are retained after distribution of dividends (if any) to the Parties; and

 

(iii)                               other lawful sources as determined by
the Board.

 

5.6                                                         Assignment of
Registered Capital

 

(a)                                  Except as
otherwise permitted by this Contract or the Articles of Association, the
Existing Shareholders shall not sell, assign, pledge, hypothecate, mortgage or
otherwise transfer their/its contribution to the registered capital of the EJV
except with the prior written consent of SCL followed by approval by the Board,
and subject to the receipt of all necessary Government Approvals including the
approval of the Approval Authority.

 

(b)                                 After
obtaining all of the consents and approvals referred to in Article 5.6(a)
above, a Party desiring to transfer its contribution to the registered capital
to the EJV (the “Offering Party”) shall first offer such contribution in
writing to the other Party (the “Offered Parties”). Such offer shall include
the amount, price, and terms and conditions of the contribution to be
transferred. The Offered Parties shall have ninety (90) days from the date of
receipt of said offer in which to notify the Offering Party of acceptance of
the offer.  If a Party accepts the
offer, the Party shall submit a price bid within ten (10) days.  The Party offering the price shall be
entitled to purchase the offered contribution.

 

(c)                                  In the event
that more than one Party wishes to purchase all or any part of the offered
contribution to the registered capital, the Party(ies) making the highest offer
shall prevail. In the event that more than one Party has made the highest offer
the offered contribution shall be equally split among such Parties.

 

(d)                                 In the event
the Offered Parties do not wish to purchase all or any part of the offered
contribution to the registered capital, the Offering Party may transfer the
part of the offered contribution that was not purchased by the other Parties to
a third party, with the approval of the Board. Such transfer shall not be
completed until the third party acquiring the contribution has first executed a
contract containing terms and conditions in which the third party becomes bound
by all the provisions of this Contract, its attachments, and the Articles of
Association. The terms and conditions under which the transfer is concluded
shall not be more preferential than those originally offered to the other
Parties, and the Offering Party shall provide the other Parties hereto with a
duplicate of the executed written agreement with the transferee.

 

(e)                                  Notwithstanding
Articles 5.6 (a) and (b), SCL shall have the right, to transfer its
contribution to the registered capital of the EJV to a successor in interest of
its entire business, to a Person which is at least fifty percent (50%)
controlled directly or indirectly by SCL, or to a Person which controls
directly or indirectly fifty percent (50%) or more of SCL.  The transferee shall assume all of the

 

9

 

transferor’s
responsibilities herein and shall provide a written guarantee to the
non-transferring Parties that it is permitted to assume all such
responsibilities.

 

(f)                                    Notwithstanding
Article 5.6 (b) and (c) above, in regard to the transfer of the EJV registered
capital, unless the Board agrees to convert the status of the EJV to a local
enterprise from a Sino-foreign joint venture, SCL may not reduce the percentage
of its share of the EJV’s registered capital below twenty-five percent (25%).

 

(g)                                 All transfers
of contributions by a Party under this Article 5.6 shall be subject to the
validation or approval of all necessary authorities of the PRC, and shall not
become effective until such validation or approval has been obtained.  After the necessary validation or approval
is obtained, the Parties shall correspondingly amend this Contract and the
Articles of Associations and the EJV shall renew and revise its registration
with the relevant PRC administration for industry and commerce.  Neither the business of the EJV nor the
performance of its contracts shall be interrupted nor its organizational
structure affected by any such transfer.

 

5.7                                 Increase
and/or Decrease of Registered Capital

 

Any
increase and/or decrease in the registered capital of the EJV must be approved
by the Board and submitted to the Approval Authority for examination and
approval.  Upon receipt of the approval by
the Approval Authority, the EJV shall register the change in capital with the
relevant PRC administration for industry and commerce.  The Board shall set the contribution
schedule for the capital change consistent with applicable PRC laws and
regulations. The Board shall set the contribution schedule for the capital
change consistent with applicable PRC laws and regulations.

 

5.8                                 Taxes, Import
Duties and Levies on Capital Contribution

 

To
the extent capital contributions are not exempt from value-added taxes and
other taxes, the Parties shall use their best efforts to obtain such
exemptions. In case any value added taxes or other taxes or custom duties are
(to be) levied on the capital contributions, such custom duties and taxes shall
not be considered as part of the capital contribution by that Party, and shall
be borne by the EJV.

 

ARTICLE 6                                                                                RESPONSIBILITIES OF THE PARTIES

 

6.1                                 Responsibilities
of The Existing Shareholders

 

In
addition to his other obligations under this Contract, The Existing Shareholders
shall have the following responsibilities:

 

(a)                                  applying for
all PRC Government Approvals that are reasonably required for the operation of
the EJV in the manner contemplated by this Contract;

 

(b)                                 assisting the
EJV in procuring equipment required by the EJV and assisting the EJV in
obtaining licensing from Affiliates of the Existing Shareholders of

 

10

 

production
processes and essential technologies required for the production of EJV
Products and Services;

 

(c)                                  assisting the
EJV in procuring materials;

 

(d)                                 assisting the
EJV in obtaining qualified management, operations and financial personnel in
the PRC to the extent reasonably practicable;

 

(e)                                  assisting the
EJV in obtaining training including technical, marketing, management and
business development training for its personnel;

 

(f)                                    assisting the
EJV in ensuring the quantity and quality of the equipment and materials
purchased by the EJV;

 

(g)                                 assisting  in applying for all tax and duty reductions
and exemptions and other investment incentives available to the EJV under
applicable law;

 

(h)                                 at the cost of
the EJV, assisting the EJV in obtaining: (i) sufficient supply of water, gas,
and electricity; (ii) sufficient facilities of telephone, fax and network; and
(iii) other infrastructure and similar necessary requirements for the operation
of the EJV, at favorable prices and conditions;

 

(i)                                     continuing to
serve the EJV in their current capacity, and indemnifying all losses and costs
incurred by SCL due to their resignation(s) or impediments to the EJV, unless
such resignation has the prior written approval of  SCL; and

 

(j)                                     handling such
other matters as assigned by the Board from time to time.

 

6.2                                 Responsibilities
of SCL

 

In
addition to their other obligations under this Contract, SCL shall have the
following responsibilities:

 

(a)                                  infusing its
registered capital contributions pursuant to Article 5 of this Contract;

 

(b)                                 assisting the
EJV in procuring equipment required by the EJV;

 

(c)                                  assisting the
EJV in obtaining qualified management, operations and financial personnel in
the PRC to the extent reasonably practicable;

 

(d)                                 assisting the
EJV in obtaining training including technical, marketing, management and
business development training for its personnel;

 

(e)                                  handling such
other matters as assigned by the Board from time to time.

 

11

 

ARTICLE 7                                                                                LICENSING AND SALE OF
JV PRODUCTS AND SERVICES

 

7.1                                 PRC Sales
Channels

 

The
EJV Products and Services may be sold by the EJV in the PRC or overseas markets
in the manner determined by the Board.

 

7.2                                 Laws and
Regulations

 

The
Parties shall comply with, and shall make efforts to ensure that the EJV
complies with, all relevant laws and regulations of the PRC and any other
country the EJV then does business, regarding the export of products or
technical information from the PRC or use of products or technical information
within the PRC.

 

ARTICLE 8                                                                                BOARD OF DIRECTORS

 

8.1                                 Board
Composition; Chairman 

 

(a)                                  The Board is
the highest authority of the EJV and shall be deemed established on the date of
issuance of the EJV’s Business License. It shall discuss and determine all
issues regarding the EJV as required by this Contract.  The Board shall be composed of five (5)
directors.  For as long as the Parties’
contribution to the registered capital is as stated in Article 5.2, two of the
directors shall be appointed by SCL and the other two shall be appointed by the
Existing Shareholders, and one shall be appointed jointly by (i) SCL and (ii)
collectively, the Existing Shareholders.

 

(b)                                 The Board
shall have one Chairman (the “Chairman”).  The Chairman shall be appointed by SCL.  So long as the PRC law requires, the Chairman shall be the legal
representative of the EJV.  Neither the
Chairman nor any other member of the Board nor any of the Existing Shareholders
may by himself bind the Board or the EJV. 
Whenever the Chairman is unable to perform his responsibilities, another
individual (whether current director or otherwise) shall be authorized by the
Chairman to represent him.

 

8.2                                 Term of
Directors

 

The
term of appointment of each director shall be four years.  A director whose term of appointment has
expired may be re-appointed by the Party or Party(ies) that originally made the
appointment.

 

8.3                                 Vacancies

 

(a)                                  Should the
office of a director of the EJV become vacant for any reason, the Party (or in
their absence the remaining board members so selected by that Party) who
originally appointed the director shall appoint a replacement.

 

12

 

(b)                                 Any Party may
at any time dismiss without cause a director appointed by such Party and
appoint another director in his/her place.

 

8.4                                 Appointment

 

After
a director is dismissed, a new director shall be appointed, upon 10 days prior
written notice from the appointing Party to the other Party. The notice shall
include the director’s resume. Such appointment shall be submitted to the
relative authorities for record.

 

8.5                                 Meetings

 

(a)                                  The Board
shall meet at least once every year. 
Such meetings shall be called and presided over by the Chairman.  When the Chairman or SCL considers it
necessary, or at the written request of at least two (2) of the directors, an
interim meeting of the Board shall be convened.  In the event the Chairman is not able or refuses to call and
preside over any meeting of the Board, any Director designated by SCL shall
have the right to call and preside over such meetings.  Board meetings shall be held at the offices
of the EJV, unless otherwise determined by the Board.  A Board member may attend the meeting via teleconference.  The Board shall appoint a secretary who
shall prepare detailed minutes of all matters addressed at the Board
meetings.  The minutes of the meetings
shall be kept in English and Chinese by the Secretary, signed by all of the
directors present at the meeting, filed by the EJV, and a copy promptly
distributed to all directors.

 

(b)                                 The quorum
necessary to hold meetings of the Board shall be three (3) directors, including
at least one director appointed by SCL. 
Unless there is a quorum, the directors present at a meeting shall not
act.  In the event that the Chairman
calls a Board meeting and there is no quorum, then within 3 days after the date
of the intended Board meeting, the Chairman shall call another meeting (to be
held not more than 7 days after the intended meeting); and in the event that
there is still no quorum, the quorum shall be reduced to two (2) Directors.

 

(c)                                  If a director
is unable to attend a meeting of the Board, he may by properly executed proxy
authorize another person, including another director, to represent him and vote
for him at the meeting.  Any person so
authorized shall have a separate vote for the director he/she is representing
in addition to his own vote as director, and each director he/she represents
shall be counted for the purposes of the quorum.

 

(d)                                 Each director
shall be notified of the holding of a meeting of the Board and of the proposed
agenda at least ten (10) days prior to the date on which the meeting is to be
held, but such period may be shortened upon the written consent of all of the
directors.

 

(e)                                  The EJV may,
at the sole discretion of the Board, pay compensation to the directors for
their services to the EJV.  However, all
reasonable costs of air travel,

 

13

 

meals,
accommodation, and other expenses incurred by the directors for the purpose of
attending meetings of the Board shall be borne by the EJV.

 

8.6                                 Voting

 

(a)                                  Except as
otherwise provided in Article 8.6(c) of this Contract and in the Articles of
Association, all resolutions of the Board shall require a majority of the votes
of the directors present at the meeting who constitute the necessary quorum.  If upon any resolution there is a deadlock,
such resolution shall be deemed to be rejected.  Neither the Chairman nor any other director shall have a
tie-breaking vote, except in the event that there are then only four directors
duly appointed present, in which event the Chairman shall have a tie-breaking
vote.

 

(b)                                 Each director
present at a meeting of the Board shall have one (1) vote unless representing
another director in accordance with Article 8.5(c).

 

(c)                                  As long as PRC
law requires, the following matters shall require a resolution of the Board
adopted by the unanimous vote of all directors present at a validly called
meeting of the Board:

 

(i)                                     Amendment of
Articles of Association of the EJV;

 

(ii)                                  Termination
and dissolution of the EJV;

 

(iii)                               Increase or reduction
of the registered capital of the EJV;

 

(iv)                              Merger or
division of the EJV.

 

8.7                                 Written
Resolution

 

(a)                                  All Board
resolutions shall be in writing and must be signed by at least two members of
the Board attending the meeting. 
Facsimile signatures shall be sufficient and resolutions may be signed
in counterparts. The date of Board approval of such resolutions shall be the
date on which the last director required signs such resolutions.

 

(b)                                 A Board
resolution may be passed without the requirement of a Board meeting, by
circulating a written resolution among the Board members. Such resolutions must
be signed by at least the number of directors constituting a quorum (including
any quorum pursuant to Article 8.5(b), if applicable) for a meeting of the Board.  Such resolution shall be as valid as if
passed at a meeting of the Board duly convened and held.  The date of Board approval of such
resolution shall be the date on which the last director required to constitute
a quorum signs the resolution. Facsimile signatures shall be sufficient and the
resolutions may be signed in counterparts.

 

8.8                                 Exercise of
Voting Powers

 

The
Parties undertake to exercise or to procure the exercise of all voting powers
at all meetings of the EJV and through their representatives on the Board to
pass such

 

14

 

resolutions
and to take such actions as will make possible the implementation of the
purpose of this Contract.

 

8.9                                 Power of the
Board

 

The
power of the Board shall include but not limited to:

 

(a)                                  designating
the directors and the Senior Staff of the EJV and of any entity invested by the
EJV representing the EJV; and

 

(b)                                 handling any
other matters, which are deemed necessary by the Board.

 

ARTICLE 9                                                                                OPERATION AND MANAGEMENT

 

9.1                                 Senior Staff

 

The
senior staff (“Senior Staff”) of the EJV may include but is not limited to the
General Manager, the Controller, the Chief Financial Officer, the Marketing
Manager, the Chief Technology Officer, and the Human Resources Manager.

 

9.2                                 Appointment,
Nomination and Scope of Responsibility

 

(a)                                  There shall be only one General Manager of the EJV. The General Manager
shall report to the Board and shall initially be appointed by SCL; however, the
Board has the power to remove the General Manager and appoint one of its
choosing, as it deems necessary.

 

(b)                                 The General
Manager shall implement the resolutions of the Board, be responsible for the
daily management and operation of the EJV, and shall appoint and dismiss
subordinates.

 

(c)                                  The General
Manager shall, whenever requested by at least two (2) of the directors and upon
notice, bring before the Board all requested records relevant to the EJV’s
operations.

 

9.3                                 Transfer and
Dismissal of Senior Staff

 

The
Senior Staff shall be recommended by the General Manager and appointed and
dismissed by the Board; however, the Controller and the Chief Financial Officer
of the EJV can only be appointed and dismissed by SCL.

 

ARTICLE 10                                                                         SITE AND OTHER
FACILITIES

 

10.1                           The Office and any other facilities shall
be at such locations as the Board of Directors shall designate from time to
time.

 

15

 

ARTICLE 11                                                                         CONDITIONS PRECEDENT FOR COMPLETION

 

11.1                           The obligations of the Parties under
this Contract, other than Articles
15, 17, 18, 19 and 23, are subject to fulfillment, unless waived by
SCL, of each of the following conditions:

 

(a)                                  The Equity
Interest Transfer Agreement, Articles of Association, and any and all other
documents needed to satisfy all necessary authorities of the PRC, have been
duly executed by the Existing Shareholders, SCL, and Weida (if necessary).

 

(b)                                 The Business
License for the EJV has been issued.

 

(c)                                  The
requirements of the State Administration on Foreign Exchange have been
satisfied.

 

(d)                                 The due
diligence study by the financial and legal counsel of SCL has been completed to
the satisfaction of SCL, in its sole discretion.

 

(e)                                  The necessary
approval from SCL’s Board of Directors has been obtained.

 

(f)                                    The necessary
resolutions of the Board and the General Meeting of Weida, duly approving the
transactions contemplated by this Agreement and the Equity Interest Transfer
Agreement, have been obtained.

 

(g)                                 Weida and the
Existing Shareholders have executed the Representations and Warranties and Undertakings,
which is an attachment to the Equity Interest Transfer Agreement, and all of
the matters described therein are true and completed.

 

ARTICLE 12                                                                         LABOR MANAGEMENT

 

12.1                           Government Principles

 

Except
as otherwise provided in this Contract, matters relating to the recruitment,
employment, dismissal, resignation, wages, welfare and other matters concerning
the staff and workers of the EJV shall be subject to the labor law of the PRC
and other relevant laws and regulations.

 

16

 

12.2                           Employment Contracts

 

(a)                                  The EJV shall
enter into labor employment contracts with its employees.

 

(b)                                 All employment
agreements with the senior management and key technical personnel shall be
satisfactory to SCL, as to the form and substance of the agreement and as to
the employees engaged.

 

12.3                           Labor Union

 

PRC
Employees shall have the right to establish a labor union in accordance with
the PRC Trade Union Law and other relative laws, and the EJV shall create and
pay to a Union Fund and the PRC Employees shall pay labor union dues in
accordance therewith.

 

12.4                           Conformity with Labor Protection Rules

 

The
EJV shall conform to laws and regulations of the PRC government concerning
labor protection.  Labor insurance for
the PRC Employees of the EJV shall be handled in accordance with the relevant
laws and regulations of the PRC government.

 

ARTICLE 13                                                                         FINANCIAL AFFAIRS AND ACCOUNTING

 

13.1                           Financial Affairs and Accounting

 

The
Controller or Chief Financial Officer shall head the EJV’s Financial Department
and shall be responsible for the EJV’s financial and accounting matters.

 

(a)                                  RMB shall be
used as the bookkeeping currency of the EJV. 
Cash, deposits, accounts payable and receivable, income and expenses
shall  be set forth in the currency in
which they are paid or received.  All
financial statements of the EJV shall be presented in both RMB and USD.

 

(b)                                 For purposes
of preparing the EJV’s accounts and statements of the Parties’ contributions,
and for any other purposes where it may be necessary to effect a currency
translation, such translation shall be in accordance with the posted exchange
rate as determined by the middle rate for buying and selling, announced by the
People’s Bank of China on the date of actual payment.

 

(c)                                  Subject to the
Board’s determination, the accounting, tax and fiscal year for the EJV shall
commence on January 1 and end on December 31. 
The accounting, tax and fiscal year for the first year of operation of
the EJV shall begin on the Effective Date and shall end on December 31 of the
same year.

 

(d)                                 All local
expenses of the EJV including but not limited to, expenses of materials, wages
for PRC personnel, taxes, duties, charges, services and utilities, shall be
paid for in RMB.

 

17

 

(e)                                  The Controller
(or the financial manager of the EJV resident in the PRC) shall prepare the
EJV’s monthly financial statements in English in accordance with US-GAAP.  For the purpose of such statements, the
accounting, tax and fiscal year for the EJV applied in such statements,
notwithstanding the Article 13.1 (c) above, shall commence on July 1 of each
year and end on June 30 of next year, unless modified by the Board.

 

(f)                                    At the end of
each fiscal quarter, a set of financial statements shall be prepared in Chinese
and English setting out all the details required by the Accounting Regulations
of both PRC GAAP and US GAAP.  A copy of
these statements shall be sent to each Party and to each director and shall be
created in accordance with the provisions of Article 13 hereof.

 

(g)                                 The Parties
shall have the right, upon reasonable prior notice, to request from the
Controller to review the books and records of the EJV and to make copies of any
of the books and records for their own use. 
If requested by a Party, the accounting staff of the EJV shall cooperate
with such Party in providing all financial information of the EJV reasonably
required by such Party.

 

13.2                           Bank Accounts

 

(a)                                  The EJV shall
maintain both RMB and foreign exchange bank account(s) in the PRC.  Subject to the approval by the Board and
relevant PRC authorities, the EJV may also open foreign currency accounts in
banks outside the PRC.  One or more
individuals as designated by the Board in accordance with the EJV’s accounting
procedures shall operate these bank accounts.

 

(b)                                 Except as
otherwise agreed by the Board, the amount standing to the credit of the EJV in
the foreign exchange account shall remain in foreign exchange and shall not be
converted into RMB.

 

13.3                                                   Profits
Distribution

 

(a)                                  Prior to the
distribution of net profits of the EJV to the Parties, the EJV shall allocate
from the net after-tax profits of the EJV for the creation (and in subsequent
years maintenance) of the reserve, expansion, and bonus and welfare funds.  The allocation percentages of the above
mentioned three funds shall be decided by the Board.

 

(b)                                 After the
payment of income and other tax and allocation to the three (3) funds, the
Board may at its discretion declare any remaining profits or a portion thereof
to be payable in dividends to the Parties on a pro-rata basis in accordance
with their respective contribution in the Registered Capital of the EJV as set
out in Article 5.2 of this Contract or in each case as adjusted to reflect the
then current registered capital contributions. 
Dividends payable shall be paid in RMB or US Dollars, at the direction
of each Party.  Dividends, if any, shall
be distributed annually in accordance with the EJV’s accounting fiscal year,
unless modified by the Board.

 

18

 

(c)                                  SCL shall be
entitled to remit freely out of the PRC any monies whether dividends,
royalties, fees, or otherwise, in accordance with the foreign exchange
regulations of the PRC.  Profits remaining
after the payment of dividends to the Parties, if any, shall remain in a
retained earnings account to be used by the EJV in the manner determined by the
Board from time to time.

 

13.4                           Appointment of Auditor

 

SCL
shall appoint, dismiss or change the auditor of the EJV.

 

ARTICLE 14                                                                         TAXATION, FEES AND LEVIES, AND INSURANCE

 

14.1                           Income Tax, Customs Duties and Other
Taxes

 

The
EJV shall pay tax under the relevant laws of the PRC and the tax regulations
applicable to the EJV.  Employees of the
EJV shall pay their individual income tax in accordance with the PRC Income Tax
Law and other relevant laws and regulations of the PRC.

 

ARTICLE 15                                                                         CONFIDENTIALITY

 

15.1                           Confidential Information

 

For
purposes of this Contract, “Confidential Information” shall mean all
oral, written and/or tangible information concerning the business, commerce,
technology, finance, labor, tax of the Parties, and the existence, terms and
conditions or amendments of this Contract, and all Attachments, schedules,
exhibits and amendments hereto and thereto shall be considered Confidential
Information protected under this Article.

 

15.2                           Treatment of
Confidential Information

 

Unless
otherwise required by law of PRC or the USA, during the term of this Contract,
each Party and its Affiliates (where applicable), shall refrain from
disclosing, divulging, discussing or otherwise making available, any
Confidential Information made available in the course of the transaction(s)
contemplated hereby, except as provided for in Article 15.3 below.  Each Party will not use and will cause its
Affiliates (where applicable) to not use such Confidential Information for any
purpose other than the performance of its obligations under this
Agreement.  Each Party shall cause its
employee or agent to obey the confidential requirements hereof for Confidential
Information.

 

15.3                           Excluded
Information

 

Notwithstanding
the foregoing, information shall not be deemed confidential and recipient shall
have no obligation with respect to any such information which:

 

(a)                                  is shown to be
in the public domain by means other than as a consequence of a breach of this
Contract, or

 

19

 

(b)                                 was disclosed
by a third party; or.

 

(c)                                  was legally
known by the recipient prior to the date of disclosure; or

 

(d)                                 was
independently developed by recipient

 

15.4                           Provision of
Information to Regulatory Bodies

 

Nothing
in this Contract shall be construed to limit any Party’s ability to provide
information to any applicable regulatory body, including the governments of the
PRC and USA or their political subdivisions and their respective agencies and
instrumentalities, to the extent required by law.

 

15.5                           Other
Restrictions

 

Notwithstanding
anything in this Article 15 to the contrary, in the event that any Confidential
Information is also subject to a limitation on disclosure or use contained in
another written agreement between the Parties which is more restrictive than
the limitations contained in this Article 15, then the limitations in such
agreement shall supersede this Article 15.

 

15.6                           Use of Information in Individual
Employment Contracts

 

The
individual employment contracts of all EJV employees shall contain conditions
regarding use of Confidential Information of the EJV.

 

15.7                           Survival

 

The
provisions of Articles 15 shall survive the termination of this Contract and
the termination, dissolution or liquidation of the EJV for a period of five (5)
years.

 

ARTICLE 16                                                                         THE JOINT VENTURE TERM

 

16.1                           Joint Venture Term

 

The
Joint Venture Term shall commence on the date of the issuance of the Business
License and shall expire, unless extended or sooner terminated, thirty (30)
years after the date of the issuance of the Business License.

 

16.2                           Extension of the Joint Venture Term

 

At
least one (1) year prior to the expiration of the Joint Venture Term, the
Parties may discuss the extension of the term. 
If the Parties agree, an application for such extension shall be
submitted to the Approval Authority for approval no less than six (6) months
prior to the expiration of the Joint Venture Term.  If the Parties fail to reach an agreement six (6) months prior to
the expiration of the Joint Venture Term, termination proceedings shall
immediately commence.

 

20

 

ARTICLE 17                                                                         TERMINATION AND LIQUIDATION

 

17.1                           Termination by Any Party

 

This
Contract shall terminate upon the expiration of the Joint Venture Term, unless
extended pursuant to Article 16.2.  In
addition, a non-breaching Party may terminate this Contract, in accordance with
this Article 17.1, upon the commission of any one or more of the following
events by the other Party, prior to the expiration of the Joint Venture Term by
written notice to the other Party without the need of a Board resolution:

 

(a)                                  if SCL or The
Existing Shareholders commits a material breach of this Contract, the Articles
of Association, and such breach is not cured within sixty (60) days after
receipt of written notice to the Party in breach;

 

(b)                                 if SCL or The
Existing Shareholders, transfers its equity participation in the EJV in
violation of the provisions of this Contract or the Articles of Association;

 

(c)                                  for any other
reason, which allows termination by a Party without a Board resolution as
provided for in the other provisions of this Contract or the Articles of
Association, but not specifically set forth in this Article 17.1, or in
accordance with any applicable laws and regulations.

 

17.2                           Pre-Termination
Consultations

 

In
the event that any Party gives notice of a desire to terminate  this Contract for a reason stipulated under
Article 17.1, the Parties shall within a two (2) month period after such notice
is given conduct negotiations and endeavor to resolve the reason which prompted
the notification of termination.  If the
reason(s) that prompted the notification of termination cannot be resolved to
the satisfaction of the Parties, the dispute shall be submitted to arbitration
pursuant to Article 21 of this Contract. The consultations that occur pursuant
to this section shall be exclusive of any other consultations required by these
Articles.

 

17.3                           Termination in General

 

If  this Contract is terminated because its term
has expired or for a reason other than that specified in Article 17.4 below,
any Party may negotiate to purchase by itself or a third party it designated
the participation of the other Party. 
If within 90 days of termination no Party desires to exercise such
right, the Parties cannot agree which Party will exercise such right, or the
Parties cannot agree on the terms of the exercise of such right, the Parties,
through the Board, shall immediately take steps to liquidate the EJV in
accordance with Article 17.5 of this Contract.

 

17.4                           Termination

 

(a)                                  If  this Contract is terminated due to a
material breach or other circumstance in accordance with Article 17.1 of this
Contract, the Party giving notice of termination (the “Purchaser”) will
have the right to purchase or designate a third

 

21

 

party
to purchase the equity interest of the Party causing the event that gives rise
to a termination right (the “Seller”) at the lesser of Net Book Value
and the Fair Market Value of the Seller’s contribution to the EJV. Failure of
the Purchaser to exercise its election under this Article 17.4 shall not
constitute a waiver of such election with respect to any subsequent right
hereunder.  In calculating Net Book
Value and Fair Market Value, the calculation shall be made as of the last
calendar day of the month prior to the date of the action causing the need for
such calculation.

 

(b)                                 The value of a
Party’s contribution to the EJV shall be determined as follows:

 

(i)                                    The Net Book
Value of a Party’s contribution shall be equal to the ratio that such Party’s
contribution to the registered capital bears to the total amount of registered
capital contributed by all the Parties multiplied by the Net Book Value of the
EJV.

 

(ii)                                  The Fair
Market Value of a Party’s contribution shall be equal to the ratio that such
Party’s contribution to the registered capital bears to the total amount of
registered capital contributed by all the Parties multiplied by the Fair Market
Value of the EJV.

 

(c)                                  The value of
the EJV shall be determined as follows:

 

(i)                                     The EJV’s
auditing firm shall determine the Net Book Value of the EJV.  The Net Book Value of the EJV shall be equal
to the value of all assets of the EJV (including but not limited to accumulated
but unpaid dividends) minus all actual liabilities of the EJV, in each case as
indicated on the EJV balance sheet in accordance with US GAAP.  The Net Book Value of the EJV shall also be
reduced by any pending latent taxes or governmental charges.

 

(ii)                                  The Fair
Market Value of the EJV shall be equal to the fair market value of the EJV as a
going concern as determined by agreement of each of the Parties, or if the
Parties cannot so agree, by a firm of internationally recognized investment
bankers jointly selected by the Parties, or if the Parties cannot agree on a
firm, by the EJV’s auditors appointed in accordance with Article 13.4
hereof.  The determination of the
investment bank or the EJV’s auditors, if applicable, shall be final and
conclusive on all Parties.  The Parties
shall share equally the cost of determining the Fair Market Value of the EJV to
be sold and purchased pursuant hereto.

 

(iii)                               In determining the Fair Market Value of
the EJV, the investment bank or the auditing firm shall give special
consideration to:

 

(A)                              assets or liabilities having a value
which deviates considerably from the value stated in the EJV’s books;

 

22

 

(B)                                latent taxes or other governmental
charges pending for the accounting year in question, or for previous years;

 

(C)                                other latent liabilities not included in
the annual accounts, such as employee benefits, pensions, guarantees and
sureties.

 

(d)                                 If the
Purchaser exercises its right under this Article 17.4, each Party agrees to use
its best efforts to comply with all laws, rules, regulations and requirements
of any governmental entity applicable to such purchase and sale, to cooperate
in establishing the purchase price in an expeditious manner and to cause its
representatives to take whatever action necessary to effectuate the purchase in
a timely manner.  If the Purchaser does
not elect to exercise its right under this Article 17.4 within six (6) months
from the date of termination, the Parties through the Board shall immediately
take steps to liquidate the EJV in accordance with Article 17.5.

 

17.5                                                   Dissolution
and Liquidation

 

(a)                                  When necessary,
the Board shall establish the procedures and principles for the liquidation and
establish a “Liquidation Committee”. The Liquidation committee shall
consist of three individuals, two of whom shall be designated by SCL, and the
third by the Existing Shareholders. The Liquidation Committee may act upon
resolution by a 2/3 majority.  The
Parties shall share the cost of the members of the Liquidation Committee on a
pro-rata basis in accordance with their respective contribution in the
Registered Capital of the EJV as set out in Article 5.2 of this Contract.

 

(b)                                 The tasks of
the Liquidation Committee are:

 

(i)                                     to conduct a
thorough assessment of the EJV’s assets and its creditors’ rights and debtors’
obligations;

 

(ii)                                  to prepare a
comprehensive statement of the EJV’s assets and liabilities;

 

(iii)                               to formulate the method of valuation of
the assets;

 

(iv)                              to formulate the liquidation plan;

 

(v)                                 to appoint
independent experts to assess the value of the EJV assets, as deemed necessary.

 

(c)                                  In valuing and
selling physical assets, the Liquidation Committee shall use every effort to
obtain the highest possible price for such assets.  After liquidation and the settlement of all outstanding debts of
the EJV, the joint account shall be paid over to the Parties on a pro-rata
basis in accordance with their respective shares in the registered capital of
the EJV. All amounts payable to the Parties pursuant to this Article 17 shall
be paid promptly in US Dollars if required by such Parties.

 

23

 

(d)                                 The activities
of the Liquidation Committee shall be reported to the relevant authorities.
During liquidation, the Liquidation Committee shall be the legal representative
of the EJV.

 

ARTICLE 18                                                                         NON-COMPETITION

 

18.1                           Each of the Existing Shareholders agrees
that during the Joint Venture Term he/she will not, directly or indirectly, do
or suffer any of the following:

 

(a)                                  Own, manage,
control or participate in the ownership, management, or control of, or be
employed or engaged by or otherwise affiliated or associated as a consultant,
an independent contractor, an officer, director, or shareholder of a
corporation, or otherwise, with any other corporation, partnership,
proprietorship, firm, association, or other business entity, or otherwise
engage in any business which is engaged in any manner in, or otherwise competes
with, the business of the EJV, its subsidiaries, affiliated entities and
franchises within the PRC, or in any other metropolitan or other geographic
area in which the EJV or any of its subsidiaries, affiliated entities or
franchisees, then conducts its business, provided, however, that the ownership
of not more than one percent (1%) of the stock of any publicly traded
corporation shall not be deemed a violation of this covenant;

 

(b)                                 Employ, assist
in employing, or otherwise associate in business with any present, former or
future employee of the EJV, its subsidiaries, affiliated entities and
franchises within the PRC; and

 

(c)                                  Induce any
person who is an employee of the EJV, officer or agent of the EJV, or its
subsidiaries or affiliated entities to terminate said relationship.

 

18.2                           Each Existing Shareholder expressly
agrees and understands that the remedy at law for any breach by him/her of this
Article 18 will be inadequate and that the damages flowing from such breach are
not readily susceptible to being measured in monetary terms.  Accordingly, it is acknowledged that upon
adequate proof of violation of any legally enforceable provision of this
Article 18, irreparable injury shall be presumed and SCL shall be entitled to
immediate injunctive relief and may obtain a temporary order restraining any
threatened or further breach.

 

18.3                           Nothing in this Article 18 shall be
deemed to limit SCL’s remedies at law or in equity for any breach by an
Existing Shareholder(s) of any of the provisions of this Article 18, which may
be pursued or availed of by SCL.  In the
event Employee shall violate any legally enforceable provision of this Article
18 as to which there is a specific time period during which he/she is
prohibited from taking certain actions or from engaging in certain activities,
as set forth in such provisions, then, in such event, such violation shall toll
the running of such time period from the date of such violation until such
violation shall cease.

 

18.4                           In the event that any provision of this
Article 18 is found to be unenforceable as to time or geographic
restriction(s), then such unenforceable restriction(s) shall be modified to
restrict only to the extent enforceable by law, and shall continue in full
force and effect.

 

24

 

18.5                           Each Existing Shareholder has carefully
considered the nature and extent of the restrictions upon him/her and the
rights and remedies conferred upon SCL under this Article 18 and hereby
acknowledges and agrees that the same are reasonable in time and territory, and
are not contrary to the public health, safety or welfare, are designed to
eliminate competition which otherwise would be unfair to SCL, do not stifle the
inherent skill and experience of the Existing Shareholder, would not operate as
a bar to Existing Shareholder’s sole means of support, are fully required to
protect the legitimate interests of SCL and do not confer a benefit upon SCL
disproportionate to the detriment of the Existing Shareholder.

 

ARTICLE 19                                                                         INDEMNIFICATION

 

19.1                           Indemnification

 

(a)                                  For purposes
of this Article 19, the term “Claims” shall mean all claims, demands,
losses, costs, expenses, obligations, liabilities, actions, suits, damages,
diminution in value and deficiencies including, without limitation, interest
and penalties, attorneys’ fees and costs (including reasonable attorneys’ fees
incurred in enforcing a right to indemnification hereunder), and all amount
paid in settlement of any claim, action or suit.

 

(b)                                 Subject to the
provisions of Article 19.2 below, each Party (the “Indemnifying Party”)
shall indemnify and hold harmless the EJV, the other Party and their Affiliates
and their respective officers, directors, employees and agents (the “Indemnified
Party”) from and against all Claims incurred by such Indemnified Party in
connection with each and all of the following: (i) any misrepresentation by the
Indemnifying Party or breach by the Indemnifying Party of any representation or
warranty in this Contract,  or any other
agreement, instrument or document furnished in connection with this Contract;
or (ii) any breach of any covenant, agreement or obligation of the Indemnifying
Party contained in this Contract or any other agreement, instrument or document
furnished in connection with this Contract; or (iii) any other liabilities,
debts or obligations, whether present or future, of the Indemnifying Party
related to this Contract or the EJV including without limitation any Claims
resulting from or relating to the liquidation of the EJV in accordance with
Article 17 hereof.

 

(c)                                 If any Claim
subject to Article 19.1 is brought by a third party against an Indemnified
Party, the Indemnified Party shall provide prompt written notice thereof to the
Indemnifying Party; provided, however that the failure to give such notice
shall not affect the rights of indemnification hereunder except to the extent
the Indemnified Party is actually prejudiced thereby; and the Indemnifying
Party shall be entitled to, but shall not be obligated to, assume the defense
thereof (at its own expense) not later that seven (7) days after the receipt of
notice of such Claim. If the Indemnifying Party elects to assume the defense of
any such Claim, then the Indemnified Party shall be entitled to participate in
said defense or

 

25

 

settlement
of such Claim (at its own expense). 
Each Party shall cooperate reasonably with each other in the
investigation or defense of any Claim brought by a third party, including
making available all records reasonably necessary to the investigation or
defense of such Claim.  So long as the
Indemnifying Party is contesting any such Claim in good faith, the Indemnified
Party shall not pay or settle any such Claim; provided however that
notwithstanding the foregoing, the Indemnified Party shall have the right to
pay or settle any such Claim at any time, provided that in such event it shall
waive the right of indemnification therefore from the Indemnifying Party. If
the Indemnifying Party does not make a timely election to undertake the good
faith defense or settlement of the Claim as aforesaid, or if the Indemnifying
Party fails to proceed with the good faith defense or settlement of the matter
after making such election, then, in either such event, the Indemnified Party
shall have the right to contest or settle the Claim at his/her exclusive
discretion, at the risk and expense of the Indemnifying Party and receive
indemnification to the full extent set forth in this Article 19.1.

 

19.2                           Indemnification in connection with
breach of Representations and Warranties

 

Each
of the Existing Shareholders has represented and warranted certain matters to
SCL in the Representations, Warranties and Undertakings mentioned in Article
11.1(g). in the event the Existing Shareholders are in breach of their
warranties and undertakings or their representations become untrue, the
existing Shareholders shall indemnify SCL against all the losses so incurred by
transferring all or part of their shareholdings in EJV or Weida to SCL at a
pro-rata basis.

 

ARTICLE 20                                                                         FORCE MAJEURE

 

20.1                           Force Majeure

 

(a)                                  “Force
Majeure” shall mean (i) fire, serious flooding, embargoes, earthquake or
other natural calamities, terrorism, war or military action of any kind, acts
or regulatory requirements of state authorities or (ii) any other circumstances
which are beyond the reasonable control of the affected Party and which could
not have been reasonably foreseen by that Party, which have arisen after the
date of this Contract and which prevent total or partial performance by the
affected Party of its obligations as contemplated in this Contract; provided,
however, that at no time shall Force Majeure include acts of, or directly or
indirectly caused by, the affected Party.

 

(b)                                 If an event of
Force Majeure occurs, the contractual obligations of the Parties to this
Contract (except the obligations under Article 15) shall be suspended during
the period of delay caused by the Force Majeure and shall be automatically
extended, without penalty, for a period equal to such suspension.

 

26

 

(c)                                  The Party
claiming Force Majeure shall within 15 days inform the other Party and shall
furnish appropriate proof of the occurrence and expected duration of such Force
Majeure.

 

(d)                                 After the
occurrence of a case of Force Majeure, the Parties shall immediately consult
with each other in order to find an equitable solution and shall use all reasonable
endeavors to minimize the consequences of such Force Majeure.

 

ARTICLE 21                                                                         SETTLEMENT OF DISPUTES

 

21.1                           Consultations

 

In
the event a dispute arises in connection with this Agreement, the Parties shall
attempt in the first instance to resolve such dispute through friendly
consultations. If the dispute cannot be resolved in this manner within 30 days
after the commencement of discussions, any Party may submit the dispute to
arbitration. The day when a notice for consultation from any Party to the other
shall be deemed the day of commencement of discussions. 

 

21.2                           Arbitration

 

Arbitration
shall be conducted as follows:

 

(a)                                  Arbitration
shall be conducted in the Hong Kong Special Administrative Region, by the Hong
Kong International Arbitration Centre (the “HKIAC”), under its then effective
rules. There shall be three arbitrators. The claimants in the arbitration shall
collectively appoint one arbitrator, and the respondent shall appoint one
arbitrator. Such arbitrators shall be freely selected, and the Parties shall
not be limited in their selection to any prescribed list. The two arbitrators
shall select the third arbitrator. If either the claimants or the respondents
do not appoint an arbitrator who has consented to participate within 15 days
after receiving the arbitration notice, the HKIAC shall make the relevant
appointment.

 

(b)                                 The
arbitration proceedings shall be conducted both in English and Chinese. The
arbitration tribunal shall apply the Rules of the HKIAC in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Article 20.2, including the provisions concerning the appointment of
arbitrators, the provisions of this Article 20.2 shall prevail.

 

(c)                                  The
arbitrators shall decide any dispute submitted by the parties to the
arbitration strictly in accordance with the substantive law of the PRC and
shall not apply any other substantive law. 
Each Party shall cooperate with the other in making full disclosure of and
providing complete access to all information and documents requested by the
other in connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such Party.

 

27

 

(d)                                 The award of
the arbitral tribunal shall be final and binding upon the disputing Party(ies),
and any prevailing Party(ies) may apply to a court of competent jurisdiction
for enforcement of such award.

 

ARTICLE 22                                                                         GOVERNING LAW

 

22.1                           Governing Law

 

This
Contract shall be governed by and construed under the laws of the PRC, without
regard to principles of conflicts of law thereunder.

 

ARTICLE 23                                                                         BREACH OF CONTRACT

 

23.1                           Should any Party to this Contract breach
or violate the terms of this Contract, then the non-breaching Party(ies) shall,
in addition to all other remedies available to them, be entitled to immediate
injunctive relief without notice or requirement of bond, temporarily,
preliminarily, and permanently enjoining and restraining the existing or
continuing violation of this Contract. 
Each Party acknowledges that such breach and/or violation of this
Contract constitutes irreparable harm and injury to the other Party(ies) which
may not be remedied by money damages. 
This remedy shall, nevertheless, be cumulative to any and all other remedies
available to the non-breaching Party.

 

23.2                           Nothing in this Article shall be to the
exclusion of any other remedy a Party may have due to the breach of Contract.

 

ARTICLE 24                                                                         MISCELLANEOUS

 

24.1                           Waiver

 

A
waiver of any claim based on the breach of any provision of this Contract shall
not be construed as a waiver of any other claim based on a subsequent breach of
the same or any other provision.

 

24.2                           Binding Effect

 

This
Contract is made for the benefit of the Parties and their successors, if any,
and may be enforced by all of them through legal means prescribed in this
Contract.  This Contract sets forth the
entire agreement and understanding between the Parties as to the subject matter
hereof and merges all prior agreements and discussions between them. Unless
otherwise set forth herein or therein, all representations and warranties,
undertakings, statements, covenants and agreements made by the Parties in this
Contract or pursuant hereto or to any other agreements, instruments or
documents delivered in connection herewith shall survive until termination of
this Contract or the termination, dissolution or liquidation of the EJV.

 

28

 

24.3                           Severability

 

If
any provision of this Agreement is found invalid or unenforceable, the validity
or enforceability of the remaining provisions or portions hereof shall not be
affected.

 

24.4                           No Agency

 

This
Contract shall not constitute any Party as the legal representative or agent of
any other Party, nor shall any Party have the right or authority, to assume,
create or incur any liability or obligation, express or implied, against, in
the name of, or on behalf of any other Party or the EJV.

 

24.5                           Language

 

This
Agreement shall be executed in both English and Chinese versions.  If there is any inconsistency between the
two versions, the English version shall prevail.

 

24.6                           No Third Party Beneficiaries

 

Except
as specifically set forth herein with respect to certain Affiliates of the
Parties and Indemnified Parties, nothing in this Contract is intended or shall
be construed to give any Person, other than the Parties hereto (and their
Affiliates and the Indemnified Parties, to the extent applicable) and the EJV
and their respective successors and permitted assigns, any legal or equitable
right, remedy or claim under or in respect of this Contract or any provision
contained within.

 

24.7                           Entire
Agreement and Amendments.

 

This
Contract sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges all prior discussions between them,
and neither of the parties shall be bound by any conditions, definitions,
warranties, understandings or representations with respect to such subject
matter other than as expressly provided herein, or as duly set forth on or
subsequent to the effective date hereof in a written amendment and signed by a
duly authorized representative of each party.

 

24.8                           Notices

 

(a)                                 All notices,
claims, certificates, requests, demands and other communications under this
Agreement shall be made in writing and shall be delivered postage prepaid, by
post mail or courier services to the parties at the following addresses or
delivered to the following facsimile number:

 

To the Purchaser: SCL Ventures
Ltd.

 

Address:

Person:

Facsimile:

E-mail:

 

29

 

To the Vendors: Li Shun Xing

Address:

Facsimile:

E-mail:

 

or such other address or facsimile number as may be
notified by such party to the others.

 

(b)                                Any notice or other communication shall
be deemed to have been received if sent by facsimile, on the date of
transmission; or if delivered personally, when delivered to the address above;
or if sent by post, 7 days if overseas and 24 hours if local after the date of
posting.

 

24.9                           Further Assurances

 

Each
of the Parties hereto shall (and shall cause the EJV to), from time to time and
without further consideration, execute and deliver such other documents and
instrument of transfer, conveyance and assignment and take such further action
as any the other Party may reasonably require to complete more effectively any
matter provided for herein.

 

24.10                     Restriction on
Employment Offers

 

The Existing Shareholders and SCL, and all
their Affiliates, undertake not to offer alternate employment contracts to
employees of the other party unless by mutual agreement.

 

IN WITNESS WHEREOF, the Parties hereto have caused this
Contract to be executed by their duly authorized representatives as of the date
first above written.

 

	
  SCL Ventures Ltd.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ 
  Mitchell Sepaniak

  	
   

  	
   

  
	
  Name: 
  Mitchell Sepaniak

  	
   

  
	
  Title:  President and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
  Li Shun Xing

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/ Li Shun Xing

  	
   

  	
   

  
					

 

30

 

	
  Li Xiang Ning

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/ Li Xiang Ning

  	
   

  	
   

  
	
   

  	
   

  
	
  Pang Da Qing

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/ 
  Pang Da Qing

  	
   

  	
   

  
	
   

  	
   

  
	
  Xie Li

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  /s/ 
  Xie Li

  	
   

  	
   

  

 

31

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00071-of-00352.parquet"}]]