PROJECT COOPERATION CONTRACT
CHINA UNICOM'S HEBEI GLOBAL SERVICE FOR MOBILE
TELECOMMUNICATIONS (GSM) NETWORK PROJECT
CHINA UNITED TELECOMMUNICATIONS CO.
AND
HEBEI UNITED TELECOMMUNICATIONS ENGINEERING COMPANY LIMITED
FEBRUARY 9, 1996
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CONTENTS
Article I Definitions and Interpretation
Article II Representations and Warranties
Article III Covenants of Both Parties
Article IV Contract and Its Attachment
Article V Basic Content of the Contract
Article VI Content Outline of the Project
Article VII Providing Construction and Operating Capital
Article VIII Project Construction
Article IX Project Operation
Article X Project Asset Ownership
Article XI Rights and Obligations
Article XII Working Group
Article XIII Profit Distribution
Article XIV Project Expansion
Article XV Asset Transfer & Grant
Article XVI Insurance
Article XVII Confidentiality
Article XVIII Force Majeure
Article XIX Violation of the Contract
Article XX Termination of the Contract
Article XXI Governing Law
Article XXII Dispute Settlement
Article XXIII Term and Effective Date of the Contract
Article XXIV Fulfillment of the Responsibilities After Termination of the
Contract
Article XXV Transfer and Change of the Contract
Article XXVI Complete Contract
Article XXVII Miscellaneous
Attachment 1 Financial Implementation Details
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Party A: China United Telecommunications Co. ("Party A")
Address: 15 Yang Xxxx Xxxx Road, Xx Xxx Street, Beijing, PRC
Zip Code:
Legal Representative: Xxxx Xxxxxxx
Position: Chairman
Telephone:
Fax:
Party B: Hebei United Telecommunications Engineering Company Limited
("Party B")
Address: 00 Xxxxx Xxxx Xx Xxxx, Xxxxxxxxxxxx, Xxxxx Xxxxxxxx
Zip Code:
Legal Representative: Ye Yunyun
Position: Chairman
Telephone:
Fax:
Pursuant to PRC laws and regulations, subject to the principles of fair profit
sharing, sincere cooperation, and, after amicable negotiations, both Party A and
B have agreed to enter into the following contract to develop the China UNICOM's
Hebei Global Service for Mobile Telecommunications (GSM) Network Project.
ARTICLE I
DEFINITIONS:
1. Unless the context, including the recitals, in this contract require
otherwise, the following words and expressions shall have the meanings
shown below:
(1). "THE PROJECT" indicates the China UNICOM's Hebei Global Service for
Mobile Telecommunications (GSM) Network Project which will cover 10
cities or prefectures with 70,000 subscribers.
(2). "THE CONTRACT" means the contract and all attachments signed by Party
A and B regarding the China UNICOM's Hebei Global Service for Mobile
Telecommunications (GSM) Network Project. It is also called the
"Master Contract".
(3). "ATTACHMENT" means attachment 1 of the Master Contract. It is part
of the contract and can not be separated. When mentioning "the
Contract", the attachment shall be included.
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(4). "UPFRONT NETWORK CONNECTION FEE" indicates the special fund which will
be used in the construction of telecommunications projects in
accordance with the regulations issued by the relevant state
authority.
(5). "OPERATING REVENUES" mean the total revenues obtained through the
operation of the project, including airtime revenues, monthly leasing
revenues, handset sales revenues, SIM Card revenues, service revenues,
etc.
(6), "OPERATING COSTS AND EXPENSES" mean the costs and expenses occurred
during project operation, including special network resource leasing
expenses, postal and telecommunications public network calculation
fees, depreciation, spare parts fees, power and fuel expenses, network
maintenance and repair expenses, labor expenses (including salary,
welfare, bonus and other compensation, etc.), business expenses,
handset expenses, financial expenses, management expenses, sales
expenses, business taxes and other various operating expenses.
(7). "PROJECT CAPITAL" means all required capital for project construction
and operation provided by Party B pursuant to the Contract
(8). "PROJECT ASSETS" means total assets provided by Project Capital
invested by Party B.
(9). "CHINA UNICOM" indicates China United Telecommunications Co.
2. The title of each article in the contract shall not be considered part of
the contract, and shall not restrict, modify or affect the meaning of the
contract.
ARTICLE II
REPRESENTATIONS AND WARRANTS:
Both parties, or either party, upon execution of the Contract and thereafter,
represents and warrants that:
1. Both entities are corporations duly incorporated and existing in good
standing under the laws of the PRC, and have obtained the necessary
business license from the Industry and Commerce Administration Department.
Each party has its own company regulations and has maintained a good
reputation in its own business field. Both parties have the right to
execute the contract, and the execution and fulfillment of this contract
will not violate their respective corporate regulations.
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2. Party B warrants that the execution and fulfillment of this contract will
not be in conflict with any other contracts, agreements or letters of
guarantee which have binding force on Party B or its assets.
3. Party B warrants that, pursuant to its current financial and business
situation, it has full power and authority to enter into and to perform
under the Contract in accordance with its terms. Further, it is possible
and feasible for Party B to fulfill its responsibilities to provide the
required capital for the construction and operation of the Project.
ARTICLE III
COVENANTS OF BOTH PARTIES:
Party A and B guarantee the following upon the execution of the contract:
1. Party B guarantees to provide all required capital for the construction and
operation of the project pursuant to the schedule, method, and sub-amounts
listed in the Contract.
2. Party A guarantees to pay all payments due to Party B in accordance with
the terms of the Contract.
3. Both parties guarantee to fulfill all regulations issued by the Chinese
government relating to the Contract.
ARTICLE IV
CONTRACT AND ITS ATTACHMENTS:
The Contract and its attachments shall be deemed as a complete legal document of
this project upon execution by both parties.
ARTICLE V
BASIC CONTENT OF THE CONTRACT:
Both parties agree that the contract shall include the following items:
1. All contents described in the Contract shall be confirmed and agreed by
both parties.
2. Based on this contract, both parties will be responsible for the
construction of the project while Party A will be responsible for project
operation.
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3. Party B will provide all required capital for the construction and
operation of the project pursuant to the schedule, method, and sub-amounts
listed in the Contract.
4. Party A will pay all payments due to Party B in accordance with the terms
of the Contract.
5. Party B will be involved in the project construction through its Working
Group pursuant to the Contract, and will supervise the operation of the
project.
ARTICLE VI
CONTENT OUTLINE OF THE PROJECT:
The Project includes, but is not limited to, the following contents:
1. LOCATION OF THE PROJECT:
The location of the Project will be Hebei Province, the People's Republic
of China.
2. SIZE OF THE PROJECT:
(1). SIZE OF THE PROJECT:
The total capacity which ensures the normal operation of the GSM
network is 70,000 subscribers. The initial phase will cover 7 cities
with 40,000 subscribers and phase two will be increased to 70,000
subscribers from the initial phase.
(2). AMOUNT OF PROJECT CAPITAL:
A. The initial phase of the project requires an estimated investment
of RMB 320 million. The actual investment amount invested will
be determined in the financial closing documents of the project
approved by Party A.
B. Phase two of the Project requires an estimated investment of RMB
280 million. The actual investment amount invested will be
determined in the financial closing documents of the project
approved by Party A.
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(3). Once the Contract becomes effective, both parties shall further
negotiate a technical proposal. When approved, this proposal shall be
signed by both parties and shall be included as an Attachment to this
Contract.
ARTICLE VII
PROVIDING CONSTRUCTION AND OPERATING CAPITAL:
Party B agrees that:
1. Once the Contract becomes effective, Party B shall provide XXX 00 xxxxxxx
xxxxx-xx capital to begin the construction of the Project within 15 days.
After the Contract becomes effective, Party A shall submit a funding usage
plan to the Working Group within 10 days, and shall guarantee that such
funds will be used in accordance with the preliminary design and estimation
of the project.
2. Party B shall fulfill its obligation to pay all expenses required to
purchase any imported equipment and domestic corollary equipment,
including, but not limited to, issuing the Letters of Credit pursuant to
Article VIII of this Contract.
3. Party A shall formulate (Party B will be involved if Party A requires) a
fund usage plan for the construction of this Project based on the
preliminary design agreed upon by the Working Group and approved by China
UNICOM. Such plan shall be examined by the Working Group and shall be
approved by Party A. Party B shall provide the required capital pursuant
to this fund usage plan.
ARTICLE VIII
PROJECT CONSTRUCTION
1. Both parties agree to complete this project in accordance with the
following documents: (1) the preliminary design and construction design of
this Project approved by China UNICOM; (2) the Contract; (3) Certain
regulations regarding the management of GSM construction issued by China
UNICOM.
2. Both parties agree that project construction includes, but is not limited
to, the following:
(1). The Working Group will appoint a qualified Chinese design institute to
be responsible for related designs of project construction through a
public auction. The design shall be examined and approved by China
UNICOM
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pursuant to construction standards and procedures issued by the state
authority and China UNICOM.
(2). Construction and installation for the sub-projects, including building
construction, pipeline and network construction, switchboard
installation, accessory equipment installation, etc., and other
construction work which must be done before formal operation.
(3). Once construction is completed, the Working Group shall conduct
initial testing and acceptance. Party A shall arrange for testing and
acceptance once approved by the Working Group.
(4). After testing and acceptance of project construction, Party A shall be
responsible for formulating the financial closing documents of this
project. These documents shall be examined by the Working Group
first, and then submitted to China UNICOM for examination and
approval.
3. Party A shall be responsible for selecting imported equipment required by
construction of this project through a public aucction, and Party B shall
participate in this activity. The equipment suppliers shall be determined
by both parties.
4. Party B approves any construction work completed by Party A before the
execution of this Contract as long as such construction work is within the
scope of the preliminary design and cost estimation.
ARTICLE IX
PROJECT OPERATION:
1. When Party A commences operation of the network, Party A immediately
obtains the right for project operation, management, and maintenance, and
the right to receive revenues through network operation.
2. Party A shall operate, manage and maintain the Project pursuant to China
UNICOM's requirements regarding operation, management and maintenance of
the Project and the related items listed in the Contract. Party A shall
also operate the network appropriately and reasonably in order to obtain
the best benefit through this Project.
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ARTICLE X
PROJECT ASSET OWNERSHIP
1. Pursuant to the financial closing documents, Party A owns 30% of the
Project Assets and Party B owns 70% of the Project Assets. 60% of the
Project Assets owned by Party B will be transferred to Party A year by year
through the method of paying Party B the "Distributable Cash Flow" from
Party A in accordance with the regulations listed in Attachment 1 of this
Contract. Each year, the Project Assets transferred from Party B to party
A shall be equal to the amount of the "Distributable Cash Flow" paid to
Party B by Party A at that year. Once the Project Assets transferred by
Party B year after year accumulate to 60% of the entire Project Assets,
such transfer shall be terminated. The remaining 10% of the Project Assets
owned by Party B shall be transferred to Party A without any condition
after the Contract expires.
2. The exercise of the asset ownership right by both parties shall not be in
conflict with the following:
(1). Asset transfer shall be in accordance with the terms of the Contract.
(2). Any Party who obtains the asset from the other Party shall be entitled
to the asset ownership on the part transferred.
(3). Any Party will be able to exercise its right as listed in the
Contract.
ARTICLE XI
RIGHTS AND OBLIGATIONS:
Unless otherwise specified in the Contract, both parties shall be entitled to
the following rights and shall undertake the following obligations:
1. Party A:
(1). Shall be the owner of this Project and shall be responsible for
project construction and operation.
(2). Shall make all payments due to Party B in accordance with the terms of
the Contract.
(3). Shall obtain all approvals and permits required for the operation of
the project, including the approvals from the State Radio Regulatory
Department and Management Department of Telecommunications Industry.
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(4). Shall obtain all import permits for purchasing imported equipment and
other materials as well as network connection permits.
(5). Shall obtain the frequency and number resources required by this
project and handle other related matters regarding the interconnection
between this Project and the post and telecommunications network.
(6). Shall cooperate with the Working Group to develop this project
pursuant to the terms of this Contract.
2. Party B:
(1). Shall provide the required capital pursuant to the regulations of this
Contract.
(2). Shall be involved in the purchase of the main equipment for this
Project.
(3). Shall participate in the Project construction, and shall supervise the
operation and management of this Project through the Working Group.
(4). Shall provide consulting services for project construction and
operation.
(5). Shall examine the project's preliminary design (including a budget
estimate), the financial closing documents, the annual project budget
and financial closing documents through the Working Group.
(6). Shall cooperate with the Working Group to develop this project
pursuant to the terms of this Contract.
3. Each Party shall fulfill its own responsibilities on a timely basis to
ensure that the construction and operation of the project proceed smoothly.
ARTICLE XII
WORKING GROUP:
1. In order to settle any problems promptly during the construction and
operation of the Project, both parties shall jointly establish a Working
Group (hereafter referred to as the "Working Group"). Party B shall
participate in the construction of the Project through the Working Group
pursuant to Item 3 of this Article as well as supervise the operation of
this Project.
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2. Both parties will appoint 3 representatives to the Working Group. These 6
representatives shall be the formal members of the Working Group. During
the construction period, the Director of the Working Group shall be
appointed by Party B and the Deputy Director shall be appointed by Party A.
During the operation period, the Director of the Working Group shall be
appointed by Party A and Deputy Director shall be appointed by Party B.
3. Party B shall conduct its business within the following areas through the
Working Group:
(1). It shall examine the Project's preliminary design and construction
design (including budget estimate). It shall also participate in the
formulation of the Project capital usage plan required by Party A and
supervise Party A's implementation of this fund usage plan.
(2). It shall participate in the initial testing and acceptance of the
Project construction.
(3). It shall examine the financial closing documents of the Project.
(4). It shall examine the annual project budget and financial closing
documents of the Project.
(5). It shall resolve any major issues arising during Project construction,
such as the changes of design, budget estimation, etc.
(6). It shall be responsible for any other tasks assigned by both parties.
Other than the above described responsibilities, it shall also examine and
supervise all issues deemed necessary by both parties.
4. The time, location, subject and agenda of the Working Group meetings shall
be decided by the Director and Deputy Director of the Working Group.
5. Both parties shall submit a list of the candidates who will participate in
the Working Group respectively to the other Party within 7 days after this
Contract becomes effective.
6. The first Working Group meeting shall be held within 10 days after this
Contract becomes effective.
7. If 2/3 of the 6 members of the Working Group attend the meeting, such
meeting shall be deemed effective. Any resolutions passed by at least 2/3
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of the 6 members of the Working Group shall be deemed effective. If any
member can not attend a meeting for any reason, he is allowed to appoint a
representative to attend the meeting with a written notice. His
representative shall be entitled to have the same rights as other formal
members of the Working Group.
8. The Working Group may formulate its own working procedures, systems and
other working contents if required. However, these "self-made regulations"
shall not be in conflict with PRC laws, regulations and policies regarding
construction and operation of this Project.
ARTICLE III
PROFIT DISTRIBUTION
1. Both parties agree to distribute the "Distributable Cash Flow" generated by
this Project pursuant to Attachment 1 of this Contract. The distribution
proportion will be: Party A gets 22% and Party B gets 78%.
2. Party A shall pay all payments due to Party B pursuant to Attachment 1 of
this Contract.
ARTICLE XIV
PROJECT EXPANSION:
If the market demand is greater than the capacity mentioned in Article VI, Item
2, and Party A decides to expand the project which will require additional
investment, party B shall have priority to invest in the Project under the same
condition.
ARTICLE XV
ASSET TRANSFER AND GRANT:
During the term of the Contract, neither party shall transfer, present or sell
the assets to a third party without getting written approval from the other
party.
ARTICLE XVI
INSURANCE:
1. Both parties shall select the appropriate type of insurance, insurance
amounts and insurance clauses for project equipment. The insurance
premium shall be accounted for as part of construction and operating
expenses. The insurance beneficiary shall be identified in the insurance
contract.
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2. Party A or Party B (which shall be decided according to the requirements of
the insurance organizations. If both parties can be the policyholders,
Party A shall purchase insurance) shall purchase insurance from insurance
companies in China to insure the equipment or assets of this project for
the full amount based on the type of insurance, insurance amount and
insurance clauses selected by both parties. During the construction of
this project, Party B shall be the policyholder and shall pay for the
insurance premium, and the amount shall be regarded as part of its
investment. When Party A formally starts to operate the network, Party A
shall be the policyholder and shall pay for the insurance premium, and the
amount shall be regarded as part of Operating Costs and Expenses.
ARTICLE XVII
CONFIDENTIALITY:
1. During the term of the Contract and three years after the termination of
the Contract, both parties shall not disclose, release, or provide any
information to a third party, which includes financial, business related,
technological, managerial and other related documents and information
obtained from the other party (either orally or in writing).
2. The above confidential responsibilities shall exclude the following:
(1). Information already known to the recipient of the Contract before the
information is delivered by the other party of the Contract.
(2). Any confidential information already in the public domain, or the
release of information is not a mistake caused by the recipient of the
Contract.
(3). Information received from a third party outside of the Contract.
Since no third party has responsibility to keep the information
confidential, it may disclose or release this information to the
recipient of the Contract.
(4). The confidential information was developed alone by the recipient of
the Contract.
(5). One party of the Contract has obtained a written agreement from
another party of the Contract to disclose or release any confidential
information to a third party outside of the Contract.
3. Disclosing, releasing or providing confidential information shall be
permitted in the following situations:
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(1). It is required by documents issued by the government authority which
is based on laws and regulations.
(2). It is required to source orders, or to fulfill equipment purchase
contracts or service contracts.
(3). Confidential information has become public information through other
methods without violating the confidentiality provisions.
(4). Either party of the Contract may disclose certain confidential
information to its technical consultants who are also subject to the
same confidentiality provisions.
4. Either party of the Contract may disclose certain confidential information
to employees or contractors if required. However, the employees or
contractors shall be restrained by the same confidentiality provisions.
ARTICLE XVIII
FORCE MAJEURE:
1. During the term of the Contract, if the performance of the Contract is
prevented by any cause beyond its reasonable control including acts of
earthquake, storms, war, fires, floods, strikes, riots, government martial
law or other natural disaster and any other event which that party could
not foresee at the time of executing this contract, both parties shall
handle such matters pursuant to relevant Chinese regulations.
2. The obligations of a party shall be terminated, in whole or in part, if its
power to perform the terms of the Contract is prevented by any course
beyond its natural control.
3. The party whose obligations are terminated by reasons of any such event
shall notify the other party of the Contract of such event by telex or fax.
In addition, it shall submit effective documents issued by government
agencies related to such event within 30 days, stating the nature of the
event, the reasons for the party's inability to fulfill its
responsibilities or to delay the fulfillment of its responsibilities. Both
parties shall immediately resolve the situation to minimize all losses that
may be incurred by such event.
ARTICLE XIX
VIOLATION OF THE CONTRACT:
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1. If the Contract or part of the Contract cannot be fulfilled due to one
party's violation of the Contract, the violating party shall be responsible
for compensating any direct losses. If both parties violate the Contract,
both parties shall pay for any compensation in accordance to the party's
responsibilities based on the specific situation.
2. Both parties agree that neither party has the right to terminate the
Contract except for causes beyond its reasonable control, or due to severe
violations of the Contract performed by both parties which result in the
inability to fulfill the Contract.
ARTICLE XX
TERMINATION OF THE CONTRACT:
1. The contract may be terminated under the following situations, and with the
consents of both parties:
(1). If the normal operation of the Project is prevented by any of the
force majeure events.
(2). If the normal operation of the Project is prevented due to
non-performance or violations of the Contract by Party A or Party B.
(3). If the normal operation of the Project is prevented due to other
reasons. And both parties agree that there is not a future for
further project development.
2. If the time of termination is during the investment repayments period, the
following method shall be applied:
At the time of termination agreed by both parties, if the accumulative
amount of project construction fees, consultant fees and service fees made
by Party A to Party B is less than the Project Capital, then party A shall
pay to Party B an amount of money within 60 days after the termination of
the contract in accordance with the following calculation:
Due payment amount = (Project Capital - Paid Project Construction Fees,
Consultant Fees and Service Fees) + (Project Capital - Paid Project
Construction Fees, Consultant Fees and Service Fees) x (bank deposit
interest/day) x (number of days from the termination date of this contract
to the date of paying such Due payment amount to Party B)
ARTICLE XXI
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GOVERNING LAW:
This contract shall be governed by and interpreted in accordance with the laws
of the PRC.
ARTICLE XXII
DISPUTE SETTLEMENT:
1. Any disputes, differences in opinion, or conflicts arising out of the
Contract during the fulfillment of the Contract shall, to the fullest
extent possible, shall be settled amicably by negotiation and discussion
between the parties.
2. If such disputes, differences in opinion, or conflicts can not be settled
by amicable agreement within 60 days of one party submitting a written
notice to the other party, it shall be submitted to the Beijing Arbitration
Committee for arbitration.
3. The arbitration shall be conducted under "PRC Arbitration Law".
4. Any decision taken by the arbitrators will be final, binding and
conclusive.
5. The arbitration fee shall be paid by the party who loses the case.
6. During the process of arbitration, both parties shall continue to operate
the Project in accordance with the Contract, except for the part currently
under arbitration.
ARTICLE XXIII
TERM OF THE CONTRACT
1. The Contract shall be deemed effective upon execution of the Contract by
Party A and Party B.
2. The term of this contract commences on the effective day, and terminates 15
years from the date of formal operation of the project.
ARTICLE XXIV
FULFILLMENT OF THE RESPONSIBILITIES AFTER TERMINATION OF THE CONTRACT:
1. Upon termination of the Contract and pursuant to the terms of the Contract,
if there are unfulfilled responsibilities according to the Contract by
either party, such party shall fulfill any remaining obligations (including
payments owed by Party A to Party B during the term of the Contract).
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2. Before one party has completely fulfilled its obligations, the other party
still has the binding right toward that party on any unfinished
obligations.
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ARTICLE XXV
TRANSFER AND CHANGE OF THE CONTRACT
Neither Party A nor Party B shall transfer the Contract, any portion of the
Contract, any right, profit or obligations specified by the Contract to a third
party without prior written consent from the other Joint Venture party.
ARTICLE XXVI
COMPLETE CONTRACT
The Contract and its Attachments are the only contract regarding this project
signed by Party A and Party B.
ARTICLE XXVII
MISCELLANEOUS
1. Any amendments to the Contract shall only become effective after such
amendments are signed by authorized persons from both parties.
2. Further negotiations regarding the Contract's technical attachment shall be
proceeded by both parties once the Contract has been signed and becomes
effective, and it shall be executed upon mutual agreements. This technical
attachment shall be one of the attachments of this Contract once it has
been signed. Both parties shall fulfill their responsibilities pursuant to
this Contract prior to the execution of this technical attachment.
3. Any notice, request, or communications to be given under this contract
shall be sent by registered mail, and shall be written in Chinese.
Telegram, telex and fax are acceptable. However, the original copy shall
be sent by registered post to each party. Any telex, telegram, fax and
registered mail shall be sent to the following address:
Party A: China United Telecommunications Co.
Address: 15 Yang Xxxx Xxxx Road, Xx Xxx Street, Beijing, PRC
Zip Code: 100038
Receiver: General Manager
Fax: 000-0000000
Party B: Hebei United Communications Engineering Company Limited
Address: 248 Xx Xxxx Xi Road, Shijiazhuang, Hebei, PRC
Zip Code: 050071
Receiver: General Manager
Fax: 0000-0000000
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4. The notice shall be effective from the date of receipt of such post.
5. This contract is written in Chinese and has two copies. Each party holds
one copy, and each copy has equal legal force.
6. This contract has been signed on February 9, 1996 by representatives of
Party A and party B at Beijing, the People's Republic of China.
Party A: China United Telecommunications Co.
Representative: Guo Huanmin
Party B: Hebei United Telecommunications Engineering Company Limited
Representative: Ye Yunyun
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