FUTURE EQUITY INTEREST TRANSFER AGREEMENT

Exhibit 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

 

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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

 

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		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.

 

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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                                  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.

 

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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

 

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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 :

 

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(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

 

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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 UN DERTAKINGS

 

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 Agre