Document:

Exhibit
10.8

 

ARTICLES OF
ASSOCIATION

 

OF

 

WEIDA
COMMUNICATIONS TECHNOLOGY COMPANY LIMITED

 

 

Dated as of August 26, 2004

 

 

 

ARTICLES OF
ASSOCIATION

 

OF

 

WEIDA
COMMUNICATIONS TECHNOLOGY COMPANY LIMITED

 

 

TABLE OF CONTENTS

 

	
  PREAMBLE

  	
   

  	
   

  
	
  ARTICLE 1

  	
   

  	
  DEFINITION

  
	
  ARTICLE 2

  	
   

  	
  PARTIES TO THE JOINT VENTURE

  
	
  ARTICLE 3

  	
   

  	
  OPERATION OF THE JOINT VENTURE

  
	
  ARTICLE 4

  	
   

  	
  PURPOSE AND SCOPE OF BUSINESS

  
	
  ARTICLE 5

  	
   

  	
  TOTAL AMOUNT OF INVESTMENT AND REGISTERED
  CAPITAL

  
	
  ARTICLE 6

  	
   

  	
  LICENSING AND SALE OF JV’S PRODUCTS AND
  SERVICES

  
	
  ARTICLE 7

  	
   

  	
  BOARD OF DIRECTORS

  
	
  ARTICLE 8

  	
   

  	
  OPERATION AND MANAGEMENT

  
	
  ARTICLE 9

  	
   

  	
  SITE AND OTHER FACILITIES

  
	
  ARTICLE 10

  	
   

  	
  CONDITIONS PRECEDENT FOR COMPLETION

  
	
  ARTICLE
  11

  	
   

  	
  LABOR
  MANAGEMENT

  
	
  ARTICLE 12

  	
   

  	
  FINANCIAL AFFAIRS AND ACCOUNTING

  
	
  ARTICLE 13

  	
   

  	
  TAXATION, FEES AND LEVIES

  
	
  ARTICLE 14

  	
   

  	
  THE JOINT VENTURE TERM

  
	
  ARTICLE 15

  	
   

  	
  TERMINATION AND LIQUIDATION

  
	
  ARTICLE 16

  	
   

  	
  LANGUAGE

  

 

 

ARTICLES OF
ASSOCIATION

OF

WEIDA
COMMUNICATIONS TECHNOLOGY COMPANY LIMITED

 

These
Articles of Association (these “Articles”)
are formulated by Li Shun Xing, Li Xiang Ning, Pang Da Qing, and Xie Li  (the “Existing
Shareholders”), and SCL Ventures
Ltd. (“SCL”), a company
incorporated in the British Virgin Islands, in accordance with the Law of the
People’s Republic of China (the “PRC”)
on Sino-Foreign Equity Joint Venture Enterprise and other relevant laws and
regulations of the PRC, and the Equity Joint Venture Contract dated as of
August 26, 2004 (the “JV Contract”)
signed by the Existing Shareholders and SCL on August 27, 2004.

 

(In
these Articles, 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”.)

 

ARTICLE 1                                                                                DEFINITIONS

 

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

 

(a)                                  “Approval Authority” shall mean the
PRC Ministry of Commerce or the authority designated by such Ministry to
approve these Articles and the establishment of the JV.

 

(b)                                 “Board” shall mean the board of
directors of the JV.

 

(c)                                  “Business License” shall mean the
business license of the JV issued by the State Administration for Industry and
Commerce of PRC.

 

(d)                                 “Exchange Rate” shall mean the
exchange rate between RMB and USD, which is so promulgated by the Bank of China
on August 23, 2004;

 

(e)                                  “Export” or “export” shall
mean, when referring to a sale or license by the JV, sale or license outside of
the PRC Market.

 

(f)                                    “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.

 

(g)                                 “JV” shall mean the joint venture
company formed pursuant to the relevant laws and regulations of the PRC and the
JV Contract.

 

1

 

(h)                                 “JV Contract” shall mean the JV
Contract signed by the Existing Shareholders and SCL for the establishment of
Weida Communications Technology Company Limited, a Sino-foreign Equity Joint
Venture.

 

(i)                                     “Person” shall mean any individual,
partnership, association, company, joint venture, unincorporated organization
or government, or agency or political subdivision thereof.

 

(j)                                     “PRC”  shall mean the People’s Republic of China

 

(k)                                  “PRC Employees” shall mean all
employees of the JV who are PRC citizens holding PRC identity cards.

 

(l)                                     “PRC GAAP” shall mean the Generally
Accepted Accounting Principles of the PRC.

 

(m)                               “PRC Market” shall mean the mainland
of the PRC, not including Hong Kong, Taiwan and Macau.

 

(n)                                 “RMB” shall mean the lawful currency
of the PRC.

 

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

 

(p)                                 “US Dollars” or “US$” shall
mean the lawful currency of the United States of America.

 

(q)                                 “US GAAP” shall mean the Generally
Accepted Accounting Principles of the United States of America.

 

1.2                                 References
to any statutory provisions shall, where the context so admits or requires, be
construed as references to those provisions as respectively amended,
consolidated, extended or re-enacted from time to time, and shall, where the
context so admits or requires, be construed as including references to the
corresponding provisions of any earlier legislation (whether repealed or not)
directly or indirectly amended, consolidated, extended, or replaced thereby or
re-enacted therein, which may be applicable to any relevant tax year or other
period, and shall include any orders, regulations, instruments or other
subordinate legislation made under the relevant statute.

 

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

 

1.4                                 The
Recitals form an integral part of these Articles and shall be construed and
have the same force and effect as if expressly set out in the body of these
Articles.

 

2

 

1.5                                 References herein to
Clauses are to clauses in these Articles unless the context requires otherwise.

 

ARTICLE 2                                                                                PARTIES TO THE JOINT VENTURE

 

2.1                                 The Parties

 

The Parties to the JV 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
                          .

 

ARTICLE 3                                                                                OPERATION OF THE JOINT
VENTURE

 

3.1                                 Name and Address of the JV; Branches

 

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

 

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

 

(c)                                  The JV 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 JV is a limited
liability company.  The Parties, in
proportion to their respective contribution to the registered capital of the
JV, 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 JV.

 

3.3                                 Laws and Decrees

 

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

 

3

 

ARTICLE 4                                                                                PURPOSE AND SCOPE OF
BUSINESS

 

4.1                                 Purpose of the JV

 

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 JV

 

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.

 

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 JV) of the JV shall be USD
4,833,836.

 

5.2                                 Registered Capital

 

The registered capital of the JV 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 JV in US
Dollars.  The Existing Shareholders
shall contribute their investment by assigning all their interests in the
registered capital of Weida (as defined in the JV Contract) to the JV. After
contribution, certificates of

 

4

 

investment will be issued to the Parties. It is
acknowledged that all of Weida’s assets and business shall be converted into
the assets and business of the JV.

 

5.4                                 Contribution Schedule 

 

Within ninety (90)
days after obtaining the Business License and upon the Conditions Precedent for
Completion set out in these Articles being satisfied, SCL shall pay its respective contribution in a
lump-sum payment to an account of the JV, and the JV shall engage a PRC
registered accounting firm to verify the contribution to the registered capital
of the JV by the Parties.

 

5.5                                 Additional Financing

 

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

 

(i)                                     loans in RMB or US$ ;

 

(ii)                                  net earnings which are generated from sales
and licenses of JV’s 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 these
Articles or the JV Contract, the Existing Shareholders shall not sell, assign,
pledge, hypothecate, mortgage or otherwise transfer its contribution to the
registered capital of the JV 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 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 JV (the “Offering Party”)
shall first offer such contribution in writing to the other Parties (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.

 

5

 

(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
these Articles, their 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 JV 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 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), (c) and (d)
above, in regard to the transfer of the JV registered capital, unless the Board
agrees to convert the status of the JV to a local enterprise from a
Sino-foreign joint venture, SCL may not reduce the percentage of its share of
the JV’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 these Articles and the Articles of Associations and
the JV shall renew and revise its registration with the relevant PRC
administration for industry and commerce. 
Neither the business of the JV 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 JV 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 JV 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.

 

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,

 

6

 

such custom duties and taxes shall not be considered
as part of the capital contribution by that Party, and shall be borne by the
JV.

 

ARTICLE 6                                LICENSING AND SALE OF JV’S
PRODUCTS AND SERVICES

 

6.1                                 PRC Sales Channels

 

The JV’s products and services may be sold by the JV
in the PRC or overseas markets in the manner determined by the Board.

 

6.2                                 Laws and Regulations

 

The Parties shall comply with, and shall make
efforts to ensure that the JV complies with, all relevant laws and regulations
of the PRC and any other country the JV 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 7                                                                                BOARD OF DIRECTORS

 

7.1                                 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.

 

7.2                                 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.

 

7.3                                 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.

 

7

 

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

 

7.4                                 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.

 

7.5                                 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,

 

8

 

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

 

7.6                                 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.

 

7.7                                 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.

 

7.8                                 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

 

9

 

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

 

7.9                                 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 8                                                                                OPERATION AND MANAGEMENT

 

8.1                                 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.

 

8.2                                 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.

 

8.3                                 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 9                                                                                SITE AND OTHER FACILITIES

 

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

 

10

 

ARTICLE 10                                                                         CONDITIONS PRECEDENT FOR COMPLETION

 

10.1                           The
obligations of the Parties under these Articles, other than Article 15, are subject to the fulfillment, unless waived
by SCL, of each of the following conditions:

 

(a)          The Capital Increase Contract, the JV
Contract, these Articles of Association, and any and all other documents needed
to satisfy all necessary authorities of the PRC, have been duly executed by
Weida, the Existing Shareholders, and SCL.

 

(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 the JV Contract 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  11                                                                      LABOR MANAGEMENT

 

11.1                           Government
Principle

 

Matters relating to
the recruitment, employment, dismissal, resignation, wages, welfare and other
matters concerning the staff and workers of the JV shall be governed by the
labor law of the PRC and other relevant laws and regulations.

 

11

 

11.2                           Employment
Contracts

 

(a)                                  The JV shall
enter into labor employment contracts with 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.

 

11.3                           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.

 

11.4                           Conformity
with Labor Protection Rules

 

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

 

ARTICLE 12                                                                         FINANCIAL AFFAIRS AND ACCOUNTING

 

12.1                           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.

 

12

 

(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.

 

12.2                           Bank Accounts

 

(a)                                  The JV 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 JV may also open foreign currency accounts in
banks outside the PRC.  One or more
individuals as designated by the Board in accordance with the JV’s accounting
procedures shall operate these bank accounts.

 

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

 

12.3                                                   Profits
Distribution

 

(a)                                  Prior to the
distribution of net profits of the JV to the Parties, the JV shall allocate
from the net after-tax profits of the JV 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 JV as set
out in Article 5.2 of these Articles 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

 

13

 

annually in
accordance with the JV’s accounting fiscal year, unless modified by the Board.

 

(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 JV in the manner determined by
the Board from time to time.

 

12.4                           Appointment of
Auditor

 

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

 

ARTICLE 13                                                                         TAXATION, FEES AND LEVIES

 

13.1                           Income Tax,
Customs Duties and Other Taxes

 

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

 

ARTICLE 14                                                                         THE JOINT VENTURE TERM

 

14.1                           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, 30 years after the date of
the issuance of the Business License.

 

14.2                           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 proceeding shall immediately commence.

 

14

 

ARTICLE 15                                                                         TERMINATION AND LIQUIDATION

 

15.1                           Termination by
Any Party Termination by Any Party

 

This Contract shall
terminate upon the expiration of the Joint Venture Term, unless extended
pursuant to Article 14.2.  In addition,
a non-breaching Party may terminate this Contract, in accordance with this
Article 15.1, 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 15.1, or in
accordance with any applicable laws and regulations.

 

15.2                           Pre-Termination Consultations

 

In the event that any
Party gives notice of a desire to terminate 
this Contract for a reason stipulated under Article 15.1, 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. The
consultations that occur pursuant to this section shall be exclusive of any
other consultations required by these Articles.

 

15.3                           Termination in
General

 

If  this Contract is terminated because its term
has expired or for a reason other than that specified in Article 15.4 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 15.5 of this Contract.

 

15.4                           Termination

 

(a)                                  If  this Contract is terminated due to a
material breach or other circumstance in accordance with Article 15.1 of this
Contract, the Party giving notice of termination (the “Purchaser”) will
have the right to purchase or designate a third party to purchase the equity
interest of the Party causing the event that gives rise

 

15

 

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 15.4 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 12.4
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;

 

16

 

(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 15.4, 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 15.4 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 15.5.

 

15.5                                                   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 15 shall
be paid promptly in US Dollars if required by such Parties.

 

17

 

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

 

ARTICLE 16                                                                         LANGUAGE

 

16.1                          The Parties
have executed these Articles in both English and Chinese. Both versions shall
have the same effect in all aspects.

 

18

 

IN WITNESS WHEREOF, the Parties
hereto have caused these Articles to be executed by their duly authorized
representatives.

 

	
  SCL Ventures Ltd.

  
	
   

  
	
  By:

  	
  /s/  Mitchell Sepaniak

  	
   

  
	
  Name:

  	
  Mitchell Sepaniak

  
	
  Title:

  	
  President and Chief Executive Officer

  
				

 

 

	
  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

  	
   

  

 

19Exhibit 10.9

 

SCL Ventures Ltd.

(the “Purchaser”)

 

and

 

Li Shun Xing, Li Xiang Ning,

Pang Da Qing, and Xie Li

(the “Vendors”)

 

 

FUTURE EQUITY INTEREST TRANSFER AGREEMENT

 

for the Future 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.

  	
   

  	
  FUTURE 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

  

 

 

FUTURE 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” or
“Existing Shareholders”.)

 

(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.                             Pursuant to an
Equity Joint Venture Agreement, an Equity Joint Venture Articles of Association,
and an Equity Interest Transfer Agreement, the Parties have previously agreed
that SCL shall acquire 25% of the equity ownership of the Company, with the
Company

 

1

 

simultaneously converting into a Sino-foreign
Equity Joint Venture (the “EJV”) under the laws of the PRC;

 

4.                             The Parties
intend that, at such time as PRC law allows, the Existing Shareholders shall
sell and transfer additional equity ownership (over and above-described 25%) of
the Company, up to the greater of (i) the maximum allowed by PRC law or (ii) a
total of 51%.

 

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.                                      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

  

 

2

 

	
   

  	
   

  	
  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 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 incremental increases in Purchaser’s equity
  ownership, up to a maximum of 51% 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
  acquisition by the Purchaser, from the Existing Shareholders, of the maximum
  amount of equity ownership which PRC law permits, up to a maximum of 51% of
  the equity ownership of the EJV;

  
	
   

  	
   

  	
   

  
	
  “Transferred Shares”

  	
   

  	
  as much of the equity ownership of the
  Company (or of the Sino-foreign Equity Joint Venture into which the Company
  has converted), as the Effective Law permits SCL to hold, up to a maximum of
  51%;;

  
	
   

  	
   

  	
   

  
	
  “USD”

  	
   

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

  

 

3

 

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.

 

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                        A legal
opinion has been issued by Chen & Co. Law Firm, or other legal counsel
designated by SCL, confirming that SCL is permitted by the Effective Law to
acquire the additional equity ownership (up to a total of 51%) as contemplated
in this Agreement; and 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                        Upon the
Completion Date, the Existing Shareholders shall transfer additional equity
ownership (over and above 25%), on a pro rata basis from the equity ownership
then held by the Existing Shareholders, to SCL.

 

4

 

2.2.2                        Upon the
Completion Date, the Purchaser shall be the legal and beneficial owner of the
Transferred Shares.

 

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

 

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

 

2.2.5                        As and when
PRC law permits, from time to time, SCL shall be entitled to acquire equity
ownership of the EJV (in addition to the 25% which was the subject of the
previous Equity Interest Transfer Agreement), up to a maximum of 51% ownership
of the EJV.  The acquisition of the
additional 26% may be made in increments, always to the maximum then allowed by
PRC law, and always subject to the terms and conditions of this Agreement.

 

2.3                                     FORMALITIES OF
TRANSFER

 

The Parties agree that as and when SCL gives written
notice to the Existing Shareholders that SCL believes that PRC law permits SCL
to acquire an increased equity ownership by SCL (up to a maximum of 51% of the
EJV), then the Existing Shareholders shall be obligated, at their expense, to
proceed expeditiously and in good faith, to obtain all of the necessary
Governmental Approvals for SCL to acquire the additional ownership.

 

2.4                                 EXERCISE OF
RIGHTS

 

The Purchaser shall be entitled to the
Transferred Shares and excise the relevant rights of a shareholder under such
Transferred Shares upon the Completion Date for each incremental increase in
its equity ownership (up to a maximum of 51% of the EJV).

 

3.                             CONSIDERATION AND PAYMENT

 

3.1                 The
Consideration for Share Transfer for each incremental increase of equity
ownership shall be the lowest amount then permitted by PRC law.

 

3.2                 Each of the
Existing Shareholders hereof covenants that he/she shall not make requests for
increase of the Consideration for Shares Transfer and shall not assert any
doubt or claim on the agreed Consideration for Shares Transfer.

 

3.3                 SCL shall pay
the total Consideration for Shares Transfer to the bank account designated in
written by the Existing Shareholders at the time agreed by the Parties. A
receipt shall be issued to the SCL by each Existing Shareholder upon his/her
receipt of payment

 

5

 

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:

 

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 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 :

 

6

 

(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, 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

 

7

 

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 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

 

8.                                      TERMINATION 

 

8.1                                 If at any
time prior to Completion Date:

 

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 “FUTURE 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 “FUTURE 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
beneficial ownership of their respective shares on the terms of this Agreement

 

14

 

without the consent of any third party
(subject to the rights of SCL to acquire 25% of the share capital from the
Vendors pursuant to an existing Equity Interest Transfer Agreement dated as of
the date hereof).

 

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
has 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 RMB 40,000 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

  
					

 

22

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"}]]