Joint Project Contract - Chong Qing Branch of Ji Tong Network Communications Co. Ltd. and Chengdu Big Sky Network Technology Services Ltd.
The Joint Project Contract
the Chong Qing Branch of Ji Tong Network Communications Co., Ltd.
CHENGDU Big Sky Network TECHNOLOGY SERVICE Ltd.
Article 1.1 Preamble
Ji Tong Network Communication Co., Ltd. is a large Telco permitted by the Chinese Government to operate the Tele communication business nation-wide. Chong Qing Branch of the Ji Tong Network Communication Co., Ltd. is responsible for the business development and the network construction in Chong Qing area. Chengdu Big Sky Network Technology Services Ltd. is a Canadian company headquartered in Chengdu and its main business is to provide high-speed broadband Internet technology services. Based on the spirit of friendly cooperation and mutual development, after discussions and negotiations, both Parties agreed to deploy Internet and value-added business in the Chong Qing area jointly. In accordance with the Contract Law of the People's Republic China, the General Principle of Civil Law of the People's Republic of China, and other related laws and regulations, the Parties concluded the Contract on October 31st, 2001
Article 1.1 Definitions
In this Contract, the following words and expressions shall have the meaning hereby assigned to them, except where the context otherwise requires:
PARTIES OF THE JOINT PROJECT
Article 2 The Parties
The Parties to this Contract are as follows:
1. Party A: Chong Qing Branch of Ji Tong Network Communications Co., Ltd.
Registration Place: The People's Republic of China
Legal Address: No. 283 Minsheng Road, Rm. 60601 Business Mansion of the
Chong Qing Guest House, Chong Qing, the People's Republic of China
Name: Mr. Xian Fu Ning
Position: Deputy General Manager
Party B: Chengdu Big Sky Network Technology services Ltd.
Registration Place: Chengdu, Sichuan Province, the People's Republic of China
Legal Address: Gaofa Building, Chengdu Hi-Tech Industrial Development
Name: Daming Yang
Position: President of Big Sky Network Canada Ltd.
DECLERATIONS AND WARRANTIES
Article 3.1 Party A
Party A hereby declares and warranties as follows:
Article 3.2 Party B
Party B hereby declares and warranties as follows:
Article 3.3 Special Terms
THE OBJECTIVE, BUSINESS SCOPE AND
BUSINESS PLAN OF THE PROJECT
Article 4.1 The Objective
The objective of the Project is to provide Internet technology services for data transmission and Internet related business in Chong Qing area. This will be accomplished by economic cooperation and technical exchanges as well as through adopting advanced technology and scientific management expertise, in order to achieve reasonable economic results and ensure a maximum rate of return for both Parties.
Article 4.2 The Principle of Cooperation
The Parties fully agree the following as the principle of cooperation between the Parties:
Article 4.3 The Scope of Business
The scope of business of the Project is to develop or build broadband Internet Customer Premises Networks in Chong Qing area, to develop Voice Over IP based on the Customer Premises Networks; to provide broadband Internet technology services which includes the equipment purchasing, designing, installation, operation, maintenance and management of the broadband network platform for broadband data transmission, network based data transmission and value-added business; to develop the application software; and to provide technical, consulting, management and training services.
Article 4.3 The Business Plan
The following sets out a description of the Project's business plan:
INVESTMENT AND COOPERATIVE CONDITIONS
FOR THE JOINT PROJECT
Article 5.1 Investment
Article 5.2 Cooperative Conditions
The cooperative conditions of the Parties are as follows:
(1) Party B shall make cash investment to purchase the Customer Premises Networks that has
been completed or to construct the Customer Premises Networks. The purchase price shall
be approved by the Management Committee.
(2) Party B shall make cash investment to purchase the equipment for the Customers Premises
Networks, including server, router, campus switches and building switches.
(3) During the term of this Contract, any Party of this Contract shall not change or modify the
cooperative conditions contributed to the Project or dispose the assets of the Project without
prior written consent of the other Party.
Article 5.3 Assignment of Interest, Rights and Obligations
OBLIGATIONS OF EACH PARTY OF THE CONTRACT
Article 6.1 Obligations of Party A:
Article 6.2 Obligations of Party B:
Article 6.3 Obligations of Both Parties
The mutual Obligations of the Parties:
Article 7.1 Income Distribution
After the Project pays all taxes as required by applicable laws and regulations of the People's Republic of China, the Distributable Cash Flow shall be distributed as follows:
The accounting system of the Project shall be independent from Party A's accounting system and keep a separate set of books for the Project.
MANAGEMENT COMMITTEE OF THE PROJECT
Article 8.1 Establishment of The Management Committee
The Management Committee of the Project is the highest authority of the Project. The Management Committee of the Project shall be established on the date of signing of this Contract.
The Management Committee shall have all the powers to make major decisions concerning the management and other impotent matters of the Project. The Management Committee is also responsible to make strategic business decisions of the Project.
The Management Committee shall be consisted of five (5) members that appointed by the Parties. The term of the membership is three (3) years. The term of membership may be renewed if their respective Parties continuously appoint the member. The distribution of the members shall be as follows:
The powers, procedures, requirements and other matters relating to the Management Committee are set out in the Working Procedure of the Project. If there is a conflict, the Working Procedure of the Project shall prevail.
Article 8.2 Meeting of the Management Committee and its Quorum
The Management Committee shall convene at least one meeting every six months. At any meeting, a quorum shall consist of at least four (3) members, of which not less than one (1) member is appointed by Party A and one (1) member is appointed by Party B, attending the meeting in person, by proxy or by telephone. The Chairperson of the Board must call a meeting upon the request of any three members. For matters which would otherwise require to be approved by a meeting of the Management Committee, a written resolution, In lieu of a meeting of the Management Committee, may be adopted by the Management Committee if such resolution is sent to all members of the Management Committee and to be signed and adopted by the number of members required to make such decision as stipulated in the Working Procedure of the Project. A notice shall be deemed to be waived by attending the Board meeting in person, by proxy or participating the meeting by telephone or video conference.
Article 8.3 Powers of the Management Committee
The Management Committee may exercise all of the powers belonging to the Project. Except specifically stipulated in the Contract hereof. All actions taken by the Management Committee shall require approval by simple majority of the members at the meeting at which a quorum is present.
Article 8.4 Minutes of the Management Committee
The minutes of the Management Committee meeting shall be confirmed and signed by the members attending the meeting and shall be filed with the Project.
MANAGEMENT AND OPERATION OF THE PROJECT
Article 9.1 The Operation and Management and
The Project shall establish the Working Group which shall be responsible for the day-to-day operation and management of the Project
Article 10.1 Confidentiality
1. During the term of this Contract and three(3) years following the termination of this Contract, No Party to this Contract shall, nor shall it permit any of its employees, to divulge to any person any confidential information, including the confidential information before and after signing of this Contract and the confidential information developed or acquired by either Party during the term of the Project. The confidential information including, but not limited to business plan, financial plan or information, customer information, technical secrets, intellectual property, sells plan and activities, and product marketing information.
2. Notwithstanding anything in this Agreement to the contrary, Confidential information shall not include any information which:
disclosure made directly or indirectly by the Receiving Party.
violating any of its obligation under this Contract.
3. The confidential information can only be disclosed under the following circumstances:
TAXES, FINANCE, AUDIT, STATISTICS
Article 11.1 Taxation
The Project shall pay taxes in accordance with the laws and regulations of the People's Republic of China.
Article 11.2 Accounting
The accounting system of the Project shall be independent from Party A's accounting system and keep a separate set of books for the Project.
Article 11.3 Reports
Party A shall submit the necessary financial reports to the relevant authorities in accordance with the regulations of the People's Republic of China.
TERM OF THE CONTRACT
Article 12.1 Term of the Contract
The term of the Contract is twelve (12) years. The establishment of the Project shall start from October 2001 and to be terminated at the end of October 2013. A Party may file a request to extend the Contract one hundred and eighty (180) days prior to the termination of this Contract.
THE DISPOSAL OF ASSETS AFTER
EXPIRATION OF THE CONTRACT
Article 13.1 Committee of Liquidation
Upon expiration of this Contract, the Project shall liquidate the assets, credit and debt. The liquidation shall be carried out by a Committee of Liquidation in accordance with the terms of the Contract and the relevant laws and legal procedures. A Committee of Liquidation shall be consisted of representatives appointed by the Parties
Article 13.2 Assets Distribution
Upon early termination or expiration of this Contract, the Project's assets after the liquidation shall be settled in accordance with the Law of the People's Republic of China on Chinese and Foreign Contractual Joint Ventures:
TERMINATION OF THE CONTRACT
Article 14.1 Modification
The modification of the Contract, pledge of the corporate assets, merge or split of the Project, discontinuation or dissolution of the Project, amalgamation with other economic organization or any other important matters shall be unanimously agreed by all members of the Management Committee and be recorded by writing.
The following matters shall be agreed unanimously by the members of the Management Committee:
1. To mortgage assets of the Project for a loan;
2. To pledge or permit any liens on any properties of the Project;
3. To set up a subsidiary of the Project;
4. To make an important business decision;
5. To make an important investment;
6. To purchase a major equipment;
7. To approve the Project budget and quarterly investment plan.
Article 14.2 Early Termination
If the Project is unable to fulfill the Contract or to continue the operation due to heavy loss in successive years, or as a result of Force Majeure, Chinese law and policy change, the change of governmental administrative activities, the Contract can be terminated before the expiration of the Contract only after consultation between the Parties.
Article 14.3 Termination
If the Project is unable to continue its operations or achieve the objectives stipulated in this Contract due to that one of the contracting Parties fails to perform the obligations under the Contract and the Articles of Incorporation, or breaches the Contract and the Articles of Incorporation (particularly the provisions of Chapter 3 of this Contract), that Party shall be deemed as having unilaterally terminated the Contract. The other Party shall have the right to terminate the Contract in accordance with the provisions of the Contract and to claim damages. If the Parties agree to continue to operate the Project, the Party that failed to perform the obligations under the Contract shall be liable for the losses thus caused to the Project.
LIABILITIES FOR BREACHING OF CONTRACT
Article 15.1 Failure to provide Conditions of the Cooperation
If a Party fails to provide the cooperative conditions, the Party shall be liable for breaching the Contract and pay the other Party a penalty equal to the bank yearly interest set up by the People's Bank of China and a cash penalty equal to 0.5% of the value of the investment per day. If the breaching Party fails to remedy such material breach within ninety (90) days after receiving a written notice of the breach from the other Party, the breaching Party shall continue to pay the penalty to the other Party. In addition to the penalty, the other Party shall have the right demanding to terminate the Contract and claim the total damage caused by the breach.
Article 16.1 Force Majeure
Should either of the Parties to the Contract be prevented from performing the Contract by Force Majeure, such as earthquake, typhoon, flood, fire and war and other unforeseen events, and their happening and consequences are unpreventable and unavoidable, the prevented Party shall notify the other Party by cable without any delay, and within fifteen (15) days thereafter provide the detailed information of the events and a valid document for evidence issued by the relevant public notary organization at where the Force Majure happens for explaining the reason of its inability to perform or delay the performance of all or part of the Contract. Both Parties shall, through consultations, decide whether to continue the Contract, terminate the Contract, to delay the performance of the Contract, to release from the obligations of the Contract, or to release from part of the obligations of the Contract according to the effects of the events on the performance of the Contract.
Article 17.1 Applicable Law
The formation of this Contract, its validity, interpretation, execution and settlement of the disputes shall be governed by the relevant laws of the People's Republic of China.
If changes are made to the current laws, regulations or policies of the People's Republic of China applicable to this Contract to provide more favourable conditions for the achievement of the objectives of the Parties, the Parties shall negotiate in good faith to amend this Contract so that the Parties can benefit from the favourable conditions to the greatest extent possible.
If changes are made to the laws, regulations or policies of the People's Republic of China at any time that cause the economic interests of any Party to suffer a material adverse effect, the Parties shall negotiate in good faith to amend this Contract and/or the operations of the Project to remove or mitigate such material adverse effect as soon as possible and to the greatest extent possible.
SETTLEMENT OF DISPUTES
Article 18.1 Consultation
Any disputes or differences between the Parties arising out of or in connection with this Contract or as to rights or obligations hereunder shall initially be referred to the legal representatives of Party A and Party B for resolution to the satisfaction of the Parties, if possible. The legal representative of the Parties may, if they so desire, consult outside experts for assistance in arriving at a resolution. Such persons shall make a bona fide attempt, through friendly negotiation, to settle amicably any such dispute or difference within 30 days after its submission and, if unable to do so, the dispute or difference may be referred by any of them to Arbitration.
Article 18.2 Arbitration
Article 18.3 Operation of the Project
Pending for the resolution of any dispute or difference submitted to the legal representatives of the Parties pursuant to Article 18.1 or to arbitration pursuant to Article 18.2, the Project shall continue to conduct its business activities in accordance with the business plans of the Project then in effect.
Article 19.1 Language
The Contract shall be written in Chinese and English languages. Both languages have equal legal authority and effect. Should there be a conflict between the two versions, the spirit and the objectives of the Contract shall be the guiding principle to interpret the Contract.
EFFECTIVENESS OF THE CONTRACT
Article 20.1 Appendices
The appendices (including the Working Procedure of the Joint Project)drawn up in accordance with the principles of this Contract are an integral part of this Contract.
Article 20.2 Headings
The headings of the Articles of this Contract are for convenience of reference only and shall not be deemed or construed as in any way limiting or extending the language of the provisions to which such headings may refer.
Article 20.3 Effective Date
This Contract and its appendices shall come into force on the date of signing by the Parties.
Article 20.4 Notice
Should notices in connection with any Party's rights and obligations be sent by either Party A or Party B by telegram, telex, email or fax, etc., the written notices shall be also required afterwards. Such written notices shall be delivered by postal services, and be considered to be received by the Party in ten (10) business days from the date of postmark. The legal address of Party A and Party B listed in this Contract (or such other address as either Party may notify the other Party in writing) shall be the postal addresses.
Article 20.5 Severability
If any provision of this Contract becomes fully or partly invalid, illegal or unenforceable in any respect for any reason whatsoever, the validity, legality and enforceability of the remaining provisions of this Contract shall not in any way be affected or impaired thereby.
Article 20.6 Original Copies
This Contract is executed in Chinese and English versions and in four (4) original counterparts each of which shall have equal effect in law. Each Party shall keep two (2) copy of the original Contract.
IN WITNESS WHEREOF, the Parties hereto have signed this Contract as of October 31, 2001. .
THE CHONG QING BRANCH OF JI TONG NETWORK COMMUNICATIONS CO., LTD.
CHENGDU BIG SKY NETWORK TECHNOLOGY SERVICE LTD.
/s/ Xian Fu Ning
Xian Fu Ning
Deputy General Manager
/s/ Daming Yang