Contractual Joint Venture Contract for Sichuan Huayu Big Sky Network Ltd. - Chengdu Huanyu Information Industry Co. Ltd. and Big Sky Network Canada Ltd.
CONTRACTUAL JOINT VENTURE CONTRACT
FOR
SICHUAN HUAYU BIG SKY NETWORK LTD.
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PRELIMINARY STATEMENTS
In accordance with the " Law of the People's Republic of China on Chinese
Foreign Contractual Joint Ventures" and other relevant Chinese laws and
regulations of Chengdu, Chengdu Huanyu Information Industry Co., Ltd. and Big
Sky Network Canada Ltd., adhering to the principle of equality and mutual
benefits, spirit of friendship and cooperation, agreed to jointly set up a
Contractual Joint Venture to manage the project at Chengdu, Sichuan Province,
the People's Republic of China. The Contract hereunder is concluded by both
parties on July 8, 2000.
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CHAPTER 1
GENERAL PROVISIONS
ARTICLE 1.1 DEFINITIONS
In the Contract (as hereinafter defined) the following words and expressions
shall have the meanings hereby assigned to them, except where the context
otherwise requires:
1. "Approval Authority" means the Chengdu Municipal Government and its
functional departments.
2. "Articles of Association" means the "Articles of Association for Sichuan
Huayu Big Sky Network Ltd.
3. "Board of Directors" means the Board of Directors of the Company.
4. "Business License" means the business license of the Company issued by the
State Administration for Industry and Commerce.
5. "Company" means Sichuan Huayu Big Sky Network Ltd.
6. "Contract" means this Contractual Joint Venture Contract For Sichuan Huayu
Big Sky Network Ltd.
7. "Effective Date" means the date on which the approval documents of this
Contract is issued by the Approval Authority.
8. "Parties" means Party A (Chengdu Huayu Information Industry Co., Ltd.,
[Chinese Characters Appear Here] and Party B (Big Sky Network Canada Ltd.).
9. "RMB" means the currency of the People's Republic of China.
10. "Foreign Currency" means the currencies of foreign countries (including
paper money) and foreign payment orders (including commercial instruments
and bank deposit certificates, etc.).
11. "Senior Officers" means the members of the Directors of Board, the General
Manager, the Deputy General Manager, the Chief Engineer and the Chief
Accountant.
12. "ITSP" means the Internet Technology Service Provider.
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CHAPTER 2
PARTIES OF THE CONTRACTUAL JOINT VENTURE
ARTICLE 2.1 JOINT VENTURE PARTIES
Parties to this Contract are as follows:
Party A: Chengdu Huayu Information Industry Co., Ltd. [Chinese Characters Appear
Here] " hereinafter referred to as Party A).
Registration Place: Chengdu, The People's Republic of China
Legal Address: 14F, Jinyu Building, 191, Section Bei Si, Yihuan
Road., Chengdu, Sichuan, the People's Republic of China
Legal Representative:
Name:Wang Yuan Lin
Position: Chairman
Nationality: Chinese
Telephone: 86-28-3372468
Fax: 86-28-3315758
Party B: Big Sky Network Canada Ltd. [Chinese Characters Appear Here],
hereinafter referred to as Party B).
Registration Place: British Virgin Islands
Legal Address: 2080, 440 2nd Ave., SW, Calgary, Alberta, Canada
Legal Representative:
Name: Matthew Heysel
Position: Chairman
Nationality: Canadian
Telephone: 1-403-708-5962
Fax: 1-403-708-0823
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CHAPTER 3
REPRESENTATIONS AND WARRANTIES
ARTICLE 3.1 REPRESENTATIONS AND WARRANTIES BY PARTY A.
Party A hereby represents and warranties as of the date hereof as follows:
1. Party A is a company duly organized and validly existing with the status of
a legal person 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 resolution, (iii) do not
contravene its Articles of Association and (iv) do not contravene any law
or contractual restriction binding on or affecting part A.
3. Party A owns and controls Huayu HFC network and its entire software and
hardware platform, and the rights to use the Facilities ("the Facilities")
and equipment for the data transmission and Internet related business in
Chengdu area.
4. Party A ensures to hire the Company as its exclusive Internet Technology
Service Provider ("ITSP") in Chengdu area during the life of the Company.
Party A promises not to appoint other companies located either in Chengdu
or outside China for the purpose of offering the above-mentioned services
to Party A without the written consent of the Company.
5. Party A understands and promises to be held responsible for the prohibition
of business strife in bad faith and Party A shall ensure the Joint Venture
all relevant permission and approvals (including approval for Internet
business operation) by the relevant government authorities. Party A ensures
not to permit and transfer its ownership, operating rights to use the said
network Facilities and equipment to any third party without a written
permission from the Company.
6. All authorizations, consents or approvals or actions by, and all notices to
or filings with, any governmental authority required for the due execution
and performance by Party A of this
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Contract have been obtained, except for the approval of this Contract by
the Approval Authority.
7. Subject to the approval of this Contract and its appendices by the
relevant Authority, this Contract is the legal, valid and binding
obligation of Party A, enforceable against Party A in accordance with its
terms.
ARTICLE 3.2 REPRESENTATIONS AND WARRANTIES BY PARTY B.
PARTY B hereby represents and warranties as of the date hereof as follows:
1. Party B is a corporation duly incorporated, validly existing and in good
standing 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 Association and (iv) do not contravene any
law or contractual restriction binding on or affecting Party B.
3. The investment funds and equipment, contribution manners and time
arrangement stipulated in the Contract shall be observed Party B to
guarantee operation of the project.
4. All authorization, consent or approval or other action by, and notice to or
filng with, any governmental authority is required for the due execution,
delivery and performance by Party B of this Contract and its appendices,
except for the approval of this Contract by the Approval Authority.
5. Subject to the approval of this Contract and its appendices by the Approval
Authority, this Contract is the legal, valid and binding obligation of
Party B, enforceable against Party B in accordance with its terms.
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CHAPTER 4
ESTABLISHMENT OF THE CONTRACTUAL
JOINT VENTURE COMPANY
ARTICLE 4.1 ESTABLISHMENT OF THE COMPANY.
The Company shall be established as a limited liability Contractual Joint
Venture company in accordance with the Law of the People's Republic of China on
Chinese Foreign Contractual Joint Ventures and other relevant Chinese laws and
regulations, and after completion of the Feasibility Study.
ARTICLE 4.2 THE NAME AND LEGAL ADDRESS OF THE COMPANY
1. The Name of the Company in Chinese is: [Chinese Characters Appear Here]
(hereinafter referred to as the "Company").
2. The name of the Company in English is: Sichuan Huayu Big Sky Network Ltd.
3. Registration. Place: Chengdu, Sichuan Province, the People's Republic of
China.
4. Legal Address: 2 Gulou North 3rd Street, Chengdu, Sichuan, the People's
Republic of China.
ARTICLE 4.3 LAW OF THE PEOPLE'S REPUBLIC OF CHINA
The Company is a Contractual Joint Venture registered in Chengdu, approved by
the authorities of the Government of Chengdu. As a legal entity, the Company
shall follow 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
pertinent rules and regulations of the People's Republic of China.
ARTICLE 4.4 LIMITED LIABILITY
The Company is a limited liability company. The funds or /and cooperative
conditions and terms provided by both Parties of the Company shall constitute
part of the property of the Company. The Company shall be responsible for its
own liability and under all its own assets. Both Parties of the Company have
reached consensus in the Contract on the following: the terms and conditions of
the
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cooperation and investment, profit distribution, manner of the business
management anal operation, and asset distribution on termination of the
Contract.
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CHAPTER 5
OBJECTIVE AND SCOPE OF BUSINESS
ARTICLE 5.1 PURPOSE
The objective of the Company is using Huayu's HFC network to develop an
advanced broadband software and hardware platform for data transmission and
Internet related business in Chengdu 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 favourable
economic results and ensure a satisfactory rate of return for the Parties.
ARTICLE 5.2 SCOPE OF BUSINESS
The business scope of the Company shall include: to provide a software and
hardware platform for broadband data transmission network, data transmission and
network value-added business, information network services, related development
of software applications, technical consulting and training services.
ARTICLE 5.3 BUSINESS ACTIVITIES
The Company and Party A shall jointly provide Internet access services to
customers as follows:
1. The Company shall purchase and install multi-user modems and related
equipment to connect the computers or other equipment of customers to Party A's
network.
2. Customers who desire to obtain Internet access will be required to pay an
installation and monthly maintenance fee (including monthly equipment fee and
the Internet access .fee payable to Party A for being permitted to connect to
the Internet through Party A's network).
3. After collecting the above said fees from customers and paying an
interconnection provider the inter-connection charges, Party A and Party B will
share the profits in accordance with Article 9.1 of the Contract.
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CHAPTER 6
TOTAL AMOUNT OF INVESTMENT AND REGISTERED
CAPITAL AND OTHERS
ARTICLE 6.1 TOTAL INVESTMENT
1. The total amount of investment in the Company shall be US$5,500,000(say US
Dollars five million five hundred thousand).
2. The unit of currency for the total investment, registered capital and
contributions shall be the U.S. dollar. The exchange rate used shall be the
average exchange rate announced by the China State Administration of
Exchange Control for U.S. dollars and RMB for the date on which the
respective capital contributions are made.
3. All capital contributions in cash shall be made to the account of the
Company at the office of an authorized bank in Chengdu or, if approved by
the appropriate PRC authorities pursuant to the relevant foreign exchange
control regulations,to a bank designated by the Company outside of the PRC.
4. All capital contributions to the Company, whether in cash or kind, shall be
for the exclusive use of the Company.
ARTICLE 6.2 REGISTERED CAPITAL.
1. The registered capital shall be US$2,250,000(say US Dollars two million and
two hundred and fifty thousand) including cash and equipment. The purchase
of the said equipment should be in accordance with CHAPTER 8 of the
Contract.
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.
Party B shall be assisting fund raising for the new business development.
It needs to be approved by the Approval Authority of the government.
ARTICLE 6.3 TERMS AND CONDITIONS
The terms and conditions provided by both Parties are as follows:
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1.By Party A: Huayu's software and hardware data transmission platform on its
HFC network and the rights to use all its Facilities and equipment for the high
speed Internet access, data transmission and network value-added business.
2.By Party B:
Total cash and equipment investment required by the project to a maximum of
US$5,500,000(including cash and equipment). Registered capital shall be
US$2,250,000. The purchase of the said equipment should be in accordance with
CHAPTER 8 of the Contract.
3.CONTRIBUTION MANNERS
The contribution stipulated in the Contract shall be made in accordance with the
following manner:
(1)Party A shall obtain all regulatory approvals that the Company may
require in order to conduct its business within fifteen (15) days after
the issuing date of the Business License and Party B shall be satisfied
of these approvals by obtaining a legal opinion from Chinese counsel
selected by Party B. If all relevant approvals are not obtained by Party
A within fifteen (15) days after the issuance of the Business License
due to the government policy and delay, Party A shall not be considered
to be in breach of the Contract. Should approvals not be obtained by
Party A, both Parties shall mutually agree on an appropriate extension
to obtain the relevant approvals.
(2)The initial capital contribution of US$500,000 shall be made by Party B
within thirty (30) days after all approval of relevant Approval
Authorities.
(3)All the remaining registered capital and other investment shall be made
based on the Company's operation plan and investment plan as per the
relevant provisions of China.
(4)Party A shall provide the Company with the terms and conditions of
cooperation stipulated in ARTICLE 6.3 of this Contract within fifteen
(15) days after the issuance of the Business License.
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4.During the cooperation, both Parties shall not withdraw any registered capital
or vary the terms and conditions of cooperation upon which the Parties have
mutually agreed.
ARTICLE 6.4 VERIFICATION OF CAPITAL CONTRIBUTIONS AND TERMS
1. A reputable international accounting firm registered in China shall be
engaged by the Company to verify the contributions of Party B and provide a
certificate of verification. The Company, upon the receipt of a
satisfactory certificate of verification, 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 conclusive 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 and the seal of
the Company is affixed thereon.
2. A law firm registered in China shall be retained by the Company to verify
the contributions of Party A and provide a certifcate of verification. The
Company, upon the receipt of a satisfactory certificate of verification,
shall issue a Certificate of Contribution to each Party. The Certificate of
Contribution shall include the following items: the name of the Company,
the date of establishment, the names of the Parties and their respective
contributions, the date on which Party A's contributions were made, and the
date of issuance of the Certificate of Contribution. The Certificate of
Contribution shall be the conclusive evidence of Party A's contribution to
the Company. The Certificate of Contribution shall be effective when signed
by the Chairman and Vice Chairman and the seal of the Company
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is affixed thereon
Article 6.5 TRANSFER OF INTEREST, RIGHTS AND OBLIGATIONS
1. In case either party to the Contract intends to assign all or part of its
interest, rights and obligations to a third party, a written consent shall
be obtained from the other party (the Non-Transferring Party). Approvals
with regard to the said transfer is required from the examination and
Approval Authority. The application for the said transfer shall be
registered with the State Administration for Industry and Commerce within
one (1) month after the approval from relevant Approval Authority.
2. If a party (the "Transferring Party") desires to transfer all or part of
its interest rights and obligations to any third party other than a
subsidiary of the Party, the Transferring Party shall secure a binding
written offer from such third party (the "Third Party Offer") to purchase
some or all of its interest, rights and obligations and the other Party to
this Contract (the "Non-Transferring Party") shall have an option,
exercisable within fifteen (15) days of the Third Party Offer, to purchase
the Transferring Party's interest, rights and obligations in the Company as
specified in this Article on the same terms and conditions as the Third
Party Offer. Such option shall be exercised by the Non-Transferring Party
giving a written notice to the Transferring Party of its exercise of such
option.
3. If any Non-Transferring Party exercises its option within the fifteen (15)
day period to purchase the Transferring Party's interest, rights and
obligations in the Company, the Transferring Party's Interest shall be sold
to such Non-Transferring Party on the same terms and conditions as the
Third Party Offer.
4. If the Non-Transferring Party does not exercise its option within the
fifteen (15) day period, the Transferring Party may, subject to obtaining
the prior written consent of such Non-Transferring Party (which consent
shall not be
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unreasonably withheld) and the unanimous approval of the Board of Directors
(and the Non-Transferring Party hereby agrees to cause the members of the
Board of Directors designated by it to approve such transfer), transfer the
transferring Party's interest to such third party.
5. Notwithstanding the foregoing but subject to any required approval from the
Approval Authority, a Party may transfer all or any part of its respective
interest, rights and obligations in the Company to any Subsidiary upon
notification to the other Party. With respect to any such transfer to a
Subsidiary, such other Party hereby agrees to any such transfer and waives
any first right of refusal with respect to such transfer. The Parties to
the Contract also agrees that the option to purchase shall not apply to
such transfer or assignment. When such transfer or assignment has been
completed, the Transferring Party shall release from the Contract as per
the provisions of the Contract and the Articles of Association. The
Subsidiary shall be a new party to the Contract.
6. Any sale, assignment or transfer of a Party's interest, rights and
obligations in the Company under this Article shall not become effective
until all necessary approvals have been obtained. Upon receipt of such
approvals, the Parties shall cause the Company to cancel the then
outstanding Certificates of Capital Contribution and to issue a new
Certificate of Capital Contribution to reflect the new ownership and to
register the change in ownership with the relevant office of the State
Administration of Industry and Commerce. The Parties shall also amend this
Contract, if required, to reflect the admission of a new party to this
Contract.
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CHAPTER 7
RESPONSIBILITIES OF EACH PARTY TO THE
CONTRACTUAL JOINT VENTURE
ARTICLE 7.1 RESPONSIBILITIES OF BOTH PARTIES
The Parties shall be respectively responsible for performing their obligations
contained in Article 7.2, 7.3 and 7.4 in a timely and effective fashion, The
Parties agree that the cost involved in performing the following obligations
will be paid by the Company except to the extent that any such cost is
specifically included as part of a Party's capital contribution to the
registered capital of the Company.
ARTICLE 7.2 RESPONSIBILITIES OF PARTY A:
1. Handling applications for approval, registration, business license and
other matters concerning the establishment of the Company from relevant
Approval Authorities in Chengdu;
2. Assisting the Company with any matters involving PRC governmental
departments or agencies;
3. Use its best efforts to assist the Company in obtaining satisfactory
network access for public use or other telecommunications services;
4. Assisting the Company in the submission of applications for, and obtaining
of, all necessary approvals, permits, certificates and licenses required to
conduct Company's business;
5. Assisting the Company in applying for and obtaining the maximum benefit of
all permitted reductions in, or exemptions from, PRC income tax including
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 or may in the
future become entitled;
6. Assisting Party B in obtaining from the appropriate PRC authorities all
necessary licenses and foreign exchange approvals to permit the
repatriation out of China of all profits, dividends, return of capital,
proceeds of liquidation, after the
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payment of applicable PRC income tax, if any;
7. Processing for applying the right to the use of a site as an office space
of the Company;
8. Assisting the Company in purchasing or leasing necessary equipment,
materials, articles for office use, means of transportation and
communication facilities, etc;
9. Assisting the Company in contacting and settling the fundamental facilities
for business operation such as water, etectricity, transportation, etc.
10. Assisting the Company in recruiting Chinese management and technical
personnel, workers and other personnel required.
11. Assisting expatriate personnel in applying for Temporary Residential Card,
entrance visa and work permit and handle their traveling matters.
12. Providing convenience for Party B in controlling the implementation of
investment.
13. Providing Party B with a certificate of integrity of Party A's ownership of
the said network stipulated in ARTICLE 6.3 to guarantee the implementation
of the Contract and the Articles of Association within fifteen (15) days
after signing this Contract.
14. Responsible for handling other matters entrusted by the Company.
ARTICLE 7.3 REPONSIBILITIES OF PARTY B:
1. Assisting Party A to handle applications for approval, registration,
business license and other matters concerning the establishment of the
Company from relevant approval authorities in China;
2. Assisting the Company in the development of (i) its financial planning and
reporting systems, and (ii) its utilizing advanced scientific management
systems;
3. Assisting the Company with any matters involving PRC governmental
departments or agencies;
4. As entrusted by the Company, (i) selecting technology, components, software
and other related materials unavailable
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in the PRC from abroad, (ii) selecting appropriate equipment necessary to
establish the computer network system, at a comparable price for comparable
quality and specifications, to be obtained abroad on behalf of the Company,
and (iii) shipping the foregoing to Chengdu or such other destinations in
the PRC in which the Company is engaged in business;and (iv)the cost
incurred in performing the above said matters shall be borne by the
Company.
5. Training the technical personnel and employees of the Company (details in
ARTICLES OF ASSOCIATION).
6. Assisting the Company in promoting its business with the best marketing
efforts.
7. Party B shall provide Party A with the Letter of Comfort from an investment
bank within fifteen (15) days after signing this Contract to show
commitment to the Contract.
8. Assisting the Company with other matters entrusted by the Company.
ARTICLE 7.4 RESPONSIBILITIES OF BOTH PARTIES.
Each Party shall be responsible for the following:
1. Making their respective contributions to the Company pursuant to ARTICLE
6.3;
2. To use their best efforts in good faith to (i) ensure the economic
viability and profitability of the Company, (ii) maximize revenue of the
Company by increasing the number of users of the Company's network, and
(iii) protect the goodwill and the trademarks of the Company from
infringement;
3. Ensuring 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 accounts for each set of books and records in RMB and US dollars
and 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 the prior written approval
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of the Board of Directors;
5. Parties shall cooperate to each other, execute all documents, take all
necessary actions, in order to achieve the purpose and goals of the Company
set forth in this Contract.
6. No party shall borrow or lend money or provide guarantee in the name of
the Company or establish any subsidiary of the Company without the approval
of the Board of Directors.
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CHAPTER 8
EQUIPMENT
ARTICLE 8.1 PURCHASE OF EQUIPMENT
All equipments for the Company can be purchased in either domestic or
international market. The Company shall give priority to suppliers of the
People's Republic of China whenever the equipment from such suppliers are
competitive with like imported items in pricing, delivery time, technical
specifications, quality of product, international credit, and reputation and
other material terms. If the Company needs to purchase from international
market, the Board of the Company shall make a decision to purchase the
equipment. The Company shall submit the equipments purchased from the
international market for inspection by the PRC's commodity inspection authority
pursuant to the "Law of Import and Export Commodity Inspection of the People's
Republic of China." The Parties shall agree further upon the details of the
purchase of equipments contributed by Part B as part of the registered capital.
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CHAPTER 9
PROFIT DISTRIBUTION
ARTICLE 9.1 DISTRIBUTION OF PROFITS
After the Company pays all taxes, fees and statutory duties as required by
applicable law and regulations of PRC, 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 profits shall
be distributed as follows:
Party A Party B
Phase I (2001*-2007): 35% 65%
Phase II (2008-2013): 50% 50%
Phase III (2014-2020): 65% 35%
*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 organ of 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 and responsibility under the
law to policy decisions concerning the management of the business and affairs of
the Company.
The Board of Directors shall be consisted of seven (7) Directors. Three (3)
Directors shall be appointed by Party A and four (4) Directors shall be
appointed by Party B. The Chairman of the Board shall be designated by Party A
and the Vice Chairman of the Board shall be designated by Party B. The term of
office of a Director, Chairman and Vice Chairman is three (3) years. The term of
office may be renewed if continuously appointed by the respective Parties. The
distribution of Directors shall be as follows:
Party A Party B
Phase I (2001*-2007): 3 4
Phase II (2008-20013): 4 3
Phase III (2014-2020): 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 Association.
ARTICLE 10.2 BOARD OF DIRECTORS AND CHAIRMAN
The Chairman of the Board of Directors is the legal representative of the
Company and may exercise powers authorized by the Articles of Association., or
act as expressly authorized in writing by the Board of Directors, or sign the
documents binding upon the Company.
ARTICLE 10.3 QUORUM; MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors shall convene at least two meetings every
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year. At any meeting, a quorum shall consist of at least four (4) Directors of
which can not be less than one (1) Director is appointed by Party A, 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 must call a meeting upon the proposal of any two Directors. Board
of Director meeting shall be called upon fourteen (14) day's prior 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, by two
thirds (2/3) majority of the Board, at any jurisdiction approved by 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 a
decision as stipulated in this Contract and the Articles of Association. 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 by TV.
ARTICLE 10.4 BOARD APPROVAL REQUIREMENTS.
The Board of Directors shall have rights to exercise all of the powers belonging
to the Company. Except specifically stated in the Contract hereof, all action
taken by the Board of Directors shall require approval by simple majority of the
Directors at the meeting at which a quorum is present and in which at least one
Director appointed by Party A votes with the majority. In particular, the
following matters
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require approval of two thirds (2/3) majority of the Board:
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 above mentioned.
2. Significant changes to the business scope stipulated in ARTICLE 5.2;
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,
the Chief Financial Officer 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 (i) any contract, commitment or expenditure
which is not included in an annual budget and which by itself, or together
with other contracts, commitments or expenditure which are not included in
the budget, exceeds an equivalent amount in U.S. Dollars of US$100,000 (say
US Dollars one hundred thousand) or (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 equivalent amount of U.S.
Dollars of US$300,000 (say US Dollars three hundred thousand)or such higher
dollar amounts and such higher percentage as the Board of Directors shall
determine or (iii) any borrowing by the Company which would result in total
debt of the Company exceeding the equivalent amount of US$300,000 (say US
Dollars three hundred thousand)or (iv) the disposition, mortgage or
transfer of fixed assets owned by the Company with a value in excess of
US$150,000(say US Dollars one hundred and fifty thousand);
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7 The commencement or settlement of arbitration, litigation or conciliation
with any third party; and
8. The appointment of a liquidation team and its members to conduct the
liquidation of the Company pursuant to Chapter 16.
ARTICLE 10.5 MINUTES OF THE BOARD MEETING
The minutes of the Board meeting shall be confirmed and signed by the Directors
attending the meeting and to be filed with the Company.
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CHAPTER II
BUSINESS MANAGEMENT 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, nominated by Party B; a Deputy General Manager, nominated by
Party A. The General Manager and Deputy General Manager shall be appointed by
the Board of Directors whose terms of office is three (3) years. 1n Phase I
(2001*-2007), 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 General Manager or Deputy General Manager. In Phase II (2008-2013)
and Phase III (2014-2020), the General Manager shall be hired by public
recruitment.
*Or the Fffective Date which ever occurs earlier.
ARTICLE 11.2 GENERAL MANAGER AND DEPUTY GGENERAL MANAGER
The responsibility of the General Manager is to carry out the decisions of the
Board, and conduct the day-to-day management of the Company. The Deputy General
Manager shall assist the General Manager in his work. The General Manager must
consult with the Deputy General Manager concerning handling major issues in the
Company.
ARTICLE 11.3 POWER OF BOARD TO DISMISS 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 LABOUR MANAGEMENT
Labor contract covering the recruitment, employment, dismissal and resignation,
wages, welfare, labor protection and insurance, labor
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discipline, rewards, penalty and other matters concerning the staff and workers
of the Company shall be drawn up between the Company and the Trade Union of the
Company as a whole or individual employees in accordance with the "Regulations
of the People's Republic of China on Labor Management in Chinese-Foreign
Contractual Joint Ventures and its Implementation Rules" and regulations of
Sichuan. The labor contracts shall, after being signed, be filed with the
Chengdu Labor Bureau for the procedures of employment.
ARTICLE 11.5 SENIOR OFFICERS
The appointment of senior officers who are recommended by both Parties, their
salaries, social insurance, welfare and the standard of traveling expenses etc.
shall be decided by the Board of Directors with reference to the trade standard
in Chengdu.
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CHAPTER 12
CONFIDENTIALITY
Article 12.1 Confidentiality
No Party in this Contract shall, nor shall, it permit any of its employecs 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 cooperation period. The confidentiality shall remain for a period of twenty
(20) years from signing this Contract to termination of this Contract.
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CHAPTER 13
TAXES, FINANCE, AUDIT, STATISTICS AND
ENVIRORNMENT MENTAL PROTECTION
ARTICLE 13.1 TAXATION
The Company shall pay taxes in accordance with the stipulations of Chinese laws
and other relevant regulations.
ARTICLE 13.2 INCOME TAX
All employees of the Company shall pay individual income tax, according to the
"Individual Income Tax Law of the People's Republic of China."
ARTICLE 13.3 FUNDS
Allocations for public reserve funds, for expansion funds of the Company and
public welfare funds and bonus for employees shall be set aside in accordance
with stipulations in the "Company Law of the People's Republic of China "and
"Law of the People's Republic of China on Chinese Foreign Contractual Joint
Ventures" and regulations of the Chengdu city. The annual proportion of
allocations shall be decided by the Board of Directors as per the laws and
regulations and in accordance with the business situation of the Company.
ARTICLE 13.4 ACCOUNTING
The financial affairs and accounting of the Company shall be handled in
accordance with the applicable accounting system and financial, management
regulations of the Financial Ministry of the People's Republic of China and the
Chengdu City. The accounting system of the Company shall be filed for the record
at the Financial Bureau and Taxation in Chengdu and reviewed by relevant
authorities with respect to finance, tax and audit.
ARTICLE 13.5 AUDITING
Financial auditing and examination of the Company shall be conducted by an
accounting firm registered in China and reports shall
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be submitted to the Board of Directors and the General Manager. Both Parties to
the Company have the right to employ on their own an registered accountant in
China to undertake annual financial checking and examination at their own
expense.
ARTICLE 13.6 REPORTS
The monthly reports, quarterly reports and annual reports including Balance
Sheet and 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.
ARTICLE 13.7 ENVIRONMENT
The Company shall commit to bear the responsibility of protecting environment
according to "Law of the People's Republic of China on Environment Protection".
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CHAPTER 14
FOREIGN EXCHANGE
ARTICLE 14.1 FOREIGN EXCHANGE
All the foreign exchange matters shall be handled in accordance with the
"Regulations of Foreign Exchange Control of the People's Republic of China."
ARTICLE 14.2 BALANCE OF FOREIGN CURRENCY RESERVE
The Company shall maintain a balance of foreign currency reserve. Any loan and
guarantee as investment or cooperation terms for either side of the Parties
shall be settled on their own, respectively.
ARTICLE 14.3 REMITTING FOREIGN CURRENCY
All profits, income and funds after liquidation of Party B shall be entitled in
accordance with relevant foreign exchange regulations of China to be remitted to
outside China.
ARTICLE 14.4 REMITTING EMPLOYMENT INCOME OF EXPATRIATES
The employment income and other legitimate income of the expatriate personnel in
the Company shall be entitled to remit their employment income and other
legitimate income to outside China after they complete paying relevant tax and
deduct the expenses incurred in China.
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CHAPTER 15
DURATION OF THE COMPANY
ARTICLE 15.1 DURATION
The duration of the Company 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 duration, 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
Company.
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CHAPTER 16
THE DISPOSAL OF ASSETS AFTER
THE EXPIRATION OF THE DURATION
ARTICLE 16.1 LIQUIDATION COMMITTEE
Upon the expiration of the duration and upon termination of this Contract,
liquidation of assets, credit and debt shall be carried out according to the
relevant law. A Liquidation Committee set up by the representatives of both
Parties shall be responsible for the liquidation.
ARTICLE 16.2 ASSETS HANDLING
Upon prior termination of this Contract, the Company's assets after the
liquidation shall be settled in accordance with the following provisions:
(1) All fixed assets and capital shall be turned to Party A upon the expiration
of the Contract and under no extension of the Contract;
(2) Before the expiration date of the Contract, after paying in full of the
debts of the Company, the Liquidation Committee shall distribute the
remaining assets among the Parties hereto in proportion to the profit
distribution ratios in effect under ARTICLE 50 of Articles of Association
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
Insurance policies of the Company on various kinds of risks shall be
underwritten with the People's Republic of China. Types, the value and duration
shall be decided by the Board of Directors with the stipulations of the People's
Republic of China.
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CHAPTER 18
THE ALTERATION AND
DISCHARGE OF THE CONTRACT
ARTICLE 18.1 ALTERATION
The amendment of the Contract and the Articles of Association, any increase or
decrease of the registered capital, pledge of assets, merger or separation,
discontinuation or dissolution, amalgamation with other economic organization or
any other major appendices shall come into force only after it is unanimously
approved by the Board of Directors. The written agreement with signatures of
both Parties can become effective only after it is submitted to the original
examination and approval authority for its approval, and registered in State
Administration for Industry and Commerce.
ARTICLE 18.2 DISCHARGE
In case of the inability to fulfil the Contract or to continue operation due to
heavy loss in successive years as a result of Force Majeure, Chinese taw and
regulations, and the change of governmental administrative activities, the
duration of the Company and the Contract shall be terminated before the time of
expiration after consultation with between each Party (If the Board of Directors
can not reach an agreement upon the above matters in question, either party
shall have the right to refer the disputes to Arbitration) and after obtaining
approvals from the original examination and approval authority.
ARTICLE 18.3 TERMINATION
Should the Company be unable to continue its operations or achieve the business
purpose stipulated in the Contract due to the fact that one of the contracting
Parties fails to fulfill the obligations prescribed by the Contract and Articles
of Association, or seriously violate the stipulations of the Contract and
Articles of Association (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
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Contract in accordance with the provisions of the Contract after approved by the
original approval authority as well as to claim damages. In case Party A and
Party B of the Company agree to continue the operation., the Party who fails to
fulfil the obligations shall be liable to the losses thus caused to the Company.
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CHAPTER 19
LIABILITIES FOR BREACH OF CONTRACT
ARTICLE 19.1 FAILURE TO CONTRIBUTE; FAILURE TO PROVIDE TERMS AND CONDITIONS
Should either Party A or Party B fails to pay on schedule the contributions or
provide the terms and conditions in accordance with the provisions defined in
ARTICLE 6.3 of this Contract, the breaching Party shall be responsible for the
breaching event and pay to the other Party in cash an amount equal to 0.04% per
day of the value of the registered capital contribution for each day following
the date when such contribution was due but not made or the terms and conditions
were due but not provided. If the breach Party fails to remedy such material
breach within a period of ninety (90) days, in addition to be paid in cash as a
penalty an amount equal to 4.5% of the value of the capital contribution. In
addition the other Party shall have the right to terminate the Contract and
claim damages thus caused during the breaching event.
ARTICLE 19.2 FAULT
Should all or part of the Contract and its appendices be unable to be fulfilled
owing to the fault of one Party, the breaching Party shall bear the
responsibilities thus caused. Should it be the fault of both Parties, they shall
bear their respective responsibilities. The breaching Party shall take action to
remedy such material breach within thirty (30) days after notice in writing from
the other Party. Except for the stipulation in ARTICLE 19.1 of this Contract, if
the breaching Party fails to remedy the breach in time, the breaching Party
shall pay the other Party in cash as a penalty an amount equal to 1% of the
value of the capital contribution to compensate for damages caused by the breach
event. If both Parties to the Company fail to execute or to fully execute the
terms and conditions of this Contract, each of them shall bear their respective
responsibilities for default and compensation for losses, based on the specific
circumstances. The circumstances specified in Article 20.1 shall not apply to
the provisions of this Article.
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CHAPTER 20
FORCE MAJEURE
ARTICLE 20.1 FORCE MAJEURE
Should either of the Parties to the Contract be prevented from executing 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 avoidable, 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 which the Force Majure happens for
explaining the reason of its inability to execute or delay the execution 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 execution 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 related 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 as set out in ARTICLE 5.1 AND ARTICLE 5.2 of this Contract, the Parties
shall negotiate in good faith to amend this Contract so that the Parties can
benefit from the more favourable conditions to the greatest extent possible.
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CHAPTER 22
SETTLEMENT OF DISPUTES
ARTICLE 22.1 CONSULTATION
Any dispute or difference 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 Chairman of Party B and the legal representative of Party A for
resolution to the satisfaction of the Parties, if possible. The Chairman of
Party B and the legal representative of Party A may, if they so desire, consult
outside experts for assistance in arriving at a resolution. Such, persons shall
make a bona fide attempt to settle amicably through friendly negotiation 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 thetas 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 discussions 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 by the
Chairman of the Stockholm International Arbitration Centre.
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
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Chinese and English.
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
Throughout the pendency of any dispute or difference submitted to the legal
representative of Party A and the Chairman of Party B for resolution 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 version and English version. Both
languages have equal legal authorities. Should there be a conflict between the
two versions, the spirit and the Purpose 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 Association ) 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 still 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
The Contract and its appendices shall come into force beginning from the date of
approval of the relevant approval authority. This approval date is 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 letter notices shall be
delivered by post services, and considered to be received by 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 posting addresses.
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ARTICLE 24.5 SEVERABILITY
If any provision of this Contract should be or become 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 four (4) original counterparts each of which shall
have equal effect in law.
IN WITNESS WHEREOF, the Parties hereto have signed this Contract as of July 8,
2000.
Party B:
Chengdu Huayu Information Big Sky Network Canada Ltd
Industry Co., Ltd.
[Chinese Characters Appear Here]
Authorized Representative Authorized Representative
/s/GONG YONGRONG /s/DAMING YANG
------------------------------------------------- --------------
Gong Yongrong [Chinese Characters Appear Here] Daming Yang
General Manager General Manager
[Seal] [Seal]
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