EQUITY JOINT VENTURE CONTRACT BETWEEN SCL VENTURES LTD. AND LI SHUN XING, LI XIANG NING, PANG DA QING, and XIE LI FOR THE ESTABLISHMENT OF: WEIDA COMMUNICATIONS TECHNOLOGY COMPANY LIMITED DATED AS OF AUGUST 26, 2004Joint Venture JV Agreement |
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Exhibit 10.7
EQUITY JOINT VENTURE CONTRACT
BETWEEN
SCL VENTURES LTD.
AND
LI SHUN XING, LI XIANG NING,
PANG DA QING, and XIE LI
FOR THE ESTABLISHMENT OF:
WEIDA COMMUNICATIONS TECHNOLOGY
COMPANY LIMITED
DATED AS OF AUGUST 26, 2004
JOINT VENTURE CONTRACT
TABLE OF CONTENTS
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EQUITY JOINT VENTURE CONTRACT
BETWEEN
SCL VENTURES LTD.
AND
Li Shun Xing, Li Xiang Ning, Pang Da Qing, and Xie Li
FOR THE ESTABLISHMENT OF:
WEIDA COMMUNICATIONS TECHNOLOGY COMPANY LIMITED
This Equity Joint Venture Contract (this “ Contract ”), dated as of August 26, 2004 (the “Execution Date”), is made by and between:
SCL Ventures Ltd. (“ SCL ”), a company incorporated in the British Virgin Islands, and
Li Shun Xing , Li Xiang Ning , Pang Da Qing and Xie Li . (Each of Li Shun Xing, Li Xiang Ning, Pang Da Qing, and Xie Li is an “ Existing Shareholder ”, and collectively, they are the “ Existing Shareholders ”.)
(SCL and each of the Existing Shareholders is a “Party”, and collectively, they are the “Parties”.)
WHEREAS :
Weida Communications Technology Company Limited (“Weida”), is a company incorporated in the People’s Republic of China (the “PRC”), whose legal address is at No.92-3, Bin Jiang West Road, Hai Zhu District, Guangzhou, Guangdong Province, PRC;
As of the Execution Date, Weida has a registered capital of RMB20,000,000, of which Li Shun Xing has contributed RMB19,000,000, representing 95% of the registered capital; Li Xiang Ning has contributed RMB400,000, representing 2% of the registered capital; Pang Da Qing has contributed RMB400,000, representing 2% of the registered capital; and Xie Li has contributed RMB200,000, representing 1% of the registered capital.
On August 27, 2004, the Parties entered into an Equity Interest Transfer Agreement dated as of August 26, 2004 (the “Equity Interest Transfer Agreement”), wherein the Parties have agreed that SCL shall acquire 25% of the equity ownership of Weida from the Existing Shareholders, with Weida simultaneously converting into a Sino-foreign Equity Joint Venture (the “EJV”) under the laws of the PRC; and
The Existing Shareholders shall cause their authorized representatives to take all necessary actions and sign all necessary documents to complete the transactions contemplated herein;
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NOW THEREFORE, after friendly consultations conducted in accordance with the principles of equality and mutual benefit, the Parties have agreed to establish an equity joint venture in Guangzhou, in accordance with the Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures , other relevant laws and regulations of the PRC, and the provisions of this Contract. The Parties hereby agree as follows:
ARTICLE 1 DEFINITIONS
1.1 Unless the terms of this Contract otherwise provide, the following terms shall have the meanings set out below:
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1.2 References to any laws, regulations or statutory provisions shall, where the context so admits or requires, be construed as references to those laws, regulations or provisions as respectively amended, consolidated, extended or re-enacted from time to time, and shall be construed as including references to any orders, regulations, or other subordinate legislation made under the laws, regulations or provisions.
1.3 Unless the context otherwise requires, words importing the singular only shall include the plural and vice versa, words importing one gender only shall include all other genders, and words importing natural persons shall include corporations and un-incorporated associations.
1.4 The recitals form an integral part of this Contract and shall be construed and have the same full force and effect as if expressly set out in the body of this Agreement.
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1.5 References herein to clauses are to clauses in this Contract unless the context requires otherwise.
ARTICLE 2 PARTIES TO THE CONTRACT
2.1 The Parties
The Parties to this Contract are:
SCL Ventures Ltd. , a company registered under the laws of the British Virgin Islands, with its registered office at .
Li Shun Xing , a male PRC citizen holding Identity Certificate number ;
Li Xiang Ning , a male PRC citizen holding Identity Certificate number ;
Pang Da Qing , a male PRC citizen holding Identity Certificate number ; and
Xie Li , a female PRC citizen holding Identity Certificate number .
2.2 Authority
Each Party possesses full power and authority to enter into this Contract and to perform its obligations hereunder. The authorized representative of each Party is fully authorized to sign this Contract pursuant to a valid power of attorney or other valid designation of authority.
2.3 Warranties and Representations
(a) The Existing Shareholders represent and warrant to SCL that they are legal citizens of the PRC in good standing, that they possess complete power and authority to execute their responsibilities herein including executing this Contract, and that such responsibilities are within the scope of their abilities.
(b) SCL represents and warrants to the Existing Shareholders that it is a valid legal entity in good standing in its home jurisdiction, it operates in accordance with the laws of the place of its registration, that it possess complete power and authority to execute its responsibilities herein, and that such responsibilities are within the scope of its corporate charter or other applicable organizational documents.
(c) Each of the Parties further represents and warrants to the other Party that, (i) the execution and delivery of this Contract by such Party, and the documents and agreements provided for herein, and the consummation by such Party of all transactions contemplated hereby, have been duly authorized by all requisite corporate or other action; (ii) this Contract and all such other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which such Party is a party constitute or will constitute
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legal and binding obligations of such Party following the execution and delivery thereof valid and legally binding obligations of such Party, enforceable against it in accordance with their respective terms, subject as to enforcement of remedies to applicable bankruptcy, insolvency, reorganization and other laws affecting generally the enforcement of the rights of creditors and subject to a court’s discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies; (iii) the execution, delivery and performance by such Party of this Contract and the documents and agreements provided for herein, and the consummation by such Party of the transactions contemplated hereby, shall not, with or without the giving of notice or the passage of time or both: (A) violate the provisions of any applicable law; (B) violate the provisions of the applicable organizational and governing documents of such Party; (C) violate any judgment, decree, order or award of any court, governmental agency or arbitrator applicable to such Party; or (D) conflict with or result in the breach or termination of any material term or provision of, or constitute a default under, or cause any acceleration under, any license, permit, concession, franchise, indenture, mortgage, lease, equipment lease, contract, permit, deed of trust or other instrument or agreement by which such Party is or may be bound; and (iv) such Party is not precluded by the terms of any contract, agreement or other instrument by which it is bound from entering into this Contract and the documents and agreements provided for herein or the consummation by such Party of the transactions contemplated hereby. If any provision of this Agreement is found invalid or unenforceable, the validity or enforceability of the remaining provisions or portions hereof shall not be affected.
(d) Each Party represents and warrants to the other Party that there has been no change in the business, financial condition or financial prospects of such Party since September 30, 2001 that may result in a material adverse effect on either (i) the information or assumptions previously provided to the other Party or (ii) such Party’s ability to perform its obligations under this Contract.
2.4 Expenses
Each of the Parties shall pay its own attorneys’ fees and expenses associated with the negotiation and preparation of this Agreement and the various documents mentioned herein. The Existing Shareholders shall be responsible for obtaining the necessary Governmental Approvals.
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ARTICLE 3 OPERATION OF THE JOINT VENTURE
3.1 Name and Address of the EJV; Branches
(a) The name of the EJV shall be “ ” in Chinese, and “ Weida Communications Technology Company Limited” in English.
(b) The legal address of the EJV shall be at No.92-3, Bin Jiang West Road, Hai Zhu District, Guangzhou, Guangdong Province, PRC.
(c) The EJV may establish branch offices inside or outside the PRC with the approval of the Board and the relevant government authorities of the PRC and/or the applicable country.
3.2 Limited Liability Company
The form of organization of the EJV is a limited liability company. The Parties, in proportion to their respective contribution to the registered capital of the EJV, shall share the profits, risks and losses. However, the liability of each Party shall be limited to the amount of its contribution due or made to the registered capital of the EJV.
3.3 Laws and Decrees
The EJV is a legal person established under the laws of the PRC. The activities of the EJV are governed and protected by the laws, decrees and relevant rules and regulations of the PRC.
ARTICLE 4 PURPOSE AND SCOPE OF BUSINESS
4.1 Purpose of the EJV
The purpose of the EJV shall be: Improving co-operation of the Parties, adopting advanced and practical techniques and introducing scientific management in the Business, increasing the quality of products and service, developing new products, meeting competition successfully for price and quality both in domestic and international markets, and raising economic efficiency so as to enable the investors to gain satisfactory benefits.
4.2 Business Scope of the EJV
The business scope of the EJV shall be: technology services for communication networks; development of software and hardware technology for communication networks; sale of equipment related to communication networks; and domestic VSAT communication business.
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ARTICLE 5 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
5.1 Total Investment
Unless otherwise agreed by the Parties and the Approval Authority, the total amount of investment (including loans required or obtained by the EJV) of the EJV shall be USD4,833,836.
5.2 Registered Capital
The registered capital of the EJV shall be USD 2,416,918, of which the Existing Shareholders shall contribute seventy five percent (75%), and SCL shall contribute twenty five percent (25%). The contribution to the Registered Capital of the EJV shall be as follows:
5.3 Contributions to Capital
SCL shall contribute its investment to the EJV in US Dollars. The Existing Shareholders shall contribute their investment to the EJV in RMB. After contribution, certificates of investment will be issued to the Parties.
5.4 Contribution Schedule
(a) The Existing Shareholders have already made their contribution to the EJV before the date of the Execution Date.
(b) SCL shall be deemed as having fully paid its contribution to the EJV upon its paying to the Existing Shareholders the consideration as described in the Equity Interest Transfer Agreement.
5.5 Additional Financing
(a) Besides the registered capital, the EJV’ s operations will be financed from the following sources:
(i) loans in RMB or US$ ;
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(ii) net earnings which are generated from sales and licenses of EJV Products and Services and which are retained after distribution of dividends (if any) to the Parties; and
(iii) other lawful sources as determined by the Board.
5.6 Assignment of Registered Capital
(a) Except as otherwise permitted by this Contract or the Articles of Association, the Existing Shareholders shall not sell, assign, pledge, hypothecate, mortgage or otherwise transfer their/its contribution to the registered capital of the EJV except with the prior written consent of SCL followed by approval by the Board, and subject to the receipt of all necessary Government Approvals including the approval of the Approval Authority.
(b) After obtaining all of the consents and approvals referred to in Article 5.6(a) above, a Party desiring to transfer its contribution to the registered capital to the EJV (the “ Offering Party ”) shall first offer such contribution in writing to the other Party (the “Offered Parties”). Such offer shall include the amount, price, and terms and conditions of the contribution to be transferred. The Offered Parties shall have ninety (90) days from the date of receipt of said offer in which to notify the Offering Party of acceptance of the offer. If a Party accepts the offer, the Party shall submit a price bid within ten (10) days. The Party offering the price shall be entitled to purchase the offered contribution.
(c) In the event that more than one Party wishes to purchase all or any part of the offered contribution to the registered capital, the Party(ies) making the highest offer shall prevail. In the event that more than one Party has made the highest offer the offered contribution shall be equally split among such Parties.
(d) In the event the Offered Parties do not wish to purchase all or any part of the offered contribution to the registered capital, the Offering Party may transfer the part of the offered contribution that was not purchased by the other Parties to a third party, with the approval of the Board. Such transfer shall not be completed until the third party acquiring the contribution has first executed a contract containing terms and conditions in which the third party becomes bound by all the provisions of this Contract, its attachments, and the Articles of Association. The terms and conditions under which the transfer is concluded shall not be more preferential than those originally offered to the other Parties, and the Offering Party shall provide the other Parties hereto with a duplicate of the executed written agreement with the transferee.
(e) Notwithstanding Articles 5.6 (a) and (b), SCL shall have the right, to transfer its contribution to the registered capital of the EJV to a successor in interest of its entire business, to a Person which is at least fifty percent (50%) controlled directly or indirectly by SCL, or to a Person which controls directly or indirectly fifty percent (50%) or more of SCL. The transferee shall assume all of the
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transferor’s responsibilities herein and shall provide a written guarantee to the non-transferring Parties that it is permitted to assume all such responsibilities.
(f) Notwithstanding Article 5.6 (b) and (c) above, in regard to the transfer of the EJV registered capital, unless the Board agrees to convert the status of the EJV to a local enterprise from a Sino-foreign joint venture, SCL may not reduce the percentage of its share of the EJV’s registered capital below twenty-five percent (25%).
(g) All transfers of contributions by a Party under this Article 5.6 shall be subject to the validation or approval of all necessary authorities of the PRC, and shall not become effective until such validation or approval has been obtained. After the necessary validation or approval is obtained, the Parties shall correspondingly amend this Contract and the Articles of Associations and the EJV shall renew and revise its registration with the relevant PRC administration for industry and commerce. Neither the business of the EJV nor the performance of its contracts shall be interrupted nor its organizational structure affected by any such transfer.
5.7 Increase and/or Decrease of Registered Capital
Any increase and/or decrease in the registered capital of the EJV must be approved by the Board and submitted to the Approval Authority for examination and approval. Upon receipt of the approval by the Approval Authority, the EJV shall register the change in capital with the relevant PRC administration for industry and commerce. The Board shall set the contribution schedule for the capital change consistent with applicable PRC laws and regulations. The Board shall set the contribution schedule for the capital change consistent with applicable PRC laws and regulations.
5.8 Taxes, Import Duties and Levies on Capital Contribution
To the extent capital contributions are not exempt from value-added taxes and other taxes, the Parties shall use their best efforts to obtain such exemptions. In case any value added taxes or other taxes or custom duties are (to be) levied on the capital contributions, such custom duties and taxes shall not be considered as part of the capital contribution by that Party, and shall be borne by the EJV.
ARTICLE 6 RESPONSIBILITIES OF THE PARTIES
6.1 Responsibilities of The Existing Shareholders
In addition to his other obligations under this Contract, The Existing Shareholders shall have the following responsibilities:
(a) applying for all PRC Government Approvals that are reasonably required for the operation of the EJV in the manner contemplated by this Contract;
(b) assisting the EJV in procuring equipment required by the EJV and assisting the EJV in obtaining licensing from Affiliates of the Existing Shareholders of
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production processes and essential technologies required for the production of EJV Products and Services;
(c) assisting the EJV in procuring materials;
(d) assisting the EJV in obtaining qualified management, operations and financial personnel in the PRC to the extent reasonably practicable;
(e) assisting the EJV in obtaining training including technical, marketing, management and business development training for its personnel;
(f) assisting the EJV in ensuring the quantity and quality of the equipment and materials purchased by the EJV;
(g) assisting in applying for all tax and duty reductions and exemptions and other investment incentives available to the EJV under applicable law;
(h) at the cost of the EJV, assisting the EJV in obtaining: (i) sufficient supply of water, gas, and electricity; (ii) sufficient facilities of telephone, fax and network; and (iii) other infrastructure and similar necessary requirements for the operation of the EJV, at favorable prices and conditions;
(i) continuing to serve the EJV in their current capacity, and indemnifying all losses and costs incurred by SCL due to their resignation(s) or impediments to the EJV, unless such resignation has the prior written approval of SCL; and
(j) handling such other matters as assigned by the Board from time to time.
6.2 Responsibilities of SCL
In addition to their other obligations under this Contract, SCL shall have the following responsibilities:
(a) infusing its registered capital contributions pursuant to Article 5 of this Contract;
(b) assisting the EJV in procuring equipment required by the EJV;
(c) assisting the EJV in obtaining qualified management, operations and financial personnel in the PRC to the extent reasonably practicable;
(d) assisting the EJV in obtaining training including technical, marketing, management and business development training for its personnel;
(e) handling such other matters as assigned by the Board from time to time.
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ARTICLE 7 LICENSING AND SALE OF JV PRODUCTS AND SERVICES
7.1 PRC Sales Channels
The EJV Products and Services may be sold by the EJV in the PRC or overseas markets in the manner determined by the Board.
7.2 Laws and Regulations
The Parties shall comply with, and shall make efforts to ensure that the EJV complies with, all relevant laws and regulations of the PRC and any other country the EJV then does business, regarding the export of products or technical information from the PRC or use of products or technical information within the PRC.
ARTICLE 8 BOARD OF DIRECTORS
8.1 Board Composition; Chairman
(a) The Board is the highest authority of the EJV and shall be deemed established on the date of issuance of the EJV’s Business License. It shall discuss and determine all issues regarding the EJV as required by this Contract. The Board shall be composed of five (5) directors. For as long as the Parties’ contribution to the registered capital is as stated in Article 5.2, two of the directors shall be appointed by SCL and the other two shall be appointed by the Existing Shareholders, and one shall be appointed jointly by (i) SCL and (ii) collectively, the Existing Shareholders.
(b) The Board shall have one Chairman (the “ Chairman ”). The Chairman shall be appointed by SCL. So long as the PRC law requires, the Chairman shall be the legal representative of the EJV. Neither the Chairman nor any other member of the Board nor any of the Existing Shareholders may by himself bind the Board or the EJV. Whenever the Chairman is unable to perform his responsibilities, another individual (whether current director or otherwise) shall be authorized by the Chairman to represent him.
8.2 Term of Directors
The term of appointment of each director shall be four years. A director whose term of appointment has expired may be re-appointed by the Party or Party(ies) that originally made the appointment.
8.3 Vacancies
(a) Should the office of a director of the EJV become vacant for any reason, the Party (or in their absence the remaining board members so selected by that Party) who originally appointed the director shall appoint a replacement.
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(b) Any Party may at any time dismiss without cause a director appointed by such Party and appoint another director in his/her place.
8.4 Appointment
After a director is dismissed, a new director shall be appointed, upon 10 days prior written notice from the appointing Party to the other Party. The notice shall include the director’s resume. Such appointment shall be submitted to the relative authorities for record.
8.5 Meetings
(a) The Board shall meet at least once every year. Such meetings shall be called and presided over by the Chairman. When the Chairman or SCL considers it necessary, or at the written request of at least two (2) of the directors, an interim meeting of the Board shall be convened. In the event the Chairman is not able or refuses to call and preside over any meeting of the Board, any Director designated by SCL shall have the right to call and preside over such meetings. Board meetings shall be held at the offices of the EJV, unless otherwise determined by the Board. A Board member may attend the meeting via teleconference. The Board shall appoint a secretary who shall prepare detailed minutes of all matters addressed at the Board meetings. The minutes of the meetings shall be kept in English and Chinese by the Secretary, signed by all of the directors present at the meeting, filed by the EJV, and a copy promptly distributed to all directors.
(b) The quorum necessary to hold meetings of the Board shall be three (3) directors, including at least one director appointed by SCL. Unless there is a quorum, the directors present at a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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