ARTICLES OF ASSOCIATION
OF THE COOPERATIVE JOINT VENTURE CONTRACT
PLACER TECHNOLOGIES CORP.
This Contract is made and entered as of the ____th day of___________________
1997 by and between:
XIN HAI TECHNOLOGY DEVELOPMENT LTD., a corporation formed under the laws of
the People's Republic of China with its legal address at Xxxxx 000, Xxxxxxxx
X, Xx. 00, Xx Xxx Xxx Xxxx, Xxxx Xxxxxxxx, Xxxx xx Xxxxxxx, Xxxxxx'x Xxxxxxxx
of China herein represented by XX. XXX XXX. a Chinese citizen, its legal
representative and its Chairman
("Xin Hai")
AND:
INFORNET INVESTMENT LIMITED, a corporation formed under the laws of Hong Kong
with its legal address at 14th Floor, Xxxxxxxxx House, 00 Xxxxxxxx Xxxx, Xxxx
Xxxx, and herein represented by XX. XXXXXX XXXXXX, a Canadian citizen, its legal
representative and its President
("Infornet")
who together, acting for and on behalf of PLACER TECHNOLOGIES CORP., a
Chinese corporation to be formed under the laws of the People's Republic of
China, with a legal address at Xxxxx 0 00, Xxxxxxxx X, Xx. 00, Xx Xxx Xxx
Xxxx, Xxxx Xxxxxxxx, Xxxx xx Xxxxxxx, Xxxxxx'x Xxxxxxxx xx Xxxxx
("hereinafter sometimes referred to as "Party A" or as the "Joint Venture
Company')
AND:
XIN HAI TECHNOLOGY DEVELOPMENT LTD., a corporation formed under the laws of the
People's Republic of China with its legal address at Xxxxx 000, Xxxxxxxx X, Xx.
00, Xx Xxx Xxx Xxxx, Xxxx Xxxxxxxx, Xxxx xx Xxxxxxx, Xxxxxx'x Xxxxxxxx xx Xxxxx,
herein represented by XX. XXX XXX, a Chinese citizen, its legal representative
and its Chairman
(hereinafter sometimes referred to as "Party B" or ('Xin Hai" or as the
"Chinese Operator"
AND:
INFORNET INVESTMENT LIMITED, a corporation formed under the laws of Hong Kong
with its legal address at l4th Floor, Xxxxxxxxx House, 00 Xxxxxxxx Xxxx, Xxxx
Xxxx, and herein represented by XX. XXXXXX XXXXXX, a Canadian citizen, its legal
representative and its President
(hereinafter sometimes referred to as "Party C" or "Infornet')
WHEREAS Xin Hai is a Chinese company engaged in the business of developing
computer hardware, software and telecommunication network technology, and
providing consultation and training services and technology
transfer thereof, and Xxx Xxx has obtained from the Beijing Telecommunication &
Administration Bureau, under the Ministry of Posts and Telecommunications, an
internet service provider ("ISP") license, which permits
Xin Hai to provide internet access services and value-added services, including
World Wide Web server hosting and integration services, client software and
security products, training, and network integration as well as consulting
services in Beijing;
WHEREAS Xin Hai and Infornet entered into a Cooperative Joint Venture Contract
on___________ day of ___________1997, pursuant to which PLACER TECHNOLOGIES
CORP. (the "Joint Venture Company") is to be formed and registered under the
laws and other relevant regulations of
the People's Republic of China;
WHEREAS the Joint Venture Company to be formed shall manufacture and sell
computer network systems, communication equipment and provide communication
engineering services, including development and construction of internet access
networks in China and the parties agree -to authorize Xxx Xxx to operate the
said network according to the prevailing laws and regulations in China which
allow Sino-foreign joint venture companies to construct internet access networks
and to have legitimate ownership rights and rights for return on the investment.
but disallow joint venture companies to operate such networks:
WHEREAS Xxx Xxx and Infornet have agreed on their own behalf. and acting
collectively for and on behalf of the Joint Venture Company to be formed, to
enter into this Contract in order to render effective and implement the Joint
Venture Contract
WHEREAS Xxx Xxx declares that it has duly obtained all authorizations required
under the laws of the People's Republic of China to operate the internet access
services and value-added services in Beijing;
WHEREAS Xxx Xxx has been designated as the "Chinese Operator to be responsible
for the operations of the internet access networks set up by the Joint Venture
Company";
WHEREAS according to the Joint Venture Contract signed by the parties, Infornet
shall contribute all of the required capital of the Joint Venture Company and
until such date as Infornet's total investment in the Joint Venture Company has
been fully recovered by Infornet (the "Recoupment Date"),. the distribution of
profits shall be in accordance with the following percentages:
Xin Hai - 20%
Infornet - 80%
and after the Recoupment Date all distribution of profits shall be made as
follows:
Xin Hai - 49%
Infornet - 51 %
WHEREAS Xin Hai and the Joint Venture Company recognize the benefit of a
cooperative arrangement in which Xin Hai exclusively contracts with the Joint
Venture Company and uses the technical service and financial support provided by
the Joint Venture Company during the term of this Contract;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
adhering to the principles of equality and mutual benefit through friendly
consultations, the Parties hereto hereby agree as follows:
ARTICLE 1
INTERPRETATION
1. Definitions. When used in this Agreement, unless the context indicates
otherwise, the capitalized
expressions used therein shall have the meanings as set out below:
1. 1. "Affiliate" means any legal entity whose ownership by a party shall exist
through the direct or indirect ownership of more than fifty percent (50%) of the
equity interest of the legal entity and more than fifty percent (50%) of the
voting rights entitling the holders thereof to vote for the election of
directors or persons performing similar functions, or the right by any other
means to elect or appoint directors or persons performing similar functions, or
has more than fifty percent (50%) of the vote in such a legal entity;
1.2. "Commencement Date" means the date upon which the Joint Venture Company
shall have
obtained its Business License;
1.3. "Contract" means this present contract entered into between the Parties and
all agreements and other documents relating thereto:
1.4. "Earnings" has the meaning ascribed thereto in Section 9.11;
1.5. "Event of Force Majeure" means fire, explosion, accident, earthquake, tidal
wave, strike, picketing, lockout, labour dispute, breakdown in machinery,
facilities or equipment, flood, drought, embargo, war, riot or insurrection,
uprising, rebellion, act of God or public enemy, acts or orders of any
government or governmental authority, failure or delay of carrier, contractor,
supplier or distributor or any other event whether similar or dissimilar to the
foregoing which is beyond the reasonable control of the Party affected thereby
and which shall delay, interrupt or prevent the performance in whole or in part
by such Party of any of its obligations;
1.6. "Fiscal Year" shall mean the period of twelve months ending on
December 31 of each year;
1.7. "Internet Network" means the internet access service, its value-added
services, including World Wide Web server hosting and integration services,
client software and security products, training and network integration as well
as consulting services pursuant to the internet server provider license ("ISP
License") issued to Xin Hai by Beijing Telecommunication & Administration Bureau
which is directly under the Chinese ministry of Posts and Telecommunications.
1.8. "Operating Expenditures" has the meaning ascribed thereto in Section
9.6;
1.9. "Revenues" has the meaning ascribed thereto in Section 9.4.
2. The Preamble. The preamble forms an integral part of this Contract as if
herein recited at length
3. Interpretation Not Affected by Headings. Grammatical variations of any terms
defined herein shall have similar meanings; words importing the singular number
shall include the plural and vice versa; and words importing the masculine
gender shall include the feminine and neuter genders and vice versa. The
division of this Contract into separate articles, sections, subsections,
paragraphs and subparagraphs, the provision of a table of contents and index
thereto, and the insertion of headings, marginal notes and references are for
convenience of reference only and shall not affect the construction or
interpretation of this Contract.
4. Severability. If any provision of this Contract. or the application thereof
to any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Contract or the application of such provision to persons
or circumstances other than those to which it is held invalid or unenforceable
shall not be affected thereby and each provision of this Contract shall be
separately valid and enforceable to the fullest extent permitted by law.
5. Governing Law. This Contract shall be governed by and construed in accordance
with the law of the People's Republic of China.
6. Generally Accepted Accounting Principles and Generally Accepting Auditing
Standards. An accounting and financial terms used herein unless specifically
provided to the contrary herein shall be interpreted and applied in accordance
with international generally accepted principles (International GAAP)
consistently applied.
7. Language. This Contract shall be written in Chinese and in English. Both
versions shall have the same legal and binding effect. If there is any
controversy between the both versions, such controversy shall be resolved by the
decision of the relevant Arbitration Commission.
ARTICLE 2
THE PROJECT
2.1 Purpose. The Parties hereby agree that the purpose of this Contract is to
establish the terms and conditions concerning:
2.1.1 the construction by the Joint Venture Company of the Internet
Network;
2.1.2 the operation of the Internet Network by Xxx Xxx as the Chinese
Operator;
2.1.3 the provision of equipment to the users of the Internet Network;
2.1.4 the terms of the technical assistance to be provided by the
Joint Venture Company to Xin
Hai; and
2.1.5 the sharing of revenues between the Joint Venture Company and
the Chinese Operator
during the term of this Contract.
2.2 Collaboration. The Parties hereto acknowledge and agree that they shall
collaborate with each other in order to achieve the objectives of this Contract
and perform their respective obligations hereunder. The Parties further
acknowledge and agree that they shall act in good faith in performing their
respective obligations hereunder and shall act according to the principles of
friendly consultation and discussion, equality and mutual benefit, to ensure
that the Internet Network can be operated on a profitable basis.
2.3 Separate Operating Unit. For the purposes of the Contract, the Parties
hereto agree that Xin Hai shall independently operate the Internet Network.
ARTICLE 3
THE TERM
3.1 The Term. The term of this Contract shall commence on the Commencement Date
and shall terminate on the twentieth (20th) anniversary of the Commencement
Date, unless otherwise terminated hereunder. This Contract shall form an
integrated part of the Joint Venture Contract, upon the termination of the Joint
Venture Contract, this Contract shall be terminated concomitantly therewith.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations of XIN XXX Xxx Hai hereby represents and warrants to the
other Parties that:
4.1.1 Xin. Hai is formed exclusively of Chinese shareholders.
4.1.2 Xin Hai is licensed by the Beijing Telecommunication & Administration
Bureau under the Ministry of Post and Telecommunications of China under the laws
of the People's Republic of China to operate, in Beijing, Internet Networks as
defined in this Contract. Xin Hai hereby warrants and guarantees to maintain in
full force and effect such legal and legitimate internet operating license
during the entire term of this Contract-,
4.1.3 Xin Hai is designated by Xin Hai and Infornet as the Chinese Operator to
enter into this Contract.
4.1.4 Xin Hai is duly organized, validly existing and in good standing under the
laws of the People's Republic of China, has the independent legal person status
and has all requisite power and authority to own and operate its assets,
properties and business and to carry on its business as now conducted.
4.1.5 Xin Hai has all requisite power and approvals required to enter into,
execute and deliver this Contract and to fully perform its obligations
hereunder.
4.1.6 Xxx Xxx has taken all actions necessary to authorize it to enter into and
perform its obligations under this Contract and this Contract is a legal, valid
and binding obligation of Xin Hai, enforceable against Xin Hai in accordance
with its terms.
4.1.7 Neither the execution and delivery of this Contract by Xxx Xxx, nor the
performance of Xxx Xxx's obligations hereunder, will conflict with, or result in
a breach of, or constitute a default under any provision of the Articles of
Association of Xin Hai, or any law, rule, regulation, judgment, order or decree
of any court, arbitrator or governmental agency, or of any contract, agreement
or instrument to which the Joint Venture Company and Xin Hai are subject.
4.1.8 No authorization, approval or consent of any governmental, municipal or
other authority or person or otherwise is required in connection with Xxx Xxx's
execution and delivery of this Contract and the performance of its obligations
hereunder.
4.1.9 Xin Hai is not entitled to claim any immunity from suit, execution, or
other legal process under the laws of the People's Republic of China.
4.2 Representations of Infornet. Infornet hereby represents and warrants to the
other Parties that:
4.2.1 It is duly organized, validly existing and in good standing under the laws
of Hong Kong, has the independent legal person status and has all requisite
power and authority to own and operate its assets, properties and business and
to carry on its business as now conducted.
4.2.2 It has all requisite power, authority and approvals required to enter
into, execute and deliver this Contract and to fully perform its obligations
hereunder.
4.2.3 It has taken all actions necessary to authorize it to enter into and
perform its obligations under this Contract and this Contract is its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
4.2.4 Neither the execution and delivery of this Contract by it, nor the
performance of its obligations hereunder, will conflict with, or result in a
breach of, or constitute a default under, any provision of its charter, or any
law, rule, regulation, judgment, order or decree of any court, arbitrator or
governmental agency, or of any contract, agreement or instrument to which the
Joint Venture Company and the Xin Hai are subject.
4.2.5 No authorization, approval or consent of any governmental, municipal or
other authority or person or otherwise is required in connection with its
execution and delivery of this Contract and the performance of its obligations
hereunder.
ARTICLE 5
CONDITIONS PRECEDENT
The performance by the Joint Venture Company of its obligations hereunder are
subject to the following conditions to be fulfilled or performed at or prior to
the Commencement Date, which conditions are for the exclusive benefit of the
Joint Venture Company and may be waived in whole or in part by the Joint Venture
Company, in its sole discretion.
5.1 Deliveries. The Joint Venture Company shall have received at or prior to the
Commencement Date, the following, in form, scope and substance acceptable to the
Joint Venture Company and its counsel, acting reasonably: certified copies of
such consents, licenses, permits, approvals and registrations by or with all
governmental agencies or other competent authorities in the People's Republic of
China, as may be necessary to ensure the validity and binding effect of this
Contract and to permit the performance by the Parties hereto of their respective
obligations under this Contract in accordance with all of the terms and
provisions hereof and more specifically to permit Xin Hai to operate the
Internet Network in accordance with the terms and conditions outlined in this
Contract and with all applicable laws, regulations, directives, orders or
decrees in effect in the People's Republic of China.
5.2 Corporate Deliveries. The Joint Venture Company shall have received at
or prior to the Commencement Date, certified copies of company registration
certificates and certificates of good standing of Infornet;
5.3 Truth of Representations and Warranties. The representations and warranties
of Xin Hai contained in this Contract or in any report or other document
delivered to the Joint Venture Company, shall be true and correct as of the
Commencement Date with the same force and effect as if such representations and
warranties had been made on and as of such date.
5.4 No Default or Event of Default. No event of default shall have
occurred and shall be continuing.
ARTICLE 6
CONSTRUCTION
6.1 Certain Obligations of the Joint Venture Company.
6.1.1 During the term of the Joint Venture Contract and in accordance with this
Contract, the Joint Venture Company shall provide the Internet Network with all
the communication equipment as well as the necessary accessories for selling or
leasing to end users.
6.1.2 The Joint Venture Company assumes all the Operating Expenditures of the
Internet Network as contemplated in this Contract.
6.2 Engineering Services. The Parties hereto agree that the Joint Venture
Company exclusively shall perform or cause to be performed all the engineering
services in respect of the Internet Network which engineering
services shall include but shall not be limited to:
6.2.1 the engineering design;
6.2.2 the integration, the installation and the testing of the Internet
Network;
6.2.3 the customization of the Internet Network protocol and of the
network management software;
6.2.4 the development of end user interface software and user application
software;
6.2.5 the technical support to the Internet Network and advisory service on
maintenance;
6.2.6 the supply of parts and instruments to the Internet Network
ARTICLE 7
OPERATIONS
7.1 Certain obligations of Xin Hai. During the term of this Contract, Xin Hai
shall, inter alia, be responsible for:
7.1.1 managing, supervising, operating, maintaining and repairing the Internet
Network and taking all the necessary steps to ensure that the Internet Network
be in good operating condition;
7.1.2 marketing;
7.1.3 selling or leasing equipment on behalf of the Joint Venture Company;
7.1.4 collecting all the fees payable by the users of the Internet
Network;
7.1.5 obtaining all required licenses, authorizations and permits from local,
state and other authorities of the People's Republic of China to permit the
transactions contemplated under this Contract and the Joint Venture Contract
7.1.6 subject to obtaining prior written consent of the Joint Venture Company
and thereafter the Joint Venture Company's final approval, the negotiating and
entering into agreements with governmental or private parties. which are
necessary and appropriate for or in connection with the construction or
operation of the Internet Network;
7.1.7 effecting and maintaining all appropriate insurances in relation to the
assets comprising the Internet Network and in relation to all employees or
agents engaged in any way in the operation thereof,
7.1.8 in the case of emergency or accident, taking such action as is necessary
for the protection of life and property (and forthwith reporting any such
emergency or accident and the particulars thereof to the Joint Venture Company);
7.1.9 doing such other acts and things as may be necessary or advisable for the
efficient and economical operation of the Internet Network as well as doing any
other act or thing in accordance with the Joint Venture Contract or which may be
authorized thereunder.
ARTICLE 8
STANDARDS
8. 1 Standards. Each of the Parties shall perform all of its obligations
hereunder and conduct all of its operations in a good workmanlike and
commercially reasonable manner and in accordance with standard and suitable
engineering, processing, procurement and purchasing methods, procedures and
practices, and with the standard of diligence and care normally exercised by
duly qualified persons in the performance of comparable work..
8.2 Employees in Connection with Internet Network. During the term of this
Contract, Xin Hai shall employ qualified personnel according to the authorized
staff quantity (subject to the review and approval of the Joint Venture Company)
to carry out its obligations under this Contract. The Parties hereto agree that
the total employment compensation payable to, or in respect of, such personnel
must not exceed the amount allocated for such expense under the budgets approved
by the Joint Venture Company as contemplated under Section 9. 1.
ARTICLE 9
FINANCIAL MATTERS WITH RESPECT TO OPERATIONS
9.1 Budgets. Immediately following the date hereof, and thereafter at least 30
days prior to the commencement of each subsequent Fiscal Year, Xin Hai shall
prepare and submit to the Joint Venture Company for its review and approval the
programmes (including long term programmes and planning), budgets and estimates
including revenue, delivery and cash flow schedules, capital expenditure and
outstanding commitment schedules and other matters transpiring in connection
with operations of the Internet Network for the next following twelve months
(except for the first period which shall continue until the commencement of the
next following Fiscal Year) and for any other periods as the Joint Venture
Company may, from time to time, reasonably require. Xin Hai shall, on a
quarterly basis to prepare and submit to the Joint Venture Company amendments
and revisions of such Programmes, budgets and estimates as aforesaid. The
programmes and budgets as approved and from time to time amended or revised by
the Joint Venture Company shall be binding on Xin Hai which shall carry out its
duties hereunder in accordance therewith. Xin Hai shall, for the benefit of the
Internet Network, make all disbursements in connection with operations of the
Internet Network in accordance with such approved programmes and budgets.
9.2 Financial Statements
9.2.1 Monthly. Starting from the beginning of the second Fiscal Year, Xin Hai
shall, -within fifteen (15) days after the close of each month, furnish to the
Joint Venture Company a progress report summarizing the operations and results
of the Internet Network during such month together with an unaudited statement
reflecting in reasonable detail, but in summary form, revenues, expenditures and
cash flow of the Internet Network for such month and a comparison for the same
period in the immediately preceding Fiscal Year.
9.2.2 Other Reports. In addition to the report and comparative statements
referred to in Section 9.2. 1, Xin Hai shall, as promptly as practicable after
their preparation, furnish to the Joint Venture Company copies of other
significant reports prepared by or received by Xxx Xxx and in addition, Xin Hai
shall promptly furnish to the Joint Venture Company copies of any written
communications to or from any government or other competent authority which, in
the opinion of Xxx Xxx, is significant to the transactions contemplated
hereunder.
9.2.3 Quarterly. Within thirty (30) days following the end of each fiscal
quarter. Xin Hai shall furnish to the Joint Venture Company quarterly and
cumulative financial statements consisting of a balance sheet as of the end of
such quarter. and a statement of income and cash flow for such quarter, and
quarterly and cumulative figures for the corresponding periods of the preceding
year as well as the budgeted figures for such quarter. Such quarterly reports
shall also include other financial, commercial, business or operational
information concerning the operations of the Internet Network as may be required
by the Joint Venture Company.
9.2.4 Annually. In addition to the reports, statements and communications
referred to in Sections 9.2.1, 9.2.2 and 9.2.3, Xin Hai shall furnish to the
Joint Venture Company as soon as practicable after the close of each Fiscal Year
and in any event not later than eighty (80) days after the close thereof,
Financial Statements, to be audited by a firm appointed by the Joint Venture
Company reflecting the results for such Fiscal Year of all transactions in
connection with operations of the Internet Network as disclosed by the records
and accounts kept or caused to be kept by the Chinese Operator pursuant to
Section 9.3 and reflecting the Internet Network assets in the custody or control
of Xxx Xxx as at the end of such Fiscal Year. The firm of auditors appointed by
the Joint Venture Company shall have access to all records, registries,
documents, reports, data, software and other information in the possession of or
under the control of Xin Hai, to allow such auditors to proceed with the audit
of the Financial Statements in accordance with the instructions of the Joint
Venture Company.
9.3 Records and Accounts and Rights of Inspection
9.3.1 Xin Hai shall keep or cause to be kept, distinct and separate from any
other records and accounts relating to the business of Yin Hai, comprehensive,
true and accurate records and accounts of all operations of the Internet
Network, and of Xxx Xxx's performance of its duties under this Contract and all
property, real and personal, belonging to and of all transactions entered into
in connection with the Internet Network and of the costs and expenses thereof
including, without limitation, records and accounts in respect of:
(a) each sum received by Xxx Xxx from the Joint
Venture Company and date of receipt thereof;
(b) each sum received from Xxx Xxx on behalf of the Joint
Venture Company and the date of receipt and the
source thereof,
(c) each sum disbursed by Xxx Xxx for the benefit of the
Internet Network and the date and purpose thereof,
(d) the acquisition of services and materials, equipment and
supplies and other property and assets by Xxx Xxx for
the purposes of the Internet Network and the date, cost of
acquisition and description thereof,
(e) inventories of materials, equipment and supplies and other
property of the Interne Network in the custody or
possession of Xxx Xxx;
(f) the sale, abandonment or other disposition by Xin Hai of
any of such materials, equipment and supplies or any
other property which may be part of the Internet Network.
The Joint Venture Company shall be entitled to inspect and
obtain copies of all such records and accounts, and Xin
Hai shall supply the Joint Venture Company with copies
of all reports, statements and certificates material to
the Joint Venture Company.
9.3.2 The Joint Venture Company shall be entitled to inspect and obtain copies
of all such records and accounts, and Xin Hai shall supply the Joint Venture
Company with copies of all reports, statements and certificates material to the
Joint Venture Company.
9.3.3 The records and accounts referred to herein shall be made available for
audit by the firm of auditors appointed by the Joint Venture Company at such
time and in such manner as the Joint Venture Company may direct.
9.3.4 The Joint Venture Company shall have the right at all reasonable times
during the term of this Contract to send observers to inspect and observe the
operations of the Internet Network and to report to the Joint Venture Company.
Such observers shall have access to any and all records, data and information
relating to the Internet Network and the operation thereof.
9.4 Internet Revenues. The Parties agree that the revenues generated from the
operations of the Internet Network (the "Revenues") shall consist of any amount
invoiced or that may be invoiced under any contract entered into by Xin Hai
relating to the sale of products or the performance of services offered by Xxx
Xxx in connection with the Internet Network. The Internet Revenues shall consist
of, but not be limited to:
9.4.1 the end users monthly service fees;
9.4.2 the internet initial connecting fees;
9.4.3 equipment sales revenues and/or monthly leasing fees;
9.4.4 maintenance fees;
9.4.5 the fees for additional warranty coverage on equipment;
9.4.6 the bank interest income (including the interest
income in the bank accounts of the Xin Hai and the bank
account of the Join Venture Company as referred to in
Section;
9.5 Collection of Internet Revenues. All Revenues shall be deposited by Xxx Xxx
into a bank account in the name of Xin Hai which shall require joint signatures
and joint seals of both a Xin Hai authorized officer and a Joint Venture Company
authorized officer for any withdrawal of money from it. Forty percent (40%) of
the Revenue shall be transferred to another bank account (the second account) of
the Xin Hai while the other sixty percent (60%) of the Revenue shall be
transferred to a bank account of the Joint Venture Company. The forty percent
(40%) Revenue transferred to the second bank account of Xin Hai shall be used to
cover the Operating Expenditures. If the amount is less than actual Operating
Expenditures, Xin Hai shall obtain the balance from the Joint Venture Company
(on a month by month basis). If the amount is higher than the actual Operating
Expenditures, then the Xin Hai must remit the surplus to the Joint Venture
Company. The use of the sixty percent (60%) Internet Revenue transferred to the
Joint Venture Company shall be reported to the two Parties of the Joint Venture
Company. This amount shall be treated as business revenue of the Joint Venture
Company under the terms of the network investment/construction return, technical
service fees and profit repatriated to network owners.
9.6 Internet Network Operating Expenditures. The Parties hereby agree that all
operating expenditures contained in the operating budgets submitted to and
approved by the Joint Venture Company shall constitute expenditures derived from
the operation of the Internet Network (the "Operating Expenditures").
9.7 Chargeable Costs by Xxx Xxx. Xin Hai may charge as operating expenses of the
Internet Network all the costs, expenses and liabilities (except as herein
mentioned) incurred by Xin Hai in the performance of its obligations under this
Contract and which constitute Operating Expenditures but solely to the extent
that they have been approved by the Joint Venture Company in the programmes,
budgets and estimates referred to in Section 9.1 hereof The Parties hereby agree
that for greater certainty, the following expenditures when they are directly
related to the Internet Network form part of the Operating Expenditures:
9.7.1 salaries and other reimbursements of network operators;
9.7.2 office rental costs;
9.7.3 marketing costs;
9.7.4 reasonable business entertainment costs;
9.7.5 reasonable traveling costs;
9.7.6 insurance costs; and
9.7.7 management costs;
9.7.8 In principle, the Internet Network service employees shall enjoy similar
compensation packages as those received by the Joint Venture Company employees.
9.8 Non-chargeable Costs by Xxx Xxx. The following costs, expenses and
liabilities shall be borne entirely by Xin Hai unless otherwise determined by
the Board of Directors:
9.8.1 fines and penalties and similar liabilities and amounts paid in settlement
thereof resulting from negligent failure by Xxx Xxx to comply with or the
willful violation by Xin Hai of the applicable laws, rules or regulations except
when incurred as a result of compliance with guidelines of the Joint Venture
Company; and
9.8.2 taxes imposed upon or measured by income of the Chinese Operator.
9.9 Any rebates or other credits received by Xxx Xxx for goods, equipment and
services acquired by Xxx Xxx hereunder during the Operation of the Internet
Network shall be for the account of the Internet Network.
9.10 Working Capital Requirement. The above-mentioned forty percent (40%) of the
Revenue transferred to the second account of Xxx Xxx shall be used to cover the
Operating Expenditures. At the end of each month, Xin Hai shall prepare and
submit to the Joint Venture Company a report indicating the results of the
operations of the Network during such preceding month, and indicating a
comparison between the Operating Expenditures incurred by Xxx Xxx for the
benefit of the Internet Network and the sum of the advances Xxx Xxx received
from the Joint Venture Company and the above mentioned forty percent (40%) of
the Revenue received for such month. If the amount received is less than actual
expenses, Xin Hai shall obtain the balance from the Joint Ventur6 Company (on a
month by month basis). If the amount of the Operating Expenditures is higher
than the actual expenses, then Xxx Xxx must remit the surplus to the Joint
Venture Company.
9.11 Revenue. The parties agree that all of the Earnings generated by the
operation of the Internet Network shall be retained by the Joint Venture Company
as legitimate returns on the network development and technical support. For
purposes hereof, "Earnings" is the amount by which the Revenues (described in
Section 9.4) exceeds the Operating Expenditures (described in Sections 9.6 and
9.7).
ARTICLE 10
OWNERSHIP OF THE INTERNET NETWORK
10.1 Ownership during the term of this Contract. The ownership and title to all
of the assets comprising the Internet Network shall remain with the Joint
Venture Company during the term of this Contract. Xin Hai shall, subject to this
Contract, be entitled to the custody and control of such assets on behalf of the
Joint Venture Company. Subject to the prior written approval of the Joint
Venture Company, title to any such assets may be vested in Xin Hai and, in all
such cases, such assets shall be held by Xin Hai in trust for the Joint Venture
Company.
10.2 After-acquired Property. All property, real or personal, tangible or
intangible, held, developed, constructed or acquired by Xin Hai on behalf of the
Joint Venture Company under or pursuant to this Contract shall beowned by the
Joint Venture Company in accordance with the provisions of this Contract.
10.3 Mortgages or Liens. Xin Hai shall not have any right or power (except for
liens arising in the normal and ordinary course of business) to mortgage,
pledge, charge, encumber, or otherwise dispose of or create any lien over or
trust in respect of the Internet Network or any portion thereof.
10.4 Acquisition of Property. Except in accordance with the provisions of this
Contract or as directed in writing by the Joint Venture Company, Xin Hai may not
acquire or contract to acquire any property of any kind for or on behalf of the
Joint Venture Company.
ARTICLE 11
AGREEMENT FOR OPERATIONS PURSUANT TO
ISP LICENSES OBTAINED IN OTHER CITIES IN CHINA
11.1 Covenant of Xin Hai. Xin Hai covenants that in order to expand the business
of the Joint Venture Company and Xin Hai, it will use its best efforts for
obtaining ISP licenses in other cities in China and operate the Internet Network
thereunder mutatus mutandis in accordance with this Contract. In the event that
any affliate of Xxx Xxx created to obtain an ISP license in a city other than
Beijing in China obtains such ISP License, Xin Hai will cause that affiliate or
affiliates as the case may be to expressly adopt in writing the rights, duties
and to be fully liable to perform the obligations under this Contract as if it
were the Chinese Operator hereunder for the Internet Network operation in that
city pursuant to this Contract and operate the Internet Network in that city
mutatis mutandis in accordance with this Contract.
11.2 Applicabi1ity of this Contract. The parties agree that this Contract shall
govern mutatis mutandis any and all future Internet Network operations pursuant
to any or all ISP license(s) to be obtained by Xin Hai or Xin Hai's affiliates.
ARTICLE 12
LIABILITY AND INDEMNIFICATION
12.1 Liability and Indemnification of Xin Hai. Xxx Xxx hereby agrees to
indemnify and hold the Joint Venture Company, its officers, directors,
shareholders and employees harmless from and against any and all claims, losses,
liabilities, damages, arising out of, resulting from or in connection with the
performance by Xxx Xxx its officers and employees of the obligations of Xin Hai
under this Contract or in connection with the Internet Network.
12.2 Liability and Indemnification of the Joint Venture Company. The Joint
Venture Company hereby agrees to indemnify and hold Xin Hai, its officers,
directors, shareholders and employees harmless from and against any and all
claims, losses, liabilities, damages, arising out of, resulting from or in
connection with the performance by the Joint Venture Company, its officers and
employees of the obligations of the Joint Venture Company under this Contract or
in connection with the Internet Network.
ARTICLE 13
FORCE MAJEURE
13.1 Event of Force Majeure. Should any Party be prevented from executing any of
its obligations under this Contract or should the Internet Network (or any part
thereof) be prevented from operating as a result of an Event of Force Majeure,
then the Party so prevented shall notify the other Party in writing without
delay, and within fifteen (15) days thereafter shall further provide detailed
information of the Event of Force Majeure and explain the reason of its
inability to execute its obligations under this Contract or the delay in the
execution of all or part of this Contract. The Parties shall, through
consultation, decide either to terminate this Contract in whole or in part, or
to delay the execution of this Contract (or a portion of this Contract) until
such time that the Event of Force Majeure ceases.
13.2 Minimizing Losses. The Parties hereby agree that in the Event of Force
Majeure, they shall consult with each other and take all reasonable steps to
minimize the losses of any Party resulting from such Event of Force Majeure.
ARTICLE 14
ASSIGNMENTS
14.1 Assignments Not Permitted. Neither the Joint Venture Company nor Xin Hai
may assign or transfer all or any part of its rights, benefits or obligations
hereunder. provided. however, that this shall not prevent the Joint Venture
Company or Xin Hai from merging or consolidating with any other company where
the surviving entity adopts and becomes fully liable to perform the obligations
of the Joint Venture Company or Xin Hai hereunder.
14.2 Joint Venture Company. Notwithstanding the foregoing, the Joint Venture
Company may transfer all or any part of its rights and obligations hereunder for
the purposes of (i) arranging or rearranging financing for the Internet Network,
(ii) assigning or transferring to any person providing financing to the Internet
Network all or any part of its rights (but not its obligations) hereunder. Xin
Hai shall duly acknowledge any such assignment or transfer of which it is given
notice.
14.3 Infornet. Notwithstanding the foregoing, Infornet shall have the right,
upon notice thereof to the other Parties hereto, to assign this Contract and any
or all of its rights, duties and obligations hereunder to any subsidiary or
affiliate of Infornet or to a successor in interest to Infornet's business, (as
the case may be), acceptable to the other Parties acting reasonably, provided
however, that such assignee of Infornet expressly adopts in writing the rights,
duties and obligations of Infornet hereunder. Infornet shall have the right,
upon notice thereof to the other Parties hereto, to assign this Contract and any
or all of its rights, duties and obligations hereunder to one or more
unaffiliated third parties, acceptable to the other Parties acting reasonably,
provided that such assignee of Infornet expressly adopts in writing the rights,
duties and obligations of Infornet hereunder. No assignment under this Section
14.3 shall release Infornet from any liability or responsibility hereunder.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1 Agreements with Affiliates. Any agreements which are entered into by Xin
Hai in the performance of its obligations under this Contract with any Affiliate
shall be on normal "arm's length" commercial terms. Any such agreements or
agreements with appointed regional representatives or agents shall require the
prior approval of the Joint Venture Company.
15.2 Resolution of Disputes
15.2.1 Any controversy or claim that may arise under, out of, in connection with
or relating to this Contract or any breach hereof, shall be submitted to a panel
consisting of representatives of each Party. Each Party may appoint up to two
(2) individuals to such panel. The members of such panel shall be appointed by
each Party within ten (10) days of the receipt by the Party of notice of the
existence of such controversy or claim- The unanimous decision of such panel
shall resolve the controversy or claim. If the panel is unable to resolve such
matter within thirty (30) days of the submission of such controversy or claim to
such panel, it shall be brought before the President of each Party for final
resolution. If the Presidents are unable to resolve the matter within thirty
(30) days of the submission of such controversy or claim to them, any Party may
request arbitration in accordance with Section 15.2.2.
15.2.2 Any controversy or claim that is not resolved under Section 15.2.1 shall
be settled by final and binding arbitration in Beijing in accordance with the
then existing rules of arbitration of the China International Economic and Trade
Arbitration Commission. Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction or application may be made for
judicial acceptance of the award and an order of enforcement, as the case may
be. The Parties agree that if it becomes necessary for any Party to enforce an
arbitral award by legal action or additional arbitration or judicial methods,
the party against whom enforcement is sought shall pay all reasonable costs and
attorneys' fees incurred by the party seeking to enforce the award.
15.3 Change in Circumstances. In the event, as a result of any laws, regulations
or policies of the People's Republic of China, or any agency or other body under
the control of the Government of the People's Republic of China, coming into
effect after the date hereof or as a result of any amendment, modification or
repeal of such laws, regulations or policies, the Joint Venture Company is
authorized to operate or participate in the operation, directly or indirectly,
of the Internet Network, then the Parties agree that they will discuss the basis
and terms upon which the arrangements set out in this Contract may be amended or
discontinued.
15.4 Notices. Any notice, consent, authorization, direction or other instrument
required or permitted to be given (a "Notice") hereunder shall be in writing and
shall be delivered either by personal delivery, by certified mail or by
telecopier, return receipt requested, and addressed as follows:
15.4.1 if to XXX XXX TECHNOLOGY DEVELOPMENT LTD.
Suite 2 10, Building B. Xx. 00
Xx Xxx Xxx Xx., Xxxx Xxxxxxxx
Xxxxxxx, Xxxxxx'x Xxxxxxxx xx Xxxxx
Attention: Xx. Xxx Xxx
Telecopier: (8610) 6221-2512
15.4.2 if to INFORNET INVESTMENT LIMITED
14th Floor Xxxxxxxxx House
00 Xxxxxxxx Xxxx, Xxxx Xxxx
Attention: Xx. Xxxxxx Xxxxxx
Telecopier: (000) 0000-0000
COPY TO:
000 - 000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX
Xxxxxx
X0X X X0
Attention: Xx. Xxxxxx Xxxxxx
Telecopier(604) 689-4407
Any Notice shall be deemed to have been effectively given and received, if sent
by telecopier, on the next business day following receipt of such transmission
(confirmation of receipt by confirmed facsimile transmission being deemed
receipt of communication sent by telecopy) or, if delivered, to have been given
and received on the date of such delivery. Any Party may change its address for
service by written Notice given as aforesaid.
15.5 Confidential Information. All information other than information generally
known in the telecommunications industry supplied by or on behalf of any Party
pursuant to this Contract ("Confidential Information") shall be treated as
confidential by all Parties. The Parties covenant and agree that no Confidential
Information shall be disclosed to anyone outside the organization of such party
without the prior written consent of the other. In addition, the Parties agree
to take such action as may be appropriate to prevent the unauthorized use and
disclosure of, and to keep confidential all such Confidential Information,
including ensuring that such Confidential Information is disclosed only to
responsible employees of the Party and on a need to know basis.
15.6 Relationship of Parties. No Party has the power of authority to legally
bind any other Party and nothing herein contained shall be construed as
authorizing any Party to act as an agent or representative of any other Party.
15.7 Counterparts. This Contract shall be executed in six (6) originals and all
to be executed at the same time. All executed counterparts shall constitute one
contract binding on all the Parties.
15.8 Binding Effect. Except as otherwise provided to the contrary, this Contract
shall be binding upon, and inure to the benefit of, the Parties and their
respective heirs, executors, administrators, successors and permitted assigns.
15.9 Amendment. This Contract may be amended in whole or in part only by an
agreement in writing signed by all the Parties. The Parties agree that during
the term of this Contract in order to effect a major amendment to this Contract,
they shall, where required, apply for approval to the competent authorities
where the subject of amendment requires industrial or commercial registration or
tax registration. The re-registration formalities shall be completed with the
Administrator or other competent authorities in industry and commerce or the
taxation authorities, as the case may be.
15.10 Integration. This Contract including the schedules and exhibits hereto, if
any, sets forth the entire agreement between the Parties on the subject hereof
and supersedes any previous agreement, understanding, memorandum, letter of
intent or representation on the subject matter hereof other than the Joint
Venture Contract.
IN WITNESS WHEREOF, the Parties have duly executed this Contract in Beijing,
China as of ________________________1997.
Party A: Placer Technologies Corp. The Company to be incorporated under the laws
of The Peoples' Republic of China and represented by the following parties. This
contract will also be signed as evidence of ratification by the legal
representative of the Joint Venture company according to the decision of its
Board of Directors.
Xin Hai Technology Development Ltd.
Per:______________________________________________
Infornet Investment Limited
Per:______________________________________________
Placer Technologies Corp.
Per:______________________________________________
Legal representative has signed as evidence of the ratification this__day of
_____________ 1997.
Party B: Xin Hai Technology Development Ltd.
Per:______________________________________________
Party C: Infornet Investment Limited
Per:______________________________________________
