Contractual Joint Venture - Guangshi Network Development Ltd. and Big Sky Network Canada Ltd.
CONTRACTUAL JOINT VENTURE
CONTRACT BETWEEN DEYANG
GUANGSHI NETWORK
DEVELOPMENT LTD. AND BIG
SKY NETWORK CANADA LTD.
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PREAMBLE
In accordance with the " Law of the People's Republic of China on Chinese
Foreign Contractual Joint Ventures" and other relevant laws and regulations of
the People's Republic of China, Sichuan Province and the City of Deyang and
adhering to the principle of equality and mutual benefit, spirit of friendship
and cooperation, Deyang Guangshi Network Development Ltd. and Big Sky Network
Canada Ltd. agree to form a contractual joint venture company at Deyang, Sichuan
Province, the People's Republic of China.
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CHAPTER 1
GENERAL PROVISIONS
Article 1.1 Definitions
In this Contract, unless there is something in the subject-matter or context
inconsistent therewith,
1. "Approval Authority" means the Deyang Municipal Government and its
functional departments.
2. "Approvals" means all approvals, permits, licenses, certificates,
authorizations, sanctions, consents, permissions, filings and
registrations required from or with any governmental authority.
3. "Articles of Incorporation" means the "Articles of Incorporation of
Deyang Guangshi Big Sky Ltd.
4. "Board of Directors" means the Board of Directors of Deyang Guangshi
Big Sky Ltd.
5. "Business License" means the business license of Deyang Guangshi Big
Sky Ltd. issued by the State Administration for Industry and Commerce.
6. "Company" means Deyang Guangshi Big Sky Ltd.
7. "Contract" means this Contractual Joint Venture Contract between
Deyang Guangshi Network Development Ltd. and Big Sky Network Canada
Ltd.
8. "Effective Date" means the date on which the approval document of this
Contract is issued by the Approval Authority.
9. "Parties" means Party A (Deyang Guangshi Network Development Ltd.) and
Party B (Big Sky Network Canada Ltd.).
10. "RMB" means the currency of the People's Republic of China.
11. "Foreign Currency" means the currencies of foreign countries
(including paper money) and foreign payment orders (including
commercial instruments and bank deposit certificates, etc.).
12. "Senior Officers" means the General Manager, the Deputy General
Manager, the Chief Engineer and the Chief Accountant.
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CHAPTER 2
PARTIES OF THE CONTRACTUAL JOINT VENTURE
Article 2.1 The Parties
Parties to this Contract are as follows:
Party A: Deyang Guangshi Network Development Ltd.
Place of Registration: Jinghu Hi-tec Development District, the City of Deyang,
the Province of Sichuan, the People's Republic of China
Legal Address: #50, MinJang Road East, Jinghu Hi-tec Development District, the
City of Deyang, the Province of
Sichuan, the People's Republic of China
Legal Representative:
Name: Zhou, Jinan
Position: Chairman of the Board.
Nationality: Chinese
Telephone: 86-838-223-2538
Fax: 86-838-220-3326
Party B: Big Sky Network Canada Ltd. [Chinese Characters Appear Here]
Place of Registration: British Virgin Islands
Legal Address: 2080, 440 2nd Ave., SW, Calgary, Alberta, Canada
Legal Representative:
Name: Matthew Heysel
Position: Chairman
Nationality: Canadian
Telephone: 1-403-234-8885
Fax: 1-403-265-8808
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CHAPTER 3
DECLERATIONS AND WARRANTIES
Article 3.1 Declarations and Warranties of Party A. Party A hereby
declares and warranties as follows:
1. Party A is a legal entity duly incorporated under the laws of the
People's Republic of China.
2. The execution and performance by Party A of this Contract and its
appendices (i) are within its corporate power and business scope, (ii)
have been duly authorized by necessary corporate resolutions, (iii) do
not contravene its Articles of Incorporation and (iv) do not
contravene any law or contractual restrictions binding on or affecting
part A.
3. Party A owns and controls the entire HFC network of Deyang (the
"Network") and the right to use the facilities, equipment and
frequencies (collectively, the "Facilities and Frequencies") of the
Network for data transmission and Internet- related business.
4. Party A understands and guarantees to act in good faith and shall not
relinquish, transfer or permit the transfer of the ownership or
control of, the Network or Party A's right to use the Facilities and
Frequencies to any third party, and shall ensure that the Company
shall be the Internet technology service provider for the Network
during the term of this Contract. Party A shall not engage or permit
any one to engage any third party for the aforementioned services
without the prior written consent of the Company.
5. Party A has all necessary qualifications to obtain all Approvals that
Party A may require in order to act as an Internet service provider
and to provide Internet connectivity services to its customers through
the Network.
6. Party A shall obtained all necessary Approvals for the execution and
performance of this Contract.
7. Party A ensures that all additional contracts or supplementary
documents relating to this Contract to be performed as the Contract.
8. Subject to the approval of this Contract and its appendices by the
Approval Authority, this Contract creates legal, valid and binding
obligations that are enforceable against Party A in accordance with
this Contract and all applicable laws and regulations.
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Article 3.2 Declarations and Warranties of Party B. Party B hereby
declares and warranties as of the date hereof as follows:
1. Party B is a legal entity duly incorporated under the laws of British
Virgin Island.
2. The execution and performance by Party B of this Contract and its
appendices (i) are within its corporate power and business scope, (ii)
have been duly authorized by all necessary corporate resolution, (iii)
do not contravene its Articles of Incorporation and (iv) do not
contravene any law or contractual restriction binding on or affecting
Party B.
3. The investment funds, the equipment, the manner of the
investment (pound) the timing and the amount of contribution
stipulated in the Contract shall be observed by Party B in order to
ensure the progress of the project.
4. Party A ensures that all additional contracts or supplementary
documents, signed by the Parties, relating to this Contract or Project
having the same legal status and effect as the Contract.
5. Subject to the approval of this Contract and its appendices by the
Approval Authority, this Contract creates legal, valid and binding
obligations that are enforceable against Party B in accordance with
this Contract and all applicable laws and regulations.
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CHAPTER 4
ESTABLISHMENT OF THE CONTRACTUAL
JOINT VENTURE COMPANY
Article 4.1 Establishment of the Company
The Company shall be a contractual joint venture with limited liability formed
under the "Law of the People's Republic of China on Chinese Foreign Contractual
Joint Ventures" and other relevant laws and regulations of the People's Republic
of China.
Article 4.2 The Legal Name and Address of the Company
Parties to this Contract are as follows:
Party A: Deyang Guangshi Network Development Ltd.
Place of Registration: Jinghu Hi-Tec Development District, the City of Deyang,
the Province of Sichuan, the People's Republic of China
Legal Address: #50, MinJang Road East, Jinghu Hi-tec Development Dis-
trict, the City of Deyang, the Province of Sichuan, the
People's Republic of China
Legal Representative:
Name: Zhou, Jinan
Position: Chairman of the Board
Nationality: Chinese
Telephone: 86-838-223-2538
Fax: 86-838-220-3326
Article 4.3 Laws of the People's Republic of China
The Company shall be a contractual joint venture registered in Deyang, approved
by the relevant Approval Authorities. As a legal entity, the Company shall
comply with the laws and regulations of the People's Republic of China. All
activities of the Company shall be governed and protected by the laws and the
pertinent rules and regulations of the People's Republic of China.
Article 4.4 Limited Liability
The Company is a limited liability company. The investment funds, the
cooperative conditions and the terms provided by both Parties of the Contract
shall constitute part of the property of the Company. The Company's liabilities
shall be settled by the properties of Company, except the ownership and the
right of use of the Network. Both Parties of the Contract have reached consensus
on the following: the terms and conditions of the cooperation and investment,
profit distribution, business management and operation, and assets distribution
on termination of the Contract.
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CHAPTER 5
OBJECTIVE OF THE CONTRACT AND SCOPE OF BUSINESS
Article 5.1 Objective
The objective of the Company is to provide Internet technology services for data
transmission and Internet related business in the Deyang 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 5.2 Scope of Business
The scope of business of the Company shall include the provision of Internet
technology services including, without limitation, the purchase, processing,
upgrading, development, installation, operation, maintenance and management of
network platform for broadband data transmission, network based data
transmission and value-added business; application software development; and
technical, consulting, management and training services.
Article 5.3 Business Plan
The following sets out a description of the Company's business plan:
1. Party A wishes to use the Network, Facilities and Frequencies to
provide Internet connectivity services to customers in Deyang
(collectively, "Network Customers"). However, the Network, Facilities
and Frequencies cannot be used for such purpose until appropriate
hardware and software is installed on the Network.
2. Party A and Party B agree that the Company shall act as the exclusive
Internet technology service provider for this purpose. Specifically,
the Company shall select, purchase, own, process, upgrade, install,
manage, operate and maintain all hardware and software that the
Company considers necessary for the purpose of enabling Party A to
provide internet connectivity services to its HFC Network Customers
through the Network, Facilities and Frequencies.
3. Upon receiving an Internet operating permit and other necessary
Approvals, Party A shall contract with one or more of the government-
approved Internet Network Provider(s) to interconnect the Network with
the Internet. Party A shall be responsible for paying all the
interconnection fees payable to such Internet Network Provider(s).
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4. In consideration for providing internet connectivity services to Network
Customers as an Internet Service Provider, Party A shall require Network
Customers to pay to Party A, a monthly connection fee (the "Connection
Fee"). Party A shall use such Connection Fees to offset the
interconnection fees that Party A shall be required to pay to Party A's
Internet Network Provider(s).
5. In consideration for providing Internet technology services that will
enable Network Customers to obtain Internet connectivity from Party A
through the Network, the Company shall require Network Customers to pay
to the Company, an initial installation fee and a monthly maintenance fee
(the "Installation and Maintenance Fee"). The Company shall use such
Installation and Maintenance Fees to offset the Company's capital and
operating costs and to earn an acceptable return on its investment. The
Company shall distribute to Party A and Party B, all the net profits that
the Company may derive from such activities in the manner set forth in
Article 9.1 of this Contract.
6. Immediately after the Company has been established, Party A and the
Company shall develop specific plans for attracting and maintaining
Network Customers on a cooperative basis, including: (i) the schedule for
the selection, purchase, and installation of hardware and software on the
Network and the other Internet technology services that the Company will
provide; (ii) marketing plans; (ii) pricing policies; (iii) the form and
content of the Connection Fee agreement that Party A will require Network
Customers to sign for the purpose of obtaining Internet connectivity
services from Party A as well as the separate Installation and
Maintenance Fee agreement that the Company shall require Network
Customers to sign for providing Internet technology services; (iv)
collection of fees; and (v) other operational matters.
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CHAPTER 6
TOTAL INVESTMENT, REGISTERED CAPITAL, CAPITAL
CONTRIBUTIONS AND COOPERATIVE CONDITIONS FOR THE
CONTRACTUAL JOINT VENTUREE
Article 6.1 Total Investment
1. The total investment of the Company shall be US$4,500,000 (four
million five hundred thousand US Dollars).
2. The unit of currency for the total investment, registered capital and
other contributions shall be the U.S. dollar. The exchange rate for
the two currencies shall be the average exchange rate announced by the
State Administration of Foreign Exchange of China for U.S. dollars and
RMB for the date on which the capital contributions are made.
3. All capital contributions in cash shall be deposited into a bank
account designated by the Company in Deyang or a foreign bank account
designated by the Company, if approved by the State Administration of
Foreign Exchange of China, pursuant to the relevant foreign exchange
laws regulations.
4. All capital contributions to the Company, whether in cash or in other
form, shall be used exclusively for the Company.
Article 6.2 Registered Capital
1. The registered capital of the Company shall be US$2,250,000 (two
million and two hundred and fifty thousand US Dollars) that may be
contributed in the form of cash, equipment or services. The equipment
investment is US$1,250,000 (one million and two hundred and fifty
thousand US Dollars) and the cash investment is US$1,000,000 (one
million US Dollars). The differences between the total investment and
the registered capital shall be raised by Party B abroad. 2. By a
unanimous consent of the Parties and the Board of Directors, the total
investment may be increased for the Company's new business
development.
Article 6.3 Cooperative Conditions
The cooperative conditions of the Parties are as follows:
1. Party A shall:
(1) Party A ensure that the Company shall be the exclusive provider
of the Internet technology services in relation to the Network
(the ownership of the Network belongs to Party A) and enable
Party A to use the HFC Network, Facilities and Frequencies to
provide Internet connectivity services to Party A's customers;
and
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(2) obtain all regulatory Approvals, licenses and permits that
either the Company or Party A may require to perform this
Contract. Without limiting the generality of the foregoing,
Party A shall obtain an Internet operating permit from the
Ministry of Information Industries and any other Approval that
Party A may require in order to legally provide Internet
connectivity services in the manner contemplated by this
contract.
2. Party B shall contribute to the Company in the form of cash, equipment
or services to the Company with an aggregate value of US$4,500,000.
The differences between the total investment and the registered
capital shall be raised by Party B abroad.
3. Timing of Contributions
The contributions stipulated in the Contract shall be carried out as
follows:
(1) Party A shall obtain all the Approvals contemplated by Article
6.3(1) above within fifteen (15) days after the issuance of the
Business License. If all such Approvals are not obtained by Party
A within fifteen (15) days after the issuance of the Business
License due to the reasons of policy change or governmental
delay, Party A shall not to be considered in breach of this
Contract.
(2) The initial registered capital contribution of US$1,000,000 shall
be made by Party B within twenty (20) days after receiving each
of the following documents in form and substance satisfactory to
Party B: (i) true copies of all the Approvals contemplated by
Article 6.3(1) above; and (ii) a legal opinion issued by a
qualified Chinese law firm selected by Party B confirming
relevant legal matters, such as: (a) all such Approvals have been
validly issued and are in good standing; (b) Party A owns and
controls the Network and has the right to use the Facilities and
Frequencies for data transmission and Internet related business;
and (c) this Contract is legal, valid and enforceable against
Party A. If Party B does not receive all such documents in form
and substance satisfactory to Party prior to such date, Party B
shall not be obliged to contribute any capital to the Company and
Party B shall not be considered in breach of the Contract.
(3) The remaining registered capital and other contributions to the
Company shall be made in accordance with the Company's project
schedule (as the Board of Directors may establish) and the
relevant legal requirements of the People's Republic of China.
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. Modification of Cooperative Conditions
During the term of this Contract, the Parties shall not modify the cooperative
conditions upon which the Parties have mutually agreed.
Article 6.4 Verification of Contributions
A reputable international accounting firm registered in China shall be engaged
by the Company to verify the contributions of Party B and issue a Certificate of
Verification. Upon receipt of a satisfactory Certificate of Verification, the
Company shall issue a new Certificate of Capital Contribution to each Party. The
Certificate of Capital Contribution shall include the following items: the name
of the Company, the date of establishment, the names of the Parties and Party
B's contributions, the date on which the capital contributions were made, and
the date of issuance of the Certificate of Capital Contribution. The Certificate
of Capital Contribution shall be the final evidence of Party B's capital
contribution to the Company. The Certificate of Capital Contribution shall be
effective when signed by the Chairman and Vice Chairman of the Board and the
seal of the Company is affixed thereon.
Article 6.5 Assignment of Interest, Rights and Obligations
1. If a Party (the Transferring Party) to the Contract intends to sell,
assign, transfer, wholly or in part, its interest, rights and
obligations to a third party, a prior written consent must be obtained
from the other Party (the Non-Transferring Party). The modified
Contract can only be effective after the modifications have been
registered with the State Administration for Industry and Commerce
within thirty (30) days after approved by the relevant Approval
Authorities.
2. If the Transferring Party desires to sell, assign or transfer, wholly
or in part, its interest, rights and obligations to a third party
other than a subsidiary of the Transferring Party, the Transferring
Party shall secure a binding written offer (the "Third Party Offer")
from such third party. The Non-Transferring Party shall have the right
(the "First Right of Refusal") exercisable within fifteen (15) days
after receiving a copy of the Third Party Offer to purchase the
Transferring Party's interest, rights and obligations in the Company
on the same terms and conditions as set out in the Third Party Offer.
The Non-Transferring Party shall notify the Transferring Party in
writing prior to exercise its First Right of Refusal.
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3. If the Non-Transferring Party exercises its First Right of Refusal
within fifteen (15) days after receiving a copy of the Third Party
Offer to purchase the Transferring Party's interest, rights and
obligations in the Company, the Transferring Party's respective
interest, rights and obligations shall be transferred to the
Non-Transferring Party on the same terms and conditions set out in the
Third Party Offer.
4. If the Non-Transferring Party fails to exercise its First Right of
Refusal within fifteen (15) days after receiving the notification of
the Third Party Offer, the Transferring Party may, provided that the
Transferring Party has obtained the prior written consent from the
Non-Transferring Party (such consent shall not be withheld
unreasonably), sell, assign or transfer, wholly or in part, its
respective interest, rights and obligations in the Company to the
Third Party pursuant to Article 6.5(1) of this Contract.
5. Notwithstanding the foregoing, but subject to any required approvals
from the Approval Authority, a Party, after notifying the other Party,
may sell, assign or transfer, wholly or in part, its respective
interest, rights and obligations in the Company to its Subsidiary. The
Parties agree that such assignment shall not require prior consent of
the other Party and shall not attach any conditions to such
assignment. The Parties also agree that the First Right of Refusal,
shall not be applied to such assignment.
6. Any sale, assignment or transfer of a Party's interest, rights and
obligations in the Company, wholly or in part, under this Article
shall not be effective until all necessary Approvals have been
obtained. Upon receipt of such Approvals, the Parties shall cause the
Company to cancel or amend the Certificate of Capital Contribution
referred to in Article 6.4.
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CHAPTER 7
RESPONSIBILITIES OF EACH PARTY OF THE CONTRACTUAL JOINT VENTURE
Article 7.1 Costs
The Parties shall be responsible for performing their respective obligations
contained in this Contract in a timely and effective fashion. The Parties agree
that the cost incurred in performing the following obligations shall be paid by
the Company, except to the extent that any such cost is specifically designated
as part of a Party's contribution to the registered capital of the Company or a
cooperative condition of a Party, as described in Article 6.3.
Article 7.2 Obligations of Party A:
1. To handle applications for project approval, business registration,
business license and other matters from relevant governmental
authorities with respect to the establishment of the Company and the
business operations contemplated in this Contract. The company shall
be responsible for the cost incurened.
2. To assist the Company in matters involving governmental departments or
agencies of the People's Republic of China.
3. To assist the Company in obtaining satisfactory access to the Network
for the Company.
4. To assist the Company in applying for and obtaining of all necessary
approvals, permits, certificates and licenses required for conducting
Company's business;
5. To assist the Company in applying for and obtaining of the maximum
benefit, under the tax policies and regulations of the People's
Republic of China, of all permitted reductions in, or exemptions from,
the income tax, withholding tax, import duties, value added tax,
business and consumption tax, local tax, real estate tax, vehicle tax
or any other tax reductions, rebates or exemptions to which the
Company is currently entitled or may become entitled in the future;
6. To assist Party B in obtaining all necessary licenses and foreign
exchange approvals, from the appropriate authorities of the People's
Republic of China, to permit Party B to transfer out of China of all
its profits, dividends, returning of invested capital, proceeds of
liquidation, after paying all applicable taxes of the People's
Republic of China;
7. To assist the Company to rent work site and office space;
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8. To assist the Company in purchasing or leasing any necessary
equipment, material, office supplies, tools of transportation and Tele
communication facilities, etc;
9. To assist the Company in getting the utilities for business operation,
such as water, electricity, transportation, etc.
10. To assist the Company in recruiting management and technical
personnel, workers and other personnel required from the Chinese
labour market.
11. To assist expatriate and foreign personnel in applying for Temporary
Residential Card, entrance visa, work permit, travel documents and
other documents required.
12. To give convenience to Party B in implementing and supervising its
investment.
13. To Provide Party B, within fifteen (15) days after signing of this
Contract, with written evidence that Party A is able to provide Party
A's cooperative conditions as stipulated under Article 6.3 (1) of this
Contract to ensure that this Contract can be carried out by Party A.
14. To assist the Company, with the best effort, to promote its business.
15. To assist with other matters that entrusted by the Company.
Article 7.3 Obligations of Party B:
1. To assist Party A to handle applications for project approval,
business registration, business license and other matters from
relevant Approval Authorities in Deyang with respect to the
establishment of the Company
2. To assist the Company: (i) to develop financial planning and reporting
systems, and (ii) to apply advanced scientific management systems;
3. To assist the Company in matters involving governmental departments or
agencies of the People's Republic of China.
4. As entrusted by the Company: (i) to select advanced technology,
equipment parts, software and other related materials, that are
unavailable in the People's Republic of China, from the international
market; (ii) on behalf of the Company, to select and purchase
appropriate equipment necessary for the project at a comparable price,
quality and specifications; (iii) to ship the equipment to Deyang or
such other destinations in the People's Republic of China where the
Company is engaged in business; and (iv) the cost incurred in
performing the aforementioned duties shall be paid by the Company.
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5. To train the technical personnel and employees of the Company at the
Company's cost.
6. To assist the Company, with the best effort, to promote its business.
7. Party B shall provide Party A with a Credit Certificate from an
investment bank within fifteen (15) days after signing this Contract
to show commitment to this Contract.
8. To assist with other matters that entrusted by the Company.
Article 7.4 Responsibilities of Both Parties The Parties shall be
mutually responsible for the following:
1. Making their respective contributions to the Company pursuant to
Article 6.3;
2. To use their best efforts and in good faith: (i) to ensure the
economic viability and profitability of the Company; (ii) to maximize
revenue of the Company by increasing the number of subscribers; and
(iii) protect the goodwill, the trademarks and patented and
non-patented technology of the Company from infringement;
3. To ensure that two (2) sets of books and records are kept in
accordance with the applicable accounting regulations of the People's
Republic of China. One set is in the Chinese language and another is
in the English language. Parallel Accounting Method shall be applied
for each set of books and records in RMB and US Dollars. All vouchers
are to be kept with the Chinese books;
4. No party shall mortgage, pledge or permit any liens on any property of
the Company without prior approval of the Parties and the written
approval of the Board of Directors;
5. Parties shall cooperate to each other, execute all Company documents
and take all necessary actions to achieve the objectives and goals of
the Company set forth in this Contract.
6. No party shall borrow from or lend money to or provide guarantee in
the name of the Company or establish any subsidiary of the Company
without prior approval of the Parties and the written approval of the
Board of Directors.
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CHAPTER 8
EQUIPMENT
Article 8.1 Purchase of Equipment
All equipment for the Company can be purchased either in domestic or
international market. If the Company needs to purchase from international
market, the Board of Directors of the Company shall make a decision to purchase
the equipment. The Company shall submit the equipment purchased from the
international market for inspection by the commodity inspection authority
pursuant to the "Law of the People's Republic of China on the Inspection of
Import and Export Commodities."
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CHAPTER 9
INCOME DISTRIBUTION
Article 9.1 Income Distribution
After the Company pays all taxes, fees and statutory duties as required by
applicable laws and regulations of the People's Republic of China, and allocates
the public reserve funds and public welfare funds and other relevant funds as
required by the "Company Law of the People's Republic of China "and other
regulations, the net income derived by the Company from providing Internet
technology services as contemplated hereunder shall be distributed as follows:
Party A Party B
Phase I (2001*-2005): 20% 80%
Phase II (2006-2010): 40% 60%
Phase III (2011-2015): 50% 50%
Phase III (2016-2020): 60% 40%
*Or the Effective Date which ever occurs earlier.
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CHAPTER 10
BOARD OF DIRECTORS
Article 10.1 Establishment of Board of Directors
The Board of Directors is the highest authority of the Company. The Board of
Directors of the Company shall come into existence on the Effective Date.
The Board of Directors shall have all the powers under the law to make decisions
concerning the business, management and other impotent matters of the Company.
The Board of Directors shall be consisted of seven (7) Directors. Three (3)
Directors of the Board shall be appointed by Party A and four (4) Directors of
the Board shall be appointed by Party B. The Chairman of the Board of Directors
shall be designated by Party A and the Vice Chairman of the Board of Directors
shall be designated by Party B. The term of office of the Chairman, Vice
Chairman and Director of the Board is three (3) years. The term of office may be
renewed if the Director is continuously appointed by their respective Parties.
The distribution of Directors shall be as follows:
Party A Party B
Phase I (2001*-2005): 3 4
Phase II (2006-2010): 3 4
Phase III (2011-2015): 4 3
Phase III (2016-2020): 4 3
*Or the Effective Date which ever occurs earlier.
The powers, procedures, requirements and other matters relating to the Board of
Directors are set out in the Articles of Incorporation. If there is a conflict,
the Articles of Incorporation shall prevail.
Article 10.2 Board of Directors and the Chairman
The Chairman of the Board of Directors is the legal representative of the
Company. The Chairman of the Board exercises powers authorized by the Articles
of Association, or to act as expressly authorized in writing by the Board of
Directors, or to sign the document that has legal power binding upon the
Company.
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Article 10.3 Meeting of the Board of Directors and its Quorum
The Board of Directors shall convene at least two meetings every year. At any
meeting, a quorum shall consist of at least four (4) Directors, of which not
less than one (1) Director is appointed by Party A and one (1) Director is
appointed by Party B, attending in person, by proxy or by telephone. A meeting
shall be called by the Chairman, or, if the Chairman is unable to call the
meeting, the Chairman shall delegate the Vice Chairman or another Director to
call and preside over the meeting.
The Chairman of the Board must call a meeting upon the request of any two
Directors. Board of Directors meeting shall be called upon fourteen (14) days
written notice (or upon a shorter notice if all Directors unanimously agree in
writing from time to time) to all Directors. The Board meeting can be held at
any jurisdiction approved by two thirds (2/3) majority of the Board of
Directors, provided that adequate facilities are available for electronic
participation.
Directors may be present and vote in person, by proxy or by telephone. The
Chairman and the Vice Chairman shall each have one vote. For matters which would
otherwise need to be approved at a meeting of the Board of Directors, in lieu of
a meeting of the Board of Directors, a written resolution may be adopted by the
Board of Directors if such resolution is sent to all members of the Board of
Directors signed and adopted by the number of Directors necessary to make such
decision as stipulated in this Contract and the Articles of Incorporation.
Notice of a Board meeting may be waived in writing at any time before or after
the meeting. A notice shall be deemed to be waived by attending the Board
meeting in person, by proxy or participating by telephone or video conference.
Article 10.4 Powers of the Board of Directors
The Board of Directors may exercise all of the powers belonging to the Company.
Except specifically stipulated in the Contract hereof. All actions taken by the
Board of Directors shall require approval by simple majority of the Directors at
the meeting at which a quorum is present. However, the following matters require
approval of two thirds (2/3) majority of the Board of Directors:
1. Annual and any interim production and operating plans, the annual and
any interim operating budget, including anticipated operating costs
and expenses, and annual and any interim financial statements of the
Company and any significant change to the aforementioned.
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2. Significant changes to the business scope or business plan of the
Company as stipulated in Articles 5.2 and 5.3 hereof;
3. Determining the salary and benefits for the General Manager, the
Deputy General Manager and the other Senior Officers of the Company
and any changes thereto;
4. The appointment and removal of the General Manager, Deputy General
Manager, and other Senior Officers of the Company;
5. Determining the scale of wages, benefits and allowances of the
employees of the Company and changes thereto;
6. The approval and amendment of the following:
(i) Any overdraw which is not included in the annual budget, single
contract which is equivalent to US$100,000 (one hundred thousand
US Dollars), any commitment or expenditure, or any other
contract, commitment or expenditure, which is not included in an
annual budget and by itself, or together with other contracts,
commitments or expenditure exceeds US$100,000 (one hundred
thousand US Dollars);
(ii) Any expenditure, contract or commitment approved in the annual
budget which exceeds the amount provided for in the budget by 10%
or any contract, commitment or expenditure approved in the annual
budget which exceeds an amount equivalent to US$300,000 (three
hundred thousand US Dollars)or any higher dollar amounts and any
higher percentage as the Board of Directors determines;
(iii)Any borrowing by the Company which would result in total debt of
the Company exceeds an amount equivalent to US$300,000 (three
hundred thousand US Dollars);or
(iv) The disposition, mortgage or transfer of fixed assets owned by
the Company with a value in excess an amount equivalent to
US$150,000 (one hundred and fifty thousand US Dollars).
7. The commencement or settlement of arbitration, litigation or
conciliation with any third party; and
8. The appointment of a team of liquidation and its members to conduct
the liquidation of the Company in accordance with Chapter 16 of this
Contract.
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Article 10.5 Matters Requiring Unanimous Approval of All Directors
The following matters shall require the unanimous approval of all Directors of
the Board:
1. Any modification of the Contract and the Articles of Incorporation;
2. Discontinuation or dissolution of the Company;
3. Increase, decrease or assignment of the registered capital of the
Company;
4. Pledge of assets of the Company;
5. Amalgamation with other economic organizations, splitting the Company,
or changing the organization of the Company.
Article 10.6 Minutes of the Board Meeting
The minutes of the Board meeting shall be confirmed and signed by the Directors
attending the meeting and shall be filed with the Company.
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CHAPTER 11
BUSINESS AND LABOR MANAGEMENT
Article 11.1 Management Office
The Company shall establish a management office, which shall be responsible for
its day-to-day operation and management. The management office shall have a
General Manager and a Deputy General Manager. The General Manager and Deputy
General Manager shall be appointed by the Board of Directors. The term of office
for the General Manager and Deputy General Manager is three (3) years. In Phase
I (2001*-2005), the General Manager shall be nominated by Party B and the Deputy
General Manager shall be nominated by Party A. A Director of the Board may be
appointed as the General Manager or the Deputy General Manager. In Phase II
(2006-2010), Phase III (2011-2015) and Phase IV, the General Manager and the
Deputy General Manager shall be appointed by public recruitment.
*Or the Effective Date which ever occurs earlier.
Article 11.2 General Manager and Deputy General Manager
The responsibility of the General Manager is to carry out the decisions of the
Board of Directors, and conduct the day-to-day management of the Company. The
Deputy General Manager shall assist the General Manager to conduct daily
operation of the Company.
Article 11.3 Powers of Board to Dismiss Corporate Officers
In case of graft or serious dereliction of duty on the part of the General
Manager or the Deputy General Manager, the Board of Directors shall have the
power to dismiss them at any time.
Article 11.4 Labor Management
Labor contract covering employment, dismissal, resignation, wages, welfare,
insurance, protection, discipline, rewards, penalty, and other matters
concerning the employees of the Company shall be drawn up between the Company
and the Trade Union of the Company as a whole or individual employee in
accordance with the laws and regulations of the People's Republic of China and
the City of Deyang on labor management. The labor contracts, after being signed,
shall be filed with the Deyang Labor Bureau for record.
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Article 11.5 Senior Officers
The appointment of senior Officers who are recommended by the Parties, their
salaries, social insurance, welfare and their standard of traveling expenses
etc. shall be decided by the Board of Directors with reference to the trade
standard in Deyang.
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CHAPTER 12
CONFIDENTIALITY
Article 12.1 Confidentiality
No Party to this Contract shall, nor shall it permit any of its employees or the
employees of the Company to, divulge to any person any technical or commercial
secrets concerning execution of the business of the Company during the term of
the cooperation. The confidentiality shall remain for a period of twenty (20)
years from signing of this Contract.
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CHAPTER 13
TAXES, FINANCE, AUDIT, STATISTICS AND ENVIRORNMENTAL PROTECTION
Article 13.1 Taxation
The Company shall pay taxes in accordance with the laws and regulations of the
People's Republic of China.
Article 13.2 Income Tax
All employees of the Company shall pay individual income tax in accordance with
the "Law of the People's Republic of China on Individual Income Tax."
Article 13.3 Funds
Allocations for public reserve funds, Company expansion funds, public welfare
funds and bonus for employees shall be set aside in accordance with the "Company
Law of the People's Republic of China "and other relevant laws and regulations
of the People's Republic of China and the City of Deyang. The annual proportions
of allocation shall be determined by the Board of Directors pursuant to the
legal requirements and the business situation of the Company.
Article 13.4 Accounting
The financial affairs and accounting of the Company shall be carried out in
accordance with the applicable accounting principle and financial management
rules of the Ministry of Finance of the People's Republic of China and the City
of Deyang. The accounting system of the Company shall be filed for record at the
Bureau of Finance and Taxation in the City of Deyang and be supervised by the
relevant authorities of the City.
Article 13.5 Auditing
Financial auditing and examination of the Company shall be conducted by an
accounting firm registered in China and the auditor's report shall be submitted
to the Board of Directors and the General Manager. The Parties to the Contract
have the right to engage, on their own, an registered auditor in China to audit
the Company's books.
Article 13.6 Reports
The monthly reports, quarterly reports and annual reports including Balance
Sheet, Profit and Loss Statement and Cash Flow Statement shall be submitted to
the relevant authorities in accordance with the regulations of the People's
Republic of China.
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Article 13.7 Environment
The Company shall commit to bear the responsibility of protecting the
environment in accordance with the "Law of the People's Republic of China on
Environment Protection".
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CHAPTER 14
MAMAGMENT OF FOREIGN CURRENCY
Article 14.1 Foreign Currency
All matters concerning foreign currency and foreign exchange shall be managed in
accordance with the "Regulations of the People's Republic of China on Foreign
Exchange Control."
Article 14.2 Balance of Foreign Currency Reserve
The Company shall maintain a balance of foreign currency reserve. Any debt
incurred or guarantee made as the terms and conditions of this cooperation by
either Party shall be settled by the respective Party, not by the Company.
Article 14.3 Remittance Foreign Currency
All profits, income and funds after liquidation of Party B shall be entitled to
be remitted to outside China in accordance with relevant regulations on foreign
exchange control of China.
Article 14.4 Remittance of Employment Income of Foreign Personnel and
Expatriates The employment income and other legitimate income of foreign and
expatriate personnel in the Company shall be entitled to remit their employment
income and other legitimate income to outside China after paying relevant tax
and deducting expenses incurred in China.
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CHAPTER 15
DURATION OF THE CONTRACT
Article 15.1 Duration
The duration of the Contract is twenty (20) years. The establishment of the
Company shall start from the date on which the relevant approvals are obtained.
An application for the extension of the Contract, proposed by one Party and
unanimously agreed by the Parties , shall be submitted to the approval
authorities one hundred and eighty (180) days prior to the expiry date of the
Contract.
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CHAPTER 16
THE DISPOSAL OF ASSETS AFTER
EXPIRATION OF THE CONTRACT OR DISOLUTION OF THE COMPANY
Article 16.1 Committee of Liquidation
Upon expiration of this Contract, the Company 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 16.2 Assets Distribution
Upon early termination or expiration of this Contract, the Company'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:
(1) All Company's fixed assets and capital shall be turned to Party A upon
the expiration of the Contract;
(2) Upon early termination of the Contract, after paying in full of the
debts of the Company, the Liquidation Committee shall distribute the
remaining assets ( except the ownership and the right of use of the
Network) in accordance with the profit distribution ratios stipulated
in Article 9.1 hereto as of the liquidation date. After the
liquidation, Part A has the pre-emptive right to purchase the
remaining equipment.
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CHAPTER 17
INSURANCE
Article 17.1 Insurance
The Company shall purchase insurance policies from an underwriter of the
People's Republic of China. The type, value and duration of the policies shall
be determined by the Board of Directors in accordance with the regulations of
the People's Republic of China.
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CHAPTER 18
MODIFICATION AND
TERMINATION OF THE CONTRACT
Article 18.1 Modification
The modification of the Contract and the Articles of Incorporation, any increase
or decrease of the registered capital, pledge of the corporate assets, merge or
split of the Company, discontinuation or dissolution of the Company,
amalgamation with other economic organization or any other important matters
shall be unanimously agreed by all Directors present at the Board meeting. The
agreement signed by both Parties can be effective only after it is approved by
the original examination and approval authority.
Article 18.2 Early Termination
If the Company 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 and obtaining approvals from the original
examination and approval authorities. If the Board of Directors can not reach an
agreement on this matter, the Parties shall have the right to refer the dispute
to Arbitration.
Article 18.3 Termination
If the Company 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 after
approved by the original approval authority as well as to claim damages. If the
Parties agree to continue to operate the Company, the Party that failed to
perform the obligations under the Contract shall be liable for the losses thus
caused to the Company.
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CHAPTER 19
LIABILITIES FOR BREACHING OF CONTRACT
Article 19.1 Failure to Contribute Capital or to provide Terms and
Conditions of the Cooperation
If a Party fails to contribute on schedule the capital contributions or to
provide the cooperative conditions it is required to provide under Article 6.3
of this Contract, the Party shall be liable for breaching the Contract and pay
the other Party in cash in an amount equal to 0.04% per day of the value of the
registered capital, for each day following the date when such cooperative
condition should have been, but was not provided. If the breaching Party fails
to remedy such material breach within ninety (90) days after receiving a written
notice of breach from the other Party, the breaching Party shall pay a penalty
to the other Party in an amount equal to 4.5% of the value of the registered
capital. 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
breaching Party.
Article 19.2 Breaching of Contract by Fault
If a Party is in fault and fails to perform the obligations of the Contract and
its appendices, the Party in fault shall bear the responsibilities thus caused.
The breaching Party shall take action to remedy such material breach within
thirty (30) days after notice in writing from the other Party. Should it be the
fault of both Parties, each of the Parties shall bear their respective
responsibilities and losses, based on their specific circumstances.
33
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CHAPTER 20
FORCE MAJEURE
Article 20.1 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 terminate the Contract, or to execute the part of obligations for
implementation of the Contract ,or whether to delay the performance of the
Contract or 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.
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CHAPTER 21
APPLICABLE LAW
Article 21.1 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.
Article 21.2
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 as set out in
Article 5.1, 5.2 and 5.3 of this Contract, 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.
Article 21.3
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 Company to remove or mitigate
such material adverse effect as soon as possible and to the greatest extent
possible.
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CHAPTER 22
SETTLEMENT OF DISPUTES
Article 22.1 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 22.2 Arbitration
1. Any dispute arising out of or in connection with this Contract,
including any question regarding its existence, validity or
termination or as to rights or obligations of the Parties hereunder
which is not settled by friendly consultation pursuant to Article 24.1
shall be referred to and finally resolved by arbitration in Stockholm
in accordance with the Arbitration Rules of the Stockholm
International Arbitration Centre (the " SIAC Rules") for the time
being in force which rules are deemed to be incorporated by reference
into this Article.
2. The tribunal shall consist of one arbitrator to be jointly appointed
by the Parties. If the Parties are unable to agree upon the
appointment of the arbitrator within 30 days, then the arbitrator
shall be appointed in accordance with the SIAC Rules.
3. The Chinese and English languages shall both be used in the arbitral
proceedings. Unless otherwise agreed by the Parties, all hearing
materials, statements of claim or defense, award and the reasons
supporting it shall be written in both Chinese and English languages.
4. To the extent this Article is deemed to be a separate agreement
independent from this Contract, Article 24.4 concerning notices are
incorporated herein by reference.
Article 22.3 Operation of the Company
Pending for the resolution of any dispute or difference submitted to the legal
representatives of the Parties pursuant to Article 22.1 or to arbitration
pursuant to Article 22.2, the Company shall continue to conduct its business
activities in accordance with the business plans of the Company then in effect.
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CHAPTER 23
LANGUAGE
Article 23.1 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.
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CHAPTER 24
EFFECTIVENESS OF THE CONTRACT
AND MISCELLANEOUS
Article 24.1 Appendices
The appendices (including the Articles of Incorporation)drawn up in accordance
with the principles of this Contract are an integral part of this Contract.
Article 24.2 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 24.3 Effective Date
This Contract and its appendices shall come into force on the date of approval
by the relevant approval authorities of the Government. This approval date shall
be the Effective Date.
Article 24.4 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 24.5 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 24.6 Original Copies
This Contract is executed in Chinese and English versions and in six (6)
original counterparts each of which shall have equal effect in law. Each Party
shall keep one (1) copy of the original Contract.
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IN WITNESS WHEREOF, the Parties hereto have signed this Contract as of November
25, 2000.
Party A: Party B:
Deyang Guangshi Network Big Sky Network Canada
Ltd.
Development Ltd. [Chinese Characters Appear Here]
[Chinese Characters Appear Here]
[Chinese Characters Appear Here]
Legal Representative Authorized Representative
------------------------ ------------------------
Jinan Zhou [Chinese Characters Appear Here] Daming Yang
Chairman President
[Seal] [Seal]
39