MASTER AGREEMENT

Exhibit 10.1

This MASTER AGREEMENT (this “Agreement”), dated as of April 29, 2003, is made by and between:

SCL Ventures Ltd. (“SCL”), a Bermuda corporation;

Xxxxx Communications Technology Company Limited (“Xxxxx”), a People’s Republic of China (“PRC”) corporation;

and Li Shun Xing, Xx Xxxxx Ning, Xxxx Da Qing, and Xie Li (the “Existing Shareholders”).

In this Agreement, SCL, Xxxxx, and the Existing Shareholders may be referred to collectively as the “Parties”, and each individually as a “Party”. The Existing Shareholders are a Party to this Agreement both collectively and each individually.

WHEREAS the Existing Shareholders are all of the shareholders of Xxxxx; and

WHEREAS, SCL and the Existing Shareholders desire to convert Xxxxx into a Sino-foreign Equity Joint Venture (the “Xxxxx EJV”), of which SCL shall have 25% equity ownership; and

WHEREAS, the Existing Shareholders intend to establish a Hong Kong company (the ”HK Company”), and that HK Company will establish a wholly foreign-owned enterprise (the ”Xxxxx XXXX”) under the laws of the PRC; and

WHEREAS, the Parties intend that subsequent to the establishment of the Xxxxx EJV and the Xxxxx XXXX, there shall be certain agreements made by and between the Xxxxx EJV, and the Xxxxx XXXX (including provisions for the Xxxxx XXXX to receive from the Xxxxx EJV an amount equal to those amounts which the Xxxxx XXXX would have received if the Xxxxx XXXX owned 26% equity ownership of the Xxxxx EJV (i.e., the central intent of this Agreement)); and

WHEREAS, subsequent to the establishment of the Xxxxx EJV and the Xxxxx XXXX, SCL, or its successor where SCL has merged into a public entity where SCL shareholders retain control of the merged entity, shall purchase, and the Existing Shareholders shall sell, all of the shares (i.e., 100% ownership) of the HK Company; and

WHEREAS, the Parties desire to delineate in this Agreement all of their agreements concerning the matters in the foregoing recitals;

NOW THEREFORE, in consideration of the mutual covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1. Total Consideration. The total consideration from SCL (including the acquisition of its interest in the Xxxxx EJV and the acquisition of the shares of the HK Company) shall be USD 285,000,000, which shall be divided into (a) an equity portion of USD 125,000,000, and a working capital portion of USD 160,000,000.

A. Equity. The $125,000,000 equity portion shall be divided and distributed, as follows:

(1) $15,000,000, in cash to the Existing Shareholders, within 30 days after issuance of the Business Licenses for the Xxxxx EJV and the Xxxxx XXXX; and

(2) $110,000,000, in the common shares of SCL (or the merged entity) at an agreed upon value of $6.75USD per share, to be issued to the Existing Shareholders on or before November 30, 2003, subject to the terms and conditions of the Stockholders Agreement described below. The issuance of any and all shares pursuant to this Agreement shall be in strict compliance with the applicable securities laws of the United States of America.

B. Working Capital. The $160,000,000 working capital portion shall be divided and distributed, subject to fulfillment or waiver of the conditions precedent as follows:

(1) USD 805,153 (i.e., RMB 6,666,667) in cash, as contribution to the registered capital of the Xxxxx EJV, pursuant to paragraph 2.A. below, within 30 days after issuance of the Xxxxx EJV Business License.

(2) USD 159,194,847. Pursuant to the Xxxxx EJV’s Business Plan and the Xxxxx XXXX Business Plan, to be approved by the Parties within 30 days after signing this Agreement, SCL shall provide or arrange for working capital for the Xxxxx EJV and the Xxxxx XXXX, in the form of equipment leasing, asset purchases, cash equivalents, or other commercially reasonable forms, from SCL or third-parties to the Xxxxx EJV and the Xxxxx XXXX, up to an aggregate amount of USD 159,194,847. The use of this working capital shall be determined in accordance with the direction of the Board of the Xxxxx EJV and the Board of the Xxxxx XXXX.

2. Increase of Xxxxx’x Registered Capital and Conversion of Xxxxx to Xxxxx EJV.

A. As soon as reasonably practical after the signing of this Agreement, the registered capital of Xxxxx shall be increased, with Xxxxx being simultaneously converted into the Xxxxx EJV, from RMB 20,000,000 to RMB 26,666,667 with SCL having the sole right to subscribe for the increased portion of the registered capital, representing 25% of the equity ownership of Xxxxx.

B. For the purpose of increasing the registered capital of Xxxxx and converting Xxxxx into the Xxxxx EJV, the Parties shall do any and all acts and sign any and

all documents, as may be necessary or appropriate, including but not limited to the following: passing a Resolution of the Board of Directors of Xxxxx; signing and submitting for governmental approval the Capital Increase Contract, the Equity Joint Venture Contract, the Articles of Association, and any other ancillary documents; and obtaining a Business License as well as such other documents as required by applicable PRC laws.

3. Establishment of the HK Company and the WOFE. As soon as reasonably practical after the signing of this Agreement, the Existing Shareholders shall (a) establish the HK Company, and (b) establish the Xxxxx XXXX. The structure, constitutional documentation, and characteristics of the HK Company and the Xxxxx XXXX (including but not limited to the location of the WOFE) shall be such as to facilitate the purposes and intents of this Agreement and to satisfy the reasonable requirements of SCL.

4. Board of Directors and Officers of the Xxxxx EJV. The Xxxxx EJV Board of Directors shall have 5 directors, of whom the Existing Shareholders shall be entitled to appoint 2 and SCL shall be entitled to appoint 3. SCL shall be entitled to appoint the General Manager and the Chief Financial Officer; the Existing Shareholders shall be entitled to appoint the Chairman of the Board.

5. Conditions Precedent. The following matters are conditions precedent to the obligations of SCL under this Agreement:

(1) The Capital Increase Contract, JV Contract, Articles of Association and any and all other documents needed to satisfy all necessary authorities of the PRC, have been duly executed by Xxxxx, the Existing Shareholders, and SCL and the evaluation report on Xxxxx’x assets required for the such increase of capital has been obtained pursuant to applicable PRC laws.

(2) The Business License for the Xxxxx EJV has been issued (showing SCL’s 25% equity ownership), and the Business License for the Xxxxx XXXX has been issued.

(3) The HK Company and the WOFE have been lawfully established (and SCL has acquired 100% ownership of the HK Company), and the Business License for the WOFE has been issued.

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

(5) The necessary resolutions of the Board of Directors and the General Meeting of Xxxxx, and the Board of Directors of SCL, duly approving the transactions contemplated by this Agreement have been obtained.

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

(7) The Existing Shareholders have executed Employment Agreements acceptable to SCL Ventures, Ltd.

(8) The Xxxxx EJV, the Xxxxx XXXX, and all other necessary parties shall have executed and delivered the agreements and documentation described in paragraph 6 below.

6. Agreements Between the Xxxxx EJV and the WOFE. The Existing Shareholders shall take all necessary actions and sign all necessary documents to assure that the Xxxxx EJV and the Xxxxx XXXX make and enter into the following agreements and such other documents as may be necessary or appropriate to effectuate the purposes and intents of this Agreement.

A. Service Agreement. The Xxxxx XXXX and the Xxxxx EJV shall enter into a Service Agreement, under which the Xxxxx EJV will hold the necessary licenses for its business; (ii) the Xxxxx XXXX will provide to the Xxxxx EJV a portion of the necessary services to operate the business; and (iii) the Xxxxx XXXX will receive from the Xxxxx EJV, as compensation for its services, those amounts which the Xxxxx XXXX would have received if the Xxxxx XXXX owned 26% equity ownership of the Xxxxx EJV (i.e., the central intent of this Agreement).

B. Future Transfer Agreement. The Xxxxx XXXX and the Xxxxx EJV shall enter into a Future Transfer Agreement, which shall provide that at any and all such times as PRC law permits foreign ownership of more than percent (25%) of the Xxxxx EJV, then upon the requests (from time to time) of SCL, the Existing Shareholders shall (or cause their nominees to) take all necessary actions and sign all necessary documents to transfer additional ownership of the Xxxxx EJV to SCL, up to the maximum then permitted by PRC law (up to a 51%). At such times as SCL makes such requests, then appropriate adjustments shall be made in the agreements between the Xxxxx XXXX and the Xxxxx EJV, to effectuate this Agreement and its central intent that SCL shall be entitled to fifty-one percent (51%) and the Existing Shareholders shall be entitled to forty-nine percent (49%) of the equity interest of the Xxxxx EJV. It is the intent of the parties that the participation in net profits of the EJV by the WOFE and the current equity participation of SCL in the EJV be considered for all practical purposes to satisfy the 51% equity ownership to the extent permitted by law. The Future Transfer Agreement shall provide appropriate remedies for SCL in the event that the Existing Shareholders default in their obligation to transfer additional ownership of the Xxxxx EJV to SCL.

7. Representations, Warranties, and Covenants.

X. Xxxxx and each of the Existing Shareholders represents, warrants, and covenants to SCL, that the following matters are entirely true and correct, and they shall indemnify and hold harmless SCL from and against any and all costs and liabilities arising out of any breach of the representations, warranties, and covenants:

1. Due Organization of Xxxxx. Xxxxx is duly organized and validly existing under the laws of the PRC, and has all necessary corporate power and authority to own its properties and assets and to carry on its business.

2. Authorization. The execution, delivery and performance of any document described herein by Xxxxx has been or, where to be entered into at a later date, will be duly and validly authorized by the board of directors of Xxxxx and by all other necessary action on the part of Xxxxx. Any document to which Xxxxx is a party constitutes or, where to be entered into at a later date, will constitute the legally valid and binding obligation of Xxxxx.

3. No Conflicts. The execution, delivery and performance by Xxxxx of any document or transaction contemplated by this Agreement will not (i) violate, or constitute a breach or default (whether upon lapse of time and/or the occurrence of any act or event) under the constitutional documents of Xxxxx or any other documents or contracts, or (ii) violate any laws or regulations.

4. Registered Capital and Shareholdings. The Existing Shareholders are all of the shareholders of Xxxxx, and they lawfully hold their respective interests in the registered capital of Xxxxx, free from any encumbrance or any third-party interest whatsoever. All of the registered capital of Xxxxx has been paid up, and none of the Existing Shareholders have ever taken back their contribution to the registered capital.

5. Financial Statements. All financial statements which have been or will be provided to SCL or auditors, including but not limited to the income statements and statements of cash flow, present fairly the results of operations and cash flow of Xxxxx for the period covered, and the balance sheets present fairly the financial condition of Xxxxx as of their date.

6. Undisclosed Liabilities. Xxxxx has no outstanding liabilities, except Liabilities that are disclosed in the financial statements.

7. Taxes. Xxxxx has filed or will file all required tax returns and has paid all taxes due for all periods ending prior to the date of this Agreement, or has made adequate provisions therefore in its books and records. To the knowledge of the Existing Shareholders, Xxxxx has not been the subject of any examination or investigation by any tax authority.

8. Contracts. All contracts or documents to which Xxxxx is a party, or to which Xxxxx, or any of its properties is subject, or by which Xxxxx is bound, has been provided to SCL. No breach or default, alleged breach or default, or event which would (with the passage of time, notice or both) constitute a breach or default under any such contract or document has occurred.

9. Real Property. All of Xxxxx’x interests in any real property, including but not limited to all of its leasehold interests, and all encumbrances on Xxxxx’x interests in any real property, have been disclosed (and copies of all relevant documents provided) to SCL. No default or event of default on the part of Xxxxx, or any event which with the giving of notice or passage of time or both, would constitute a default or event of default has occurred.

10. Personal Property. All personal property of Xxxxx which is reflected in the financial statements provided to SCL or which has been acquired by Xxxxx after the period of such financial statements is owned by Xxxxx free and clear of any Encumbrances.

11. All machinery, tools and equipment of Xxxxx which are reflected in the financial statements provided to SCL or which has been acquired by Xxxxx after the period of such financial statements are in a state of reasonable maintenance and repair (except for ordinary wear and tear) and are adequate for the conduct of Xxxxx’x business.

12. No State Assets. None of the assets of Xxxxx constitute state-owned assets, and therefore, are not required by PRC laws to undergo any form of valuation prior to the consummation of the transactions contemplated in this Agreement.

13. Intangible Property. Except as disclosed to SCL in writing, Xxxxx (a) has legally valid rights to and ownership of all intangible property required in connection with its business, and (b) does not use any intangible property by consent of any other person. None of the Existing Shareholders or Xxxxx has received any notice to the effect (or is otherwise aware) that the intangible property or any use thereof by Xxxxx conflicts with or infringes the rights of any other party.

14. Licenses and Permits. (a) Xxxxx holds all permits necessary to operate its business as now conducted, and (b) all such permits are valid, in full force and effect, and will remain so upon consummation of the transactions contemplated by this Agreement. To the best knowledge of the Existing Shareholders, no action against any of such Permits is threatened.

15. Legal Proceedings. There is no legal or administrative action pending or threatened against or affecting Xxxxx or any of its assets.

16. Compliance with Laws. Xxxxx has conducted its business in accordance with all applicable laws and regulations.

17. Dividends and Other Distributions. There has been no dividend or other distribution of assets declared, issued, or paid to or for the benefit (whether direct or indirect) of any Existing Shareholder by Xxxxx.

18. Transactions with Existing Shareholders. Except as previously disclosed in writing to SCL, except insofar as they hold an equity interest in Xxxxx, none of the Existing Shareholders has any material interest in any property used in or pertaining to the business of Xxxxx; no Existing Shareholder is indebted or otherwise obligated to Xxxxx; and Xxxxx is not indebted or otherwise obligated to any Existing Shareholder, except for amounts due under normal arrangements applicable to all employees generally as to salary or reimbursement of ordinary business expenses not unusual in amount or significance. The consummation of the transactions contemplated by this Agreement will not (upon the occurrence of any act or event, or with the lapse of time) result in any benefit or payment arising or becoming due from Xxxxx to any Existing Shareholder.

19. Receivables. All receivables of Xxxxx represent sales actually made in the ordinary course of business, and are current and fully collectible, net of any reserves or provisions shown on the financial statements.

20. Further Statement. The Existing Shareholders and Xxxxx warrant that Xxxxx, without notice to and consent of SCL, which consent shall not be unreasonably withheld, will not conduct any of the following activities after the execution of this Agreement: (a) any borrowing; (b) creating any encumbrance on its assets; (c) declaring or in any manner making distribution of profits or dividends; (d) increasing salary or welfare of its staff; (e) extending any loan or credit line; (f) making any capital undertaking; or (g) making repayment of indebtedness in advance.

21. No financial or other information about Xxxxx, or its present or anticipated business operations, which has been or will be provided to SCL or any auditors, is incomplete, inaccurate, or misleading in any material aspect.

B. SCL represents, warrants, and covenants to Xxxxx and the Existing Shareholders, that the following matters are entirely true and correct, and SCL shall indemnify and hold harmless Xxxxx and the Existing Shareholders from and against any and all costs and liabilities arising out of any breach of the representations, warranties, and covenants:

(1) Due Organization of SCL. SCL is duly organized and validly existing under the laws of Bermuda, and has all necessary corporate power and authority to own its properties and assets and to carry on its business.

(2) Authorization. The execution, delivery and performance of any document described herein by SCL has been or, where to be entered into at a later date, will be duly and validly authorized by the board of directors of SCL and by all other necessary action on the part of SCL. Any document to which SCL is a party constitutes or, where to be entered into at a later date, will constitute the legally valid and binding obligation of SCL.

(3) No Conflicts. The execution, delivery and performance by SCL of any document or transaction contemplated by this Agreement will not (i) violate, or constitute a breach or default (whether upon lapse of time and/or the occurrence of any act or event) under the constitutional documents of SCL or any other documents or contracts, or (ii) violate any laws or regulations.

C. In the event of a breach of the representations, warranties, and covenants contained in this paragraph 7 by Xxxxx or the Existing Shareholders, and SCL is not promptly indemnified and made whole to its reasonable satisfaction, then in addition to the remedies provided by law or in any other documents, SCL shall be entitled to reduce the interests of the Existing Shareholders in their shares or percentage ownership of SCL.

8. Termination. This Agreement shall terminate upon the fulfillment by all Parties of their respective obligations under this Agreement, or: (a) at the option of the Existing Shareholders upon a material breach by SCL; or (b) at the option of SCL upon (i) a material breach by Xxxxx or the Existing Shareholders, or (ii) upon notice by SCL to Xxxxx that the due diligence is not satisfactory.

9. Confidentiality. The Parties shall treat this Agreement as strictly confidential.

10. Costs. The attorneys’ fees and expenses associated with (a) the negotiation and preparation of this Agreement and the various documents mentioned herein, (b) the establishment of the Xxxxx EJV, the HK Company and the Xxxxx XXXX, and (c) the obtaining of the necessary governmental approvals, shall be paid by the Xxxxx EJV.

11. Miscellaneous.

A. No Party shall assign any of its/his/her rights or obligations under this Agreement.

B. This Agreement shall be governed by and construed under the laws of Hong Kong, except as otherwise specifically provided herein. Any dispute under this Agreement shall be resolved through arbitration pursuant to the ICC Arbitration Rules.

C. This Agreement may be executed in two or more counterparts.

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

E. This Agreement (including all the agreements described herein) constitutes the full and entire understanding and agreement among the Parties with regard to the subject matter hereof. It is specifically acknowledged that all previous agreements (including but not limited to the Master Transaction Agreement dated December 7, 2001) are superseded and void.

F. This Agreement may be amended only with the consent of all the Parties.

G. If any of the provisions of this Agreement are held to be unenforceable, such provision shall be excluded from this Agreement and the balance of the Agreement shall be enforceable.

H. This Agreement is written both in English and Chinese. The translation of the Chinese version from the English version shall be duly certified by a PRC qualified law firm. Both versions shall have the same effect in all respects.

I. This Agreement shall become effective upon the signing of both the English and the Chinese versions by all the Parties hereto.

J. If any Party shall be prevented from exercising any right or option hereunder, or if any action to be taken hereunder shall be interrupted, due to epidemic, fire, act of God, including without limitation the SARS-related issues, wars, or any other cause beyond the parties control, whether of a similar or dissimilar nature, such prevention or interruption shall not be deemed a breach of this Agreement or a cause for forfeiture of the rights hereunder, and the time for exercise of any such right or option shall be extended for the time period exercise was prevented.

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

SCL Ventures Ltd.

By:	/s/ Xxxxxxxx Xxxxxxxx


Xxxxx Communications Technology Company Limited

By:	/s/ Li Shun Xing

/s/ Li Shun Xxxx
Xx Shun Xing

/s/ Xx Xxxxx Xxxx
Xx Xiang Ning

/s/ Pang Da Xxxx
Xxxx Da Qing

/s/ Xie Xx
Xxx Li

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MASTER AGREEMENT

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