EXHIBIT 10.12
EQUITY JOINT VENTURE AGREEMENT
BETWEEN
COMTECH GROUP INC.,
AND
▇▇▇▇▇▇▇▇▇ GROUP LTD.,
December 8, 2004
TABLE OF CONTENTS
Acticle 1. DEFINITION.....................................................3
Article 2. ESTABLISHMENT AND LEGAL FORM OF THE JV COMPANY.................6
Acticle 3. PURPOSE AND BUSINESS SCOPE.....................................7
Acticle 4. TOTAL INVESTMENT AND REGISTERED CAPITAL........................8
Acticle 5. OBLIGATIONS AND RIGHTS OF THE PARTIES..........................9
Acticle 6. REPRESENTATIONS, WARRANTIES AND INDEMNITY.....................11
Acticle 7. BOARD OF DIRECTORS............................................12
Acticle 8. MANAGEMENT ORGANIZATION.......................................17
Acticle 9. LABOR MANAGEMENT..............................................19
Acticle 10. FINANCIAL AFFAIRS AND ACCOUNTING..............................20
Acticle 11. DISTRIBUTION OF PROFITS.......................................22
Acticle 12. TAXATION AND INSURANCE........................................23
Acticle 13. NON COMPETITION...............................................24
Acticle 14. CONFIDENTIALITY...............................................25
Acticle 15. TERM OF THE JV COMPANY........................................27
Acticle 16. MERGER, DIVISION, BANKRUPTCY, TERMINATION AND LIQUIDATION.....28
Acticle 17. FORCE MAJEURE.................................................31
Acticle 18. SETTLEMENT OF DISPUTES........................................32
Acticle 19. APPLICABLE LAW................................................33
Acticle 20. MISCELLANEOUS PROVISIONS......................................34
Acticle 21. MILESTONES....................................................36
1
PRELIMINARY STATEMENT
This EQUITY JOINT VENTURE AGREEMENT (hereinafter referred to as "AGREEMENT" or
"CONTRACT") is entered into in Hongkong on January 17, 2005 by and between
COMTECH GROUP INC., (hereinafter referred as "GROUP") a OCTBB listed company
under the symbol of COGO and ▇▇▇▇▇▇▇▇▇ GROUP LTD., (hereinafter referred as
"▇▇▇▇▇▇▇▇▇, or THE TEAM") a British Virgin Island (BVI) company in accordance
with the Company Law of Hong Kong and other relevant laws and regulations. After
friendly consultations conducted in accordance with the principles of equality
and mutual benefits, the parties have agreed to establish an Equity Joint
Venture Enterprise------COMTECH BROADBAND INC, (hereafter referred to as the "JV
COMPANY, JV, JOINT VENTURE, or BROADBAND") in Hong Kong, and therefore make
agreements herein below:
2
ACTICLE 1. DEFINITION
DEFINITIONS
-----------
Unless otherwise provided herein, the following terms used in this
Agreement shall have the meanings set forth below:
"AFFILIATE" means, with respect to any entity, any other entity, which,
directly or indirectly, is controlled by, under common control with, or
in control of, such entity; the term "CONTROL" shall mean ownership of
fifty per cent. (50%) or more of the voting stock or registered
capital, or the power to appoint or elect a majority of the directors
or to direct the management of an entity.
"APPROVAL AUTHORITIES" means the governmental departments, authorized
under the laws of the PRC and the State Council administrative
regulations regarding the examination and approval of foreign
investment projects, which have the power to examine and approve this
Contract and the Articles of Association.
"ARTICLES OF ASSOCIATION" means the articles of association of the JV
Company signed by each of the Parties immediately following execution
of this Contract and approved by the Approval Authorities
simultaneously with the approval of this Contract and any amendment
thereto approved in accordance with the provisions of this Contract.
"BOARD OF DIRECTORs" or "BOARD" means the board of directors of the JV
Company established pursuant to Article 7 hereof.
"BUSINESS LICENSE" means the business license of the JV Company issued
by the State Administration of Industry and Commerce or its authorized
local Administration of Industry and Commerce.
"CEO" means the chief executive officer.
"CFO" means the chief financial officer.
"CTO" means the chief technical officer.
"DIRECTOR" means a director of the JV Company.
"EFFECTIVE DATE" means the effective date on which this Agreement
becomes effective, which shall be the date upon which the Agreement and
the Articles of Association are approved by the Approval Authorities.
3
"ENCUMBER" means to, directly or indirectly, pledge, mortgage, grant a
security interest, or otherwise encumber, or enter into any contract,
any voting trust or other agreement or arrangement therefore; and
"ENCUMBRANCE" shall have correlative meanings.
"EQUITY INTERESTS" means, in respect of any Party, its proportional
shareholding in the JV Company as a result of its capital contribution
to the JV Company in accordance with the terms of this Contract and all
rights in relation to the JV Company accruing to and/or enjoyed by such
Party as a result of such capital contribution including, without
limitation, voting rights and rights to profits. Such Equity Interests
shall changed from time to time according to this Contract, and may be
adjusted in accordance with the actual capital contributions of
Parties.
"FISCAL YEAR" has the meaning ascribed to it in Article 10.
"HONG KONG" means the Hong Kong Special Administrative Region of the
PRC.
"MANAGEMENT PERSONNEl" means the JV Company's CEO, CFO, CTO and any
other management personnel who report directly to the CEO.
"PARTIES" means, collectively, Comtech Group, The ▇▇▇▇▇ Team, and any
other party which becomes a party to this Agreement pursuant to the
terms hereof; "Party" means any one of them.
"PRC" means the People's Republic of China, for the purposes of this
Agreement only, excluding Hong Kong, Macau Special Administrative
Region and Taiwan.
"RIGHT OF FIRST REFUSAL" is a Company's Option. The Company shall have
an option for a period of thirty (30) days from receipt of the Transfer
Notice to elect to purchase the Offered Shares at the same price and
subject to the same material terms and conditions as described in the
Transfer Notice. The Company may exercise such purchase option and,
thereby, purchase all (or a portion of) the Offered Shares by notifying
the Founder in writing before expiration of such thirty (30) day period
as to the number of such shares which it wishes to purchase.
"RMB" or "RENMINBI" means the legal currency of the PRC.
"SPECIFIED ACCOUNTANTS" means PricewaterhouseCoopers, KPMG, Ernst &
Young, and Deloitte & Touche.
"SUBSIDIARY" means, with respect to any entity, any other entity with
legal person status, which, directly or indirectly, is controlled by,
such entity; the term "control" shall mean ownership of fifty per cent.
(50%) or more of the voting stock or registered capital, or the power
to appoint or elect a majority of the directors or to direct the
management of an entity.
4
"THIRD PARTY" means any natural person, legal person or other
organization or entity other than the Parties to this Contract.
"THREE FUNDS" means the JV Company's reserve fund, expansion fund and
employee bonus and welfare fund constituted in accordance with and
subject to the laws and regulations governing Sino-foreign joint
ventures in the PRC.
5
ACTICLE 2. ESTABLISHMENT AND LEGAL FORM OF THE JV COMPANY
ESTABLISHMENT OF THE JV COMPANY
-------------------------------
The Parties hereby agree to establish and operate, and keep maintaining
the nature of, the JV Company as an equity joint venture enterprise in
accordance with the laws of Hongkong, laws of jurisdiction at which the
JV's subsidiary, or subsidiaries, may present, and the provisions in
this Agreement.
NAME AND ADDRESS OF THE JV COMPANY
----------------------------------
The name of the JV Company shall be Comtech Broadband Inc., in English
and [__________________] in Chinese.
The legal address of the JV Company is
Rm, 514 5/ F., Manhattan Centre, 8 ▇▇▇▇ ▇▇▇▇▇▇ Road, ▇▇▇▇ ▇▇▇▇▇,
Hongkong
LEGAL FORM
----------
The JV Company shall be a limited liability company with independent
legal status. The liability of each of the Parties for the debts and
obligations of the JV Company shall be limited to its respective
contribution to the registered capital of the JV Company. Creditors of
the JV Company shall have recourse only to the assets of the JV
Company.
LAWS OF REGULATIONS
-------------------
The activities of the JV Company shall comply with the laws and
relevant regulations of BVI and jurisdictions under which the JV
Company conducts business, and its legitimate rights and interests
shall be protected by such laws and relevant regulations.
6
ACTICLE 3. PURPOSE AND BUSINESS SCOPE
PURPOSE OF THE JV COMPANY
-------------------------
The purpose of the JV is to serve as an independent distributor
promoting IC's and components into China market in start with
distributing products made by Broadcom Corporation, a NASDAQ listed
company under the symbol of BRCM, into China.
BUSINESS SCOPE OF THE JV
------------------------
Business scope of the JV shall be: sales of Broadcom's products, and/or
other products, which were originally initiated or later are captured
by ▇▇▇▇▇▇▇▇▇.
CERTAIN BUSINESS PRACTICES
--------------------------
1) each Party shall use its best efforts to cause the JV Company
to, and the JV Company shall, take all necessary actions to
cause the Management Personnel, representatives, consultants,
employees and agents of the JV Company and its Subsidiaries to
comply with all applicable laws, rules and regulations of the
USA and all other applicable countries (as they may be amended
from time to time) of which such party is or ought reasonably
to have been aware, including, without limitation, the USA
Foreign Corrupt Practices Act of 1977 (as amended), and any
other law regulating payments to government officials;
2) without limiting the generality of the foregoing, each Party
shall use its best efforts to cause the JV Company to be aware
of the USA Foreign Corrupt Practices Act of 1977 (as amended),
and shall cause the JV Company not to knowingly, directly or
indirectly, make any offer, payment or promise to pay or
authorize the payment of any money or anything of value to any
Non-US official, candidate for political office or political
party for the purpose of influencing any act or decision of
such Non-US official, political party or candidate for office,
or for the purpose of inducing such Non-US official, political
party or candidate for office to use his or her influence with
any Non-US government or instrumentality thereof to affect or
influence any act or decision of such government or
instrumentality in order to obtain or retain business for or
with, or directing to, any person in violation of the U.S.
Foreign Corrupt Practices Act of 1977 (as amended);
3) no Party shall knowingly take or omit to take any action that
would cause the JV Company, its Management Personnel,
representatives, consultants, employees or agents to violate
or otherwise fail to comply with any applicable laws, rules
and regulations.
7
ACTICLE 4. TOTAL INVESTMENT AND REGISTERED CAPITAL
TOTAL INVESTMENT
----------------
The total investment of the JV Company shall be HKD1,000,000
CAPITAL CONTRIBUTION
--------------------
The JV is to issue 10,000,000 common shares at the par value of
HKD0.1/share. The Team is to buy 4,500,000 or 45% of its total
outstanding common shares while Group is to buy 5,500,000 or 55% of its
total outstanding common shares.
ENCUMBRANCE ON EQUITY RIGHTS
----------------------------
None of the Parties may, without the written consent of each of the
other parties, encumber all or any part of its Equity Interests.
8
ACTICLE 5. OBLIGATIONS AND RIGHTS OF THE PARTIES
THE OBLIGATIONS AND RIGHTS OF GROUP
-----------------------------------
1) In order for the JV to function properly, Group is responsible to provide
the credit line of four million dollars for Broadband for the first year
as soon as the JV is eligible to conduct business legally and increase the
credit line to five million and six million for the second and third year
respectively.
2) Notwithstanding Article 7, Group should be in charge of the JV's legal and
financial control, including, without limitation, determining the
legitimacy of JV's business operations, proving or terminating JV's
certain practice, appointing CFO, consulting on tax issues and deciding on
customer's trade credits.
3) Group shall use its best efforts to assist the JV to establish Comtech
Broadband China in PRC and obtain its business license, tax registration,
and the certification of Value Added Tax (VAT) status from Chinese
taxation authorities.
4) Group shall use its best efforts to assist the JV to obtain any tax
privilege, and/or exemption.
5) Group shall have the right of first refusal to purchase JV's shares
offered by The Team.
THE OBLIGATIONS AND RIGHTS OF THE TEAM
--------------------------------------
1) The Team is responsible for carrying out normal business functions,
including, without limitation, market promotion, negotiation with clients
and suppliers, product development, business operation, research and
development, customer selection, human resources control, and technical
cooperation with outside sources.
2) Without violating labor laws and other regulations, The Team should be
able to nominate CEO, CTO, any key members of the management team, and/or
any employees except CFO and members of accounting department, of the JV
Company.
3) The Team should be able to decide on establishment or termination of
offices or subsidiaries for the JV Company.
4) The Team shall use its best efforts to generate business for the JV
Company.
5) In the event that the JV gets listed on NASDAQ, The Team has the right to
purchase back 500,000 common shares from Group at par value.
6) Once the right of The Team in this section 5) of this Article 5 is
satisfied, all the rights listed in the Article 11 DISTRIBUTION OF PROFITS
(1), (2), (4) will be terminated.
9
7) Due to the licensing requirements and timing issues, Group and Comtech
Communication Technology (Shenzhen) Co., Ltd (hereinafter referred as
"COMTECH COMMUNICATION") needs to perform the duties for the JV Company
written in this Agreement prior to the formation and finalization of the
JV Company and its subsidiaries. Any business conducted through Group and
Comtech Communication shall not be, in any ways, discounting the JV
Company's annual performance in terms of revenue calculation, bonus,
and/or profit distribution. The JV Company will take back the duties and
rights presented in this Agreement as soon as the JV is able to operate
normally.
10
ACTICLE 6. REPRESENTATIONS, WARRANTIES AND INDEMNITY
MUTUAL REPRESENTATIONS AND WARRANTIES
-------------------------------------
Each Party hereby represents and warrants to each other Party that, as
of the date hereof and as of the Effective Date:
1) it is duly incorporated, validly existing and in good standing
under the laws of the place of its establishment or
incorporation and it has full power and authority under those
laws to enter into this Agreement and to perform all of its
obligations hereunder;
2) the execution and delivery of this Agreement by it has been
duly authorized and, upon the Effective Date, this Agreement
shall be legally binding on it, and enforceable in accordance
with its terms against such Party, subject to bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally, in each case, applicable to such Party.
3) neither the execution of this Agreement nor the performance of
its obligations hereunder will conflict with, or result in a
breach of, or constitute a default under, any provision of its
Articles of Association, or other constitutive documents or
internal regulations, or any law, regulation, rule,
authorization or approval of any applicable government agency
or body, or of any contract or agreement to which it is a
party or subject;
4) no lawsuit, arbitration, other legal or administrative
proceeding or governmental investigation against it which
would materially affect its ability to enter into or perform
its obligations under this Agreement is in progress or, to the
best of its knowledge, any threatened against it.
INDEMNITY
---------
Each Party hereby respectively undertakes to indemnify each of the
other Parties against only direct losses and costs (including legal
costs) or any other direct liability suffered or incurred by the other
Parties as a consequence of the indemnifying Party's breach of the
representations, warranties or undertakings given or made by it
hereunder or the occurrence of any Event of Default in relation to it,
provided that the aggregate liabilities of any Party shall be limited
to an amount equal to its respective capital contribution to the
registered capital of the JV Company.
11
ACTICLE 7. BOARD OF DIRECTORS
FORMATION OF THE BOARD OF DIRECTORS
-----------------------------------
1) The Board of Directors shall be the highest authority of the
JV Company. The date of issue of the Business License shall be
deemed to be the date of establishment of the Board of
Directors.
2) The Board of Directors shall be composed of three (3)
Directors for the first fiscal year, two (2) of whom shall be
appointed by Group, one (1) of whom shall be appointed by The
Team. One more Director from each party shall be appointed
into the Board pursuant to the procedure of election of
directors in the ARTICLE OF ASSOCIATION of the JV Company at
the beginning of the second fiscal year. Therefore, starting
from the second fiscal year, the Board shall be composed of
five (5) directors, three (3) of whom shall be appointed by
Group, (2) of whom shall be appointed by The Team. The Board
shall have one Chairman. The Director or one of the Directors
appointed by the Party with the largest Equity Interest shall
serve as Chairman of the Board, who shall be the legal
representative of the JV Company. Whenever the Chairman is
unable to perform his responsibilities for any reason, upon
the authorization of the Chairman, another appointed Director
may represent him temporarily.
3) In the case of equality between affirmative and negative
votes, the Chairman shall not have a second or casting vote.
4) Each Director shall be appointed for a term of one (1) year,
but the Party, which has appointed a Director, may remove that
Director and appoint a replacement from time to time. A
Director may serve consecutive terms if reappointed by the
Party that originally appointed him. If a seat on the Board of
Directors is vacated for the reason of retirement,
resignation, removal, disability or death of a Director, the
Party that originally appointed such Director shall appoint a
successor to serve the remaining term of such Director.
5) Directors shall serve without any remuneration. The reasonable
expenses incurred by the Directors for the performance of
their duties as Directors shall be reimbursed by the JV
Company following approval by the Board of Directors. This
Article shall not restrict the JV Company from paying salaries
to Directors in their role, if any, as employees of the JV
Company.
6) To appoint or remove a Director, or to designate or change the
Chairman, the relevant Party shall notify each other Party in
writing. The appointment and removal of a Director, and the
designation and change of the Chairman, shall become effective
upon receipt of such notice by each other Party. Any such
appointment, removal, designation or change shall be filed by
the JV Company with the relevant authority and registered with
the relevant Administration of Industry and Commerce to the
extent required by law.
12
INDEMNIFICATION OF DIRECTORS
----------------------------
The JV Company shall indemnify each Director against any claim or
liability arising from his performing his obligations as a Director,
provided that such claim or liability is not a result of any misconduct
or violation of any laws, regulations and Articles of Association of
the JV Company by such Director.
MEETINGS OF THE BOARD
---------------------
1) The first meeting of the Board of Directors shall be held
within sixty(60) days of the date of issue of the Business
License. Thereafter, the Board of Directors shall hold at
least two (2) meetings in each calendar year. Upon the written
request of one-third or more of the Directors or of any Party
and specifying the matters to be discussed, the Chairman of
the Board shall, within ten (10) days of receipt of such
request, convene an interim meeting of the Board of Directors.
2) The Chairman of the Board shall give written notice,
specifying the time, place and agenda of the meeting, to each
of the Directors at least ten (10) days prior to any meeting
of the Board. A Board meeting held without proper notice
having been given to any Director shall be invalid unless such
Director, before the meeting, delivers a written notice of
waiver to the Chairman. Meetings shall be held at the
registered address of the JV Company or such other address(es)
in or outside of the PRC as agreed by the Chairman. The
Chairman of the Board shall determine the agenda for Board
meetings from proposals of Directors and shall be responsible
for convening and presiding over such meetings. If the
Chairman of the Board fails to attend a Board meeting, or
another Director appointed, by the Chairman of the Board shall
convene and preside over the meeting.
A meeting of the Board may be held through video conference,
telephone conference or other communication equipment agreed
to by all Directors which allows everybody to take part in the
meeting by being able to hear each of the other people at the
meeting and by being able to speak to all of them at the same
time. Any board resolution, which is passed through video
conference or telephone conference or other communication
equipment, shall come into effect upon voting by the Directors
and shall be signed by such Directors after the relevant Board
meeting. Any director or proxy participating in a Board
meeting through any of the above means shall be deemed to be
present thereat for the purposes of this Agreement.
3) If a Director is unable to attend a Board meeting, such
Director may issue a letter of authorization and appoint a
representative to attend the meeting on his behalf. The letter
of authorization shall state the scope of authorization. The
representative so appointed shall have the same rights and
powers as the Director who appointed him. One person is able
to represent more than one Director by proxy.
13
4) The Board of Directors shall keep complete and accurate
minutes in English and in Chinese of all Board meetings, which
shall be signed by the Directors present. The draft minutes of
each Board meeting shall be distributed within fifteen (15)
days after the relevant meeting to all Directors. Any
suggested revision or supplement of the draft minutes shall be
delivered in writing to the Chairman of the Board within
fifteen (15) days of receipt. The Chairman shall finalize the
minutes within sixty (60) days after the meeting and
distribute a copy to each Director and each Party. The JV
Company shall keep the minutes of the Board meetings, which
shall be provided upon request of any Party or its authorized
representatives.
POWERS OF THE BOARD
-------------------
The Board of Directors shall have the power to make all major decisions
pertaining to the JV Company. Subject to Articles 7 POWERS OF THE BOARD
(1) and (2), all major decisions shall require the approval of a simple
majority of Directors present in person or by proxy at a duly convened
meeting of the Board of Directors.
1) The approval of all the Directors present in person or by
proxy or by any manner permitted by Article 7 MEETINGS OF THE
BOARD at a duly convened meeting of the Board of Directors
shall be required for each of the following matters:
a) any increase or adjustment of the JV Company's total
investment and/or registered capital;
b) any amendment to the Articles of Association;
c) division of the JV Company;
d) the dissolution or termination of the JV Company; and
e) all such other matters which the Board of Directors
may decide from time to time pursuant to Article 7
POWERS OF THE BOARD (1) that approval by the Board of
Directors under this Article 7 POWERS OF THE BOARD
(2) is required.
2) The following matters shall require the approval of simple
majority of the Directors present in person or by proxy at a
duly convened meeting of the Board of Directors;
f) any appointment or change of the accounting firm of
the JV Company for the purpose of auditing matters;
g) any material change in the business scope of the JV
Company;
14
h) the JV Company's annual financial budget, accounts,
business plan;
i) the creation of any Encumbrance over any of the
property, business or assets of the JV Company;
j) the establishment of any Board or other committee and
any terms on which it is to operate;
k) any merger or consolidation of the JV Company with
another economic organization or entity;
l) the approval of any settlement plan submitted to it
in relation to the termination of consultancy
services provided by the JV Company to other parties;
m) any application for the listing of any shares or
other securities of the JV Company on any stock
exchange or for permission for dealings in any shares
or other securities of the JV Company in any
securities market;
n) any change in the basis of accounting or accounting
principles or policies employed by the JV Company
other than as required by law or accounting policies
generally accepted in the PRC from time to time;
o) any change in the accounting period of the JV
Company;
p) the raising of any indebtedness other than by way of
trade credit on normal commercial terms and in the
ordinary course of business, or the variation or
termination of any agreement for the raising of any
such indebtedness (including without limitation early
repayment);
q) the entering into, variation or termination of any
transaction by the JV Company with (i) a Party or
(ii) any Affiliate of a Party or (iii) any Director
or officer of any such Party or any Affiliate
thereof;
r) the grant of option to purchase equity interest in
the JV Company to any of its Management Personnel;
and
s) any investment by the JV Company in any other company
or enterprise;
t) the adoption of the Tax Statement and the audited
Financial Statement by registered accountant;
u) the opening of any bank accounts and designation of
signing authorities;
15
v) any major expenses over RMB50,000; and
w) the commencement or settlement by the JV Company in
any jurisdiction of legal or arbitration proceedings
by the JV Company for an amount less than RMB300,000,
including, without limitation, any proceedings
seeking to adjudicate the JV Company insolvent
involving the above amount;
WRITTEN RESOLUTIONS
-------------------
The Board of Directors may adopt any resolution without a meeting of
the Board if all of the Directors then holding office sign the relevant
resolution in written form. Such written resolutions shall be filed
with the minutes of Board of Directors' meetings and shall have the
same force and effect as a unanimous resolution adopted at a meeting of
the Board of Directors.
16
ACTICLE 8. MANAGEMENT ORGANIZATION
MANAGEMENT ORGANIZATION
-----------------------
The JV Company's management organization shall be under the leadership
of a CEO, who shall report directly to the Board of Directors. In
addition to the CEO, the JV Company may have one or more deputy general
managers, who shall assist the CEO. The JV Company may have a CFO and,
may also set up several internal departments with department managers
and deputy department managers being responsible for the departments'
work thereof respectively.
APPOINTMENT AND REPLACEMENT OF MANAGEMENT PERSONNEL
---------------------------------------------------
The CEO and the CFO may be nominated by any Party, and all the
above-mentioned Management Personnel shall be subject to the
appointment by the Board of Directors. The other Management Personnel
shall be nominated by the CEO and subject to the appointment by the
Board of Directors. Replacements of the Management Personnel, whether
by reason of the retirement, resignation, disability or death of any
Management Personnel or of the removal of any Management Personnel by
the Board of Directors, shall be nominated and appointed in the same
manner as mentioned above. However, the first CEO shall be nominated by
The Team and the first CFO shall be nominated by Group.
SCOPE OF MANAGEMENT AUTHORITY AND PERFORMANCE OF DUTIES
-------------------------------------------------------
1) The CEO shall be in charge of the day-to-day operation and
management of the JV Company and shall carry out all matters
entrusted to him by the Board of Directors.
2) Except as otherwise agreed by all Parties in writing, the CEO,
and all other Management Personnel shall perform their duties
on a full-time basis and shall not concurrently serve as a
manager or other employee of any other company or enterprise,
nor shall they serve as a director or consultant of, or hold
or obtain any interest in, any company or enterprise that
competes with the JV Company.
3) The Board of Directors may remove at any time without notice,
the CEO, the CFO, or other Management Personnel if any of them
breaches paragraph (2) above or is otherwise in material
breach of his or her duties.
4) The general manager shall have the following powers and
responsibilities without limitation to the generality of the
other provision:
a) to preside over the JV Company's production,
operation and management and to implement any
resolutions of the Board;
17
b) to implement the JV Company's annual business plan;
c) to propose a plan for the structure of internal
management for the JV Company for the Board's
approval;
d) to propose the basic bylaws for the management of the
JV Company for the Board's approval;
e) to make specific operating rules for the JV Company
for the Board's record;
f) to appoint or dismiss employees other than the
Management Personnel;
g) any other powers delegated to him by the Articles of
Association or by the Board of Directors.
MANAGEMENT STRUCTURE
--------------------
The JV Company's basic management structure shall be determined by the
Board of Directors. The details of the JV Company's organizational
structure and the establishment of employment positions other than
Management Personnel positions shall be determined by the CEO
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ACTICLE 9. LABOR MANAGEMENT
GOVERNING PRINCIPLE
-------------------
Matters relating to the recruitment, employment, dismissal,
resignation, wages and welfare of the staff of the JV Company shall be
dealt with in accordance with the Labor Law of the PRC, the Trade Union
Law of the PRC and related laws and regulations governing the JV
Company (hereinafter collectively referred to as the "LABOR LAWS"). The
JV Company's labor rules and policies shall be approved by the Board of
Directors pursuant to Article 7, and the implementation thereof shall
be handled by the CEO or under the his supervision.
EMPLOYMENT EXAMINATION AND RECRUITMENT
--------------------------------------
1) The JV Company's working personnel, other than the Management
Personnel, shall be employed by the JV Company in accordance
with the terms of an individual labor contract approved by the
Board. The Management Personnel shall be employed by the JV
Company in accordance with the terms of individual employment
contracts approved by the Board of Directors.
2) The JV Company shall maintain strict control over the number
and quality of its employees. The CEO shall have the right to
dismiss any unsuitable or unqualified employees other than
Management Personnel in accordance with the Labor Laws.
CONFORMITY WITH LABOR PROTECTION
--------------------------------
The JV Company shall conform to rules and regulations of the Chinese
government and any governing bodies concerning labor protection and
ensure safe and civilized operations. Labor insurance for employees of
the JV Company shall be handled in accordance with the Labor Laws.
TRADE UNION
-----------
The JV Company's employees shall have the right to establish a trade
union in accordance with the Trade Union Law of the PRC. Based on the
Equity Joint Venture Law, the JV Company shall allot each month two
percent (2%) of the total amount of the actual total base wages of the
JV Company's employees for payment into a trade union fund if such
trade union is established, such payment shall be an expense of the JV
Company. The trade union shall use these funds in accordance with the
relevant control measures for trade union funds formulated by the All
China Federation of Trade Unions.
19
ACTICLE 10. FINANCIAL AFFAIRS AND ACCOUNTING
ACCOUNTING SYSTEM
-----------------
1) The CFO of the JV Company shall be responsible for the
accounting affairs of the JV Company. Subject to Article 8, no
expenditure shall be permitted out of the JV Company's
accounts without written authorization jointly from (i) the
CFO and (ii) either the CEO or the deputy general manager.
2) The CFO shall prepare the JV Company's accounting system in
accordance with the Enterprise Financial and Accounting System
and other relevant PRC laws and regulations, and submit such
to the Board of Directors for adoption. All relevant
documentation relating to the accounting system shall be filed
with the relevant government department in charge of the JV
Company and with the relevant local department of finance and
shall also be delivered to the relevant tax authorities for
their records. The CFO shall also maintain the financial
reports of the JV Company, prepared in accordance with US
GAAP.
3) The JV Company shall adopt Renminbi as its bookkeeping base
currency, but upon request of all the Parties, may also adopt
US Dollars, Hong Kong Dollars or other foreign currencies as
supplementary bookkeeping currencies.
4) All accounting records, vouchers, books and statements of the
JV Company must be made and kept in Chinese with the exception
of the separate accounts to be prepared in accordance with US
GAAP which may be kept in English. All financial statements
and reports of the JV Company shall be made and kept in both
Chinese and English.
5) The exchange rate between any applicable foreign currency and
RMB for the purposes of profit and loss accounts shall be the
end of the month rate quoted by the People's Bank of China or
otherwise required under the Enterprise Financial and
Accounting System. The exchange rate for any other financial
statements and reports shall be the middle rate quoted by the
People's Bank of China on the last date of the relevant
accounting period.
6) The exchange rate between any applicable foreign currency and
RMB for the purposes of entry of any accounting records,
vouchers and books shall be the middle rate quoted by the
People's Bank of China on the date of occurrence of the
relevant transaction.
FISCAL YEAR
-----------
The JV Company shall adopt the Gregorian calendar year as its Fiscal
Year. The JV Company's first Fiscal Year shall commence on the date of
receipt of the Business License and shall end on the immediately
succeeding December 31.
20
AUDITING
--------
1) The Parties shall have full and equal access to the JV
Company's accounts, which shall be kept at the legal address
of the JV Company. The JV Company shall furnish to each Party
unaudited financial reports on a monthly basis (within 20 days
after the end of any month) and quarterly basis (within 30
days after the end of any quarter). In addition, each Party,
at its own expense and upon advance notice to the JV Company,
may appoint an accounting firm registered in the PRC or abroad
to audit the accounts of the JV Company on behalf of such
Party. The JV Company shall permit any such accounting firm to
examine all of its accounting and financial records and other
documents subject to such accounting firm undertaking to
maintain the confidentiality of such documents.
2) The JV Company shall engage one of the Specified Accountants
to audit its accounts and issue an auditors' report. Drafts of
the audited financial statements and report shall be provided
to each Party and to the Board of Directors for review within
two (2) months after the end of each Fiscal Year, and the
final audited financial statements and report shall be
completed not later than three (3) months after the end of
each Fiscal Year.
3) The activities of the CEO and the CFO shall be reviewed and
the related accounts audited by the JV Company on each of the
following occasions:
a) termination of tenure;
b) removal by the Board of Directors;
c) voluntary resignation.
BANK ACCOUNTS AND FOREIGN EXCHANGE CONTROL
------------------------------------------
Subject to the approval of relevant authority, the JV Company shall
open foreign exchange accounts and RMB accounts at banks within the PRC
which have been approved to operate foreign exchange business and, upon
approval by the State Administration of Foreign Exchange, shall open
foreign exchange accounts at banks in Hong Kong or elsewhere outside
the PRC. The JV Company's foreign exchange transactions shall be
handled in accordance with the PRC regulations relating to foreign
exchange control.
21
ACTICLE 11. DISTRIBUTION OF PROFITS
DISTRIBUTION OF PROFITS
-----------------------
1) The JV Company shall not distribute any net profits of the
current year unless the losses of previous years have been
made up and the requirements in the Milestone 1 in Article 21
are satisfied. Retained profits from previous years may be
distributed together with those of the current year.
2) Once requirements listed in the Milestone 1 at the end of each
fiscal year are satisfied, The Team is subject to receive 5%
of net income of that fiscal year as bonus
3) After the JV Company has paid any applicable taxes and made up
any losses incurred in previous years, the Board of Directors
shall decide the allocations of the after-tax profits to the
Three Funds in accordance with applicable PRC laws.
4) The Board of Directors shall reserve 20% of NET INCOME for
long term investment not later than four (4) months after the
end of each Fiscal Year. Any amount of after-tax profits not
so required to be retained after allocation to the Three Funds
shall be promptly distributed to each party in proportion to
each Party's actual capital contribution to the JV Company
(e.g., 45% for The Team). The Team shall propose to the Board
of Directors on the amount for profit distribution; then
decisions regarding profit distribution can be made.
5) Dividends of the JV Company shall be calculated and declared
in RMB, HKD, or USD.
6) The right set in Article 5 OBLIGATIONS AND RIGHTS OF THE TEAM
(5) and the rights set in this section (2) of this Article 11
for The Team are mutually excluded.
LOSSES RECUPERATION
-------------------
If the JV Company incurs an annual loss, the JV Company shall make up
the losses from the following funds in the following order:
a) the JV Company's reserve fund;
b) the JV Company's profits of the next year. ACTICLE 12.
22
TAXATION AND INSURANCE
INCOME TAX AND OTHER TAXES
--------------------------
The JV Company shall pay all taxes required under laws and regulations of
the PRC and any other governing bodies. The JV Company's employees shall
pay individual income tax in accordance with the Individual Income Tax
Law of the PRC and other governing bodies.
INSURANCE
---------
The JV Company shall at all times maintain insurance coverage of the
types and in the amounts determined by the CEO and approved by the
Board of Directors. The JV Company shall obtain insurance from
insurance companies in the PRC, subject to any applicable PRC laws and
regulations.
23
ACTICLE 13. NON COMPETITION
The Team, without Group's prior written consent, not to, with or on
behalf of any person, directly or indirectly, be interested in, or
carry on, any business or activity, in selling Broadcom Corporation's
products, and/or products sold by the JV through other entity or
entities for the period in which such Party holds an Equity Interest in
the JV Company and until the expiry of six (6) months thereafter.
24
ACTICLE 14. CONFIDENTIALITY
CONFIDENTIALITY
---------------
1) Each Party acknowledges that it may have disclosed or may
disclose to the other Parties confidential and proprietary
information concerning its business, financial condition,
proprietary technology, research and development and other
confidential matters in connection with entry into this
Agreement. Each of the Parties further acknowledges that it
may obtain such confidential and proprietary information
concerning the JV Company and the JV Company may also obtain
such confidential and proprietary information about each of
the Parties. Except to the extent otherwise agreed, each Party
which receives any such information as aforesaid (hereinafter
referred to as "CONFIDENTIAL INFORMATION") undertakes, and
shall cause the JV Company, to at all times during the
continuation of this Agreement:
a) to maintain the confidentiality of such Confidential
Information and not, without the prior written
approval of the Party whose Confidential Information
is concerned, to disclose or permit it to be made
available to any person or entity; and
b) only to use the Confidential Information for purposes
specified in this Agreement and for the carrying on
by the JV Company of its ordinary business and for
this purpose, subject to paragraph 4) below, a Party
may only disclose the Confidential Information to
such of its officers, employees and its Affiliates,
or professional advisers acting for any of the above
persons, on a "need-to-know" basis.
2) The provisions of paragraph (1) above shall not apply to
Confidential Information that:
a) is or becomes public knowledge otherwise than through
the receiving Party's breach of this Agreement;
b) was obtained by the receiving Party from a Third
Party having no obligation of confidentiality with
respect to such Confidential Information; or
c) is required to be disclosed by order of any competent
court or governmental authority or other regulatory
authorities having jurisdiction over the JV Company
or the relevant Party provided that such disclosure
is limited to the extent required.
3) Each Party undertakes to advise its directors, senior staff,
and other employees receiving such Confidential Information of
the existence of and the importance of complying with the
obligations set forth in paragraph (1) above.
25
4) Each Party undertakes to, and to cause the JV Company to
formulate rules and regulations to cause its Directors, senior
staff, other employees and professional advisors, and those of
its Affiliates, as such persons are in receipt of Confidential
Information, to comply with the confidentiality obligations
set forth in this Article. All Directors and such senior staff
and other employees of the JV Company as directed by the Board
of Directors, shall be required to sign a confidentiality
undertaking in a form reasonably acceptable to each of the
Parties.
26
ACTICLE 15. TERM OF THE JV COMPANY
TERM OF THE JV COMPANY
----------------------
The JV Company shall have a term of fifty (50) years from the date of
the issue of the Business License, unless this Agreement is terminated.
EXTENSION OF THE TERM
---------------------
If each of the Parties agrees to extend the term of the JV Company, the
JV Company shall file an application with the Approval Authorities at
least six (6) months before the end of the term.
27
ACTICLE 16. MERGER, DIVISION, BANKRUPTCY, TERMINATION AND LIQUIDATION
MERGER OR DIVISION
------------------
The merger or division of the JV Company shall be subject to the
majority approval of the Board of Directors pursuant to Article 7 and
the approval of the Approval Authorities.
If the JV Company is declared bankrupt or insolvent by a people's court
in accordance with the laws of PRC, the liquidation of the JV Company
shall be conducted in accordance with applicable laws of PRC and with
Article 15 TERMINATION below.
TERMINATION
-----------
1) This Contract shall terminate under any of the following
circumstances:
a) the term of the JV Company expires;
b) the JV Company suffers losses and the Board of
Directors unanimously resolves that the JV Company be
liquidated on the basis that in its opinion the JV
Company is likely to continue to suffer financial
losses from which it is unlikely to recover;
c) subject to Article 16, if the JV Company is resolved
to be dissolved in accordance with Article 17 in
connection with any Force Majeure;
d) if the JV Company is declared bankrupt or insolvent
by a court in the relevant jurisdiction in accordance
with the applicable laws;
e) subject to Article 16 TERMINATION 3), if any of the
Parties is declared bankrupt or insolvent by a court
in the relevant jurisdiction in accordance with the
applicable laws;
f) if this Agreement is determined to be unenforceable
by the arbitration tribunal upon application of
Article 18 hereof; or
g) all Parties agree in writing.
2) If any of the circumstances set out in Article 16 TERMINATION
(1) has occurred, each of the Parties shall consent, and cause
the JV Company, to (THE FILING IS MADE BY THE JV COMPANY UNDER
PRC LAWS) file an application with the Approval Authorities
for termination of this Contract and the JV Company. Each
Party agrees to take all actions and to sign all documents,
and to procure its nominee Director on the Board of Directors
to take all actions and to sign all documents, which are
legally required to effect the termination of this Agreement
and the JV Company.
28
3) If any of the circumstances set out in Article 16 TERMINATION
(1)(c) or (f) has occurred on the part of any of the Parties
(the "Affected Party"), each of the other Parties shall have
the right to, within 60 days of such occurrence, to the extent
permitted by the PRC laws and regulations, purchase the Equity
Interests of the Affected Party in proportion to its actual
capital contribution to the JV Company as compared against the
aggregate actual capital contribution of all the Parties
(apart from the Affected Party), on the same principles as
contained in Articles 4 mutatis mutandis (except otherwise is
provided in this sub-paragraph) at a price equal to the value
of the i) actual capital contribution made by the Affected
Party to the JV Company, or ii) the affected or declared
Party's pro rata share of the net book value of net assets of
the JV Company by reference to the proportion its actual
capital contribution bears to all the actual capital
contribution to the JV Company, whichever is lower; provided,
however, that the JV Company shall carry on its business in
full force after the foregoing purchase of Equity Interests.
The Affected Party hereby agrees to take all actions and
execute all documents necessary for such acquisition,
including, without limitation, (i) causing the Director(s) it
has appointed to the JV Company to vote for such approval, and
(ii) executing a written consent to such acquisition.
LIQUIDATION
-----------
1) If this Agreement is terminated under Article 16 TERMINATION
(1), the Board shall establish a Liquidation Committee
according to the Measures on the Liquidation of the Foreign
Invested Enterprise. The following procedures only cover
normal liquidation, procedures for special and bankruptcy
liquidations will be in accordance with the applicable PRC
laws and regulations. The number of the members of the
Liquidation Committee shall be determined by the Board of
Directors, but each Party not in default, bankruptcy or
insolvency shall be entitled to appoint at least one member.
2) The Liquidation Committee shall value and liquidate the JV
Company's assets in accordance with relevant laws and
regulations.
3) The Liquidation Committee shall conduct a thorough examination
of the JV Company's fair market value and its assets and
liabilities. On the basis of such examination, the Liquidation
Committee shall develop a liquidation plan for the liquidation
of the JV Company.
4) All actions, including, without limitation, the disposition of
any assets with a value in excess of RMB 1,000,000.00 of the
JV Company, of the Liquidation Committee shall require the
unanimous consent in writing from all the members of the
Liquidation Committee. No member of the Liquidation Committee
shall have the power to take any action binding the JV Company
without the express authorization in writing of all members of
the Liquidation Committee.
29
5) Upon completion of all liquidation procedures, the Liquidation
Committee shall submit its final report, after approval by the
Board of Directors, to the relevant government authorities for
record. Thereafter, the Business License of the JV Company
shall be cancelled and the JV Company shall be dissolved.
6) If during the course of the liquidation, the Liquidation
Committee concludes that the assets of the JV Company are not
sufficient to pay off its debts, the Liquidation Committee,
subject to the unanimous approval of the Board of Directors
(excluding those appointed by any Party in default, bankruptcy
or insolvency), shall apply to the local court to declare the
JV Company bankrupt or insolvent and commence bankruptcy or
insolvency proceedings.
7) The total assets of the JV Company shall be applied in the
following order upon the completion of the liquidation of all
the assets of the JV Company:
a) all costs of the liquidation;
b) wages and labor insurance premiums of the staff and
personnel of the JV Company;
c) due taxes;
d) the JV Company's other debts, including due expenses
of management and operation;
e) distribution to the Parties pro rata to their
respective Equity Interests in the JV Company
(however, where one or more of the Parties fails to
make full contribution, pro rata to their respective
actual capital contribution).
8) As of the establishment of the Liquidation Committee, the JV
Company shall not develop any new business. ACTICLE 17.
30
ARTICLE 17. FORCE MAJEURE
"FORCE MAJEURE" shall mean any act or event that prevents an affected Party from
performing its obligations in accordance with the provisions of this Contract,
if such act or event is beyond the reasonable control of and not the result of
the fault or negligence of the affected Party and such Party has been unable to
overcome such act or event by taking any reasonable action, including, without
limitation, natural phenomena (including but not limited to storms, hurricanes,
floods, drought, lightning and earthquakes), fires, wars, civil disturbances,
riots, insurrections and sabotage and actions by a governmental authority that
are not voluntarily induced or promoted by a Party, including any change in
applicable law.
Except where the nature of the event shall prevent it from doing so, the Party
suffering any Force Majeure shall, promptly after the occurrence of such Force
Majeure, notify the other Parties in writing and provide proper evidence of the
occurrence of the event and an estimate of its duration and effect and shall in
every instance, to the extent reasonable and lawful under the circumstances, use
its reasonable efforts to mitigate any losses, damages, or costs arising
directly or indirectly from such Force Majeure.
After the occurrence of Force Majeure, all Parties shall negotiate on the issue
as to the continuous performance of this Contract.
If a Party is unable to perform its contractual obligations under this Contract
due to an event of Force Majeure, and such event continues for a period
exceeding six (6) months after written notice of the occurrence of such event is
given by the affected Party to each of the other Parties and the Parties have
been unable to find an equitable solution pursuant to this Article 17, subject
to Article 16, the Directors representing the unaffected Parties may, by a
unanimous decision, resolve to dissolve the JV Company notwithstanding Article
7.
31
ACTICLE 18. SETTLEMENT OF DISPUTES
ARBITRATION
-----------
a) In the event of any dispute, controversy, or claim
(collectively, a "DISPUTE") arising out of or relating to this
Contract, the Parties shall attempt in the first instance to
resolve such Dispute through friendly consultations. If no
mutually acceptable settlement of a Dispute is made within
sixty (60) days after the last Party becoming aware of the
Dispute, the Dispute shall be submitted for, and be decided
finally by, arbitration.
b) Any arbitration of a Dispute arising out of or in connection
with this Contract shall be conducted at the Hong Kong
International Arbitration Center in Hong Kong and in
accordance with the UNCITRAL Arbitration Rules. The
arbitrators may refer to this Agreement and all proceedings in
such arbitration shall be conducted in English. The
arbitration shall be handled by a panel of three arbitrators
all of whom shall be fluent in Chinese and English. One
arbitrator shall be appointed, individually or jointly, by the
claimant Party/Parties, another arbitrator shall be appointed,
individually or jointly, by the respondent Party/Parties, the
third arbitrator shall be a person agreed upon by the above
claimant and respondent. If they fail to agree within thirty
(30) days, the third arbitrator shall be chosen as provided in
the UNCITRAL Arbitration Rules and shall serve as chairman of
the panel. The arbitrators shall decide in their award the
allocation of costs, including, without limitation, the
arbitrator's fees, expenses for translators and translations
required in connection with the arbitration and all other
costs to which the Dispute may give rise. The arbitration
award shall be final and not be subject to appeal. Any
competent court may enforce such an award.
EFFECT OF ARBITRATION AWARD
---------------------------
The arbitration award shall be final and binding on the Parties, and
the Parties agree to be bound thereby and to act accordingly.
COSTS
-----
The costs of arbitration shall be borne by the losing Party unless
otherwise determined by the arbitration award.
CONTINUING RIGHTS AND OBLIGATION
--------------------------------
When any Dispute occurs and is under arbitration, except for the
matters under dispute, the Parties shall continue to exercise their
remaining respective rights, and fulfill their remaining respective
obligations, under this Agreement.
32
ACTICLE 19. APPLICABLE LAW
APPLICABLE LAW
--------------
The formation, validity, interpretation and performance of this
Agreement, and any Disputes arising under this Agreement, shall be
governed by the laws of the PRC.
PREFERENTIAL TREATMENT
----------------------
The JV Company and the Parties shall be entitled in accordance with
applicable PRC laws to enjoy any tax, investment or other preferential
treatment that becomes available to foreign invested enterprises or
foreign investors after the signing of this Agreement and which are
more favorable than those set forth in this Agreement. The Parties
agree that they shall promptly apply or procure that the JV Company
shall apply, if required by law, to the relevant PRC authorities for
the JV Company or any of the Parties to enjoy such preferential
treatment.
33
ACTICLE 20. MISCELLANEOUS PROVISIONS
WAIVER
------
Unless the laws otherwise stipulate or this Agreement otherwise
provides, failure or delay on the part of any Party hereto to exercise
a right under this Agreement shall not operate as a waiver thereof, nor
shall any single or partial exercise of a right preclude any other
future exercise thereof within the legal period or the period
stipulated in this Agreement.
ASSIGNMENT
----------
Except as otherwise provided herein, neither this Agreement nor any
rights and obligations hereunder may be assigned in whole or in part by
any Party without the prior written consent of each of the other
Parties, where required by law, the approval of the Approval
Authorities.
AMENDMENT
---------
This Agreement is made for the benefit of the Parties and their
respective lawful successors and assignees and is legally binding on
them. This Agreement may not be amended orally, and any amendment
hereto must be agreed to in a written instrument signed by each of the
Parties and, where required by law, approved by the Approval
Authorities before taking effect.
SEVERABILITY
------------
The invalidity of any provision of this Agreement shall not affect the
validity of any other provision of this Agreement.
SURVIVAL
--------
Notwithstanding anything contained in this Agreement to the contrary,
the provisions contained in Articles 6 INDEMNITY, 7 INDEMNITY OF
DIRECTORS, 13, 14, 16, 18, 19 and this Article 20 shall survive the
termination of this Contract.
LANGUAGE
--------
This Contract is signed in the English language in four (4) originals.
Each Party may keep one original, each of which shall have equal legal
effect and the others shall be submitted to the Approval Authorities.
34
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts and by the
Parties on separate counterparts, each of which, when so executed and
delivered, shall be an original but all the counterparts shall together
constitute one and the same instrument.
NOTICE
------
Any notice or written communication provided for in this Agreement from
one Party to any other Party or to the JV Company shall be made in
writing in English or Chinese and sent by courier service, or by
facsimile or electronic communication with a confirmation copy sent by
courier service. The date of receipt of a notice or communication
hereunder shall be deemed to be seven (7) days after the date on which
such notice or written communication is given to a-courier service or
the day following that on which a facsimile or electronic communication
was sent, provided the facsimile or electronic communication is
evidenced by a confirmation receipt and the confirmation copy is sent.
All notices and communications shall be sent to the appropriate address
set forth below, until the same is changed by notice given in writing
to each other Party.
Comtech Group Inc
Addressee: ▇▇ ▇▇▇▇
Mailing Address: Rm ▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇ ▇ ▇▇▇▇▇
Telephone: ▇▇-▇▇▇-▇▇▇▇▇▇▇▇
Facsimile: ▇▇-▇▇▇-▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Group Limited.
Addressee: ▇▇▇▇▇ ▇▇▇▇
Mailing Address: c/o Overseas Management Company Trust (B.V.I)
Limited, ▇.▇.▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Islands
Telephone:
Facsimile:
35
ACTICLE 21. MILESTONES
In order to monitor the performance conducted by management team of the
JV, the Parties have agreed to set following Milestones. Milestone 1 is
set for the early stage of the JV in serving the purpose of profit
distribution. Milestone 2 is set for the mature stage of the JV Company
to serve purpose of equity transformation.
MILESTONE 1
-----------
The JV Company has listed the following targets for performance
evaluation, which will ultimately decide bonus and dividends of The
Team at the end of each fiscal year. According to audited financial
report at the end of each fiscal year pursuant to Article 10, if the JV
Company can generate REVENUE equal or higher, NET INCOME equal or
higher, and CASH INFLOW FROM OPERATION equal or higher than the
criteria listed in the following table, the requirements of Milestone 1
is satisfied.
Revenue Net Income Cash Inflow from
Operation
-------------- ---------------- -------------- --------------------
First fiscal USD 11 million US$ 500,000 70% of revenue of
Year this year
-------------- ---------------- -------------- --------------------
Second fiscal USD 18 million US$ 830,000 70% of revenue of
Year this year
-------------- ---------------- -------------- --------------------
Third fiscal USD 29 million US$ 1,380,000 70% of revenue of
Year this year
-------------- ---------------- -------------- --------------------
36
IN WITNESS WHEREOF, the duly authorized representative of each Party has signed
this Contract in Hong Kong.
Comtech Group Inc.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------------------
Sign Date
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Position: CEO
▇▇▇▇▇▇▇▇▇ GROUP LIMITED
/s/ 1/17/2005
-----------------------------------------------
Sign Date
Name:
Position:
37